The World Trade Organisation (WTO) is anticipating merchandise trade volume growth of 4.4 per cent in 2018, as measured by the average of exports and imports, roughly matching the 4.7 per cent increase recorded for 2017.
According to WTO, growth is expected to moderate to 4.0 per cent in 2019, below the average rate of 4.8 per cent since 1990, but still firmly above the post-crisis average of 3.0 per cent.
However, it noted that there are signs that escalating trade tensions may already be affecting business confidence and investment decisions, which could compromise the current outlook.
“The strong trade growth that we are seeing today will be vital for continued economic growth and recovery and to support job creation. However, this important progress could be quickly undermined if governments resort to restrictive trade policies, especially in a tit-for-tat process that could lead to an unmanageable escalation.
“A cycle of retaliation is the last thing the world economy needs. The pressing trade problems confronting WTO members is best tackled through collective action. I urge governments to show restraint and settle their differences through dialogue and serious engagement,” said WTO Director-General Roberto Azevêdo.
The world trade body said, trade volume growth in 2017, the strongest since 2011, was driven mainly by cyclical factors, particularly increased investment and consumption expenditure.
“Looking at the situation in value terms, growth rates in current US dollars in 2017 (10.7 per cent for merchandise exports, 7.4 per cent for commercial services exports) were even stronger, reflecting both increasing quantities and rising prices,” it said.
It equally said that merchandise trade volume growth in 2017 may also have been inflated somewhat by the weakness of trade over the previous two years, which provided a lower base for the current expansion.
The WTO said, until recently, risks to the forecast appeared to be more balanced than at any time since the financial crisis, adding that in the light of recent trade policy developments they must now be considered to be tilted to the downside.
“Increased use of restrictive trade policy measures and the uncertainty they bring to businesses and consumers could produce cycles of retaliation that would weigh heavily on global trade and output,” the world body warned.
It also reasoned that faster monetary tightening by central banks could trigger fluctuations in exchange rates and capital flows that could be equally disruptive to trade flows.