The multilateral trading system overseen by the WTO has contributed significantly to the unprecedented economic development that has taken place over the last decades. Greater certainty over trade policies creates predictability that allows long-term business planning and investment. The recent erosion of predictability and certainty has made the system’s value more evident.
The value of international trade in 2018 continued to grow following a strong rebound in 2017 from the negative growth experienced in the previous years. The total value of trade in goods and services reached $24.5 trillion in 2018, representing around one-third of global output. However, weighed down by trade tensions and slowing economic growth world merchandise trade registered a slight decline for the year of ‑0.1% in volume terms after rising by 2.9% in the previous year. Meanwhile, the dollar value of world merchandise exports in 2019 fell by 3% to US$ 18.89 trillion. In contrast, world commercial services trade increased in 2019, with exports in dollar terms rising by 2% to US$ 6.03 trillion. The pace of expansion was slower than in 2018, when services trade increased by 9%.
Trade tensions and uncertainty continue to affect trade prospects and could significantly change the structure of global value chains (GVCs). Over the past two years, governments have introduced trade restrictions covering a substantial amount of international trade. WTO members implemented 102 new trade restrictive measures from mid-October 2018 to mid-October 2019. While this represents a decrease in number of trade restrictive measures from the previous year, the trade coverage of import-restrictive measures is estimated at $746.9 billion, a 27 per cent increase from the 2017-2018 period and the highest recorded figure since October 2012. Measures included tariff increases, bans, quantitative restrictions, stricter customs procedures, import taxes and export duties. Governments need to show strong collective leadership and coordination in curbing the imposition of new trade restrictive measures and reducing the accumulated stock of restrictions.
Unfortunately, the COVID-19 crisis is also having a significant impact on supply and demand in the global economy. This is inevitably causing major disruptions to trade, particularly trade in services and expectations of recovery in the value of world trade will need to be revised downwards. The introduction by several governments of fiscal and monetary measures to prevent social lockdown from leading to large-scale business failure and job losses, is a positive development. Alongside these measures, maintaining open trade and investment flows will be critical to protect jobs, prevent supply chain breakdown, and ensure that vital products do not become unaffordable for consumers. And once recovery begins to take hold, trade will play a central role in returning economies to full speed.