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April 3, 2019

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WTO predicts lower trade growth in 2019

GLOBAL trade growth is expected to be lower in 2019 than it was last year, the World Trade Organization forecast yesterday, citing widespread “tensions” and economic uncertainty.

The WTO had in its preliminary estimates predicted a 3.7 percent expansion of trade for this year, but has revised that down to 2.6 percent, marking a decline on the 3 percent growth recorded in 2018.

“The fact that we don’t have great news today should surprise no one who has been reading the papers over the last 12 months,” WTO Director-General Roberto Azevedo told reporters in Geneva.

In its main annual forecast, the 164-member WTO renewed its concerns about systemic threats that could continue to disrupt the world’s economy, notably the tariffs between China and the United States.

WTO chief economist Robert Koopman said worse may be to come, with an even bigger impact if US President Donald Trump goes ahead with a plan to impose high tariffs on global imports of cars later this year.

“US-China trade is about 3 percent of global trade. Automobile trade globally is about 8 percent of global trade. So you can imagine that the impact of automobile tariffs is going to be bigger than the impact of the US-China trade conflict.

“I think it’s pretty clear that any automobile tariff would likely have bigger knock-on effects through the global economy than what we see from the US-China conflict.”

There are indications that ongoing talks between China and the US could resolve the bruising tariff battle, but timelines for a possible deal are not clear.

Asked if he saw either side emerging victorious in the trade spat between the world’s two largest economies, Azevedo said: “There will be many losers.”

It was therefore becoming “increasingly urgent” that tensions are resolved, he added.

The WTO is “definitely hoping that we will hear good news” from the US-China talks, said Azevedo, who is a Brazilian national.

A year ago, the WTO projected that trade growth for 2018 would be 4.4 percent. The fact that the final number was 1.4 percentage points lower than the initial estimate highlights the considerable downside risks plaguing the global economy, WTO economists said.

For this year, the downside risks again outweigh the upside potential, but a “relaxation” of tensions, especially the lifting of restrictive trade measures, could see 2019 beat the projections, the WTO said.

Goods trade volumes are expected to grow more strongly in developing economies this year, with 3.4 percent growth in exports compared with 2.1 percent in developed economies.

The projections released yesterday are based on a “relatively smooth” Brexit playing out over the next two years, WTO economist Coleman Nee told reporters.

Britain leaving the European Union without a withdrawal agreement, or the various other possible Brexit scenarios that remain in play, will impact global trade, Nee said.

But “the situation is so fluid,” Nee added. “We will have to wait and see what the final outcome is,” before understanding Brexit’s influence on world trade.

The WTO did not make a specific prediction about the impact of Brexit, but Koopman said that in the worst case, it would help push global trade growth down to the bottom end of the WTO’s forecast range in 2019, 1.3 to 4 percent.

“The UK’s own analysis suggests that ‘no deal’ or ‘hard Brexit’ would shave 7.6 percent off British GDP. That would be a big number. It would force our numbers down to that lower part of our range,” Koopman said. “If we end up in the fall with a revision, my guess is the likelihood of a revision is that it’s downward, based on any number of factors from Brexit to no resolution in the US-China trade conflict, and other trade conflicts going on.”


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