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 email@example.com
(END) Dow Jones Newswires
November 18, 2019 12:05 ET (17:05 GMT)
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