Trade Flows Set to Stay Weak, Says WTO -- Update
November 18 2019 - 12:20PM
Dow Jones News
By Paul Hannon
Global flows of goods across borders are on course to grow at
the weakest pace since the financial crisis, according to the World
Trade Organization, as trade tensions and rising tariffs continue
to weigh on exports and imports.
The Geneva-body that mediates trade disputes Monday said its
leading indicator of trade flows points to continued weakness as
2019 draws to a close, making it more likely that international
trade will end the year having risen at a slower pace than in any
since 2009, when trade collapsed in the wake of the global
financial crisis.
In October, the WTO cut its forecast for global trade flows in
2019, projecting that cross-border movements of goods will rise by
just 1.2% this year due to trade friction and uncertainty over
Brexit, after a 3% expansion last year. The WTO expects the volume
of merchandise trade to increase 2.7% in 2020.
The WTO said that its Goods Trade Barometer recorded signs of a
pickup in export orders, container shipping and automobile
shipments, offset by weakness in airfreight, and shipments of raw
materials and electronic components.
Global trade flows rose in July and August, following three
straight quarters of decline, but remained weak.
The WTO's leading indicator for trade flows rose to 96.6 from
its August level of 95.7, but remained well below the level 100.00
mark that signals exports and imports are rising at the average
rate recorded over recent decades.
"Some components...remain on a downward trajectory reflecting
heightened trade tensions and rising tariffs in key sectors," the
trade body said.
Flows of goods across national borders have been weakened by a
number of developments in 2019.
Tariffs on trade between the U.S. and China have risen. One side
effect of that trade dispute is a weakening of business confidence
and investment. Investment goods such as factory equipment account
for a large share of global trade flows.
There has also been a slowdown in the global automobile
industry, which imports and exports parts as part of its global
supply chains, as well as finished vehicles. Stricter emissions
controls are making cars more costly just as many countries'
markets have become saturated and alternatives like ride-sharing
have sprung up.
Last month, the International Monetary Fund slashed its forecast
for the growth of trade flows in 2019 to 1.1% from 2.5%, although
it expects to see a rebound in 2020. Those hopes would be boosted
if tensions between the U.S. and China ease.
U.S. President Trump and Chinese Vice Premier Liu He said on
Oct. 11 that they were close to a limited, "phase one" trade accord
that would increase U.S. sales of agricultural products to China in
return for some rollback of tariffs on its imports from that
country.
But talks have hit a snag over the size of farm purchases, and
the two sides are also at odds over whether -- and by how much --
the U.S. would lift tariffs on Chinese imports, a core demand from
Beijing that is linked to its offers on other issues.
However, even if such a deal is secured, uncertainties about the
future of the international trade system are unlikely to go away,
and economists don't expect growth in exports and imports to return
to the rates seen before the global financial crisis.
"The difficulties in agreeing a 'phase one' deal...casts doubt
on the ability of both sides to reach a wider agreement on the more
thorny issues surrounding intellectual property, technology
transfer and industrial policy," said Neil Shearing, chief
economist at Capital Economics.
The slowdown in trade flows since the start of 2018 has taken
its toll on manufacturers around the world, a key factor in a
broad-based economic slowdown that saw Germany and Japan -- two of
the world's largest exporters -- on the brink of stagnation in the
three months through September.
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
November 18, 2019 12:05 ET (17:05 GMT)
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