WTO flags rising rifts in global trade

The World Trade Organization (WTO) on Tuesday flagged growing fragmentation in international trade, with an over nine-fold increase in the number of trade concerns raised at the Council for Trade in Goods over the last six years. Concerns raised at WTO committees are seen as early warning signs for potential trade disputes.

The top trade body citied unilateral environmental measures like Indonesia’s export restrictions on raw materials, China’s export restrictions on gallium and germanium, the European Union’s Carbon Border Adjustment Mechanism (CBAM) and other EU Green Deal measures, or the US Inflation Reduction Act (IRA) as chief concerns by member nations at the moment.

WTO warned that the use of unilateral trade policies threatens to result in a downward spiral of tit-for-tat responses and a more fragmented world, dominated by regional trade blocs and such a development is likely difficult to reverse.

“Consistent with the pattern observed in technical committees, there has been a ninefold increase in the number of trade concerns raised at the Council for Trade in Goods between 2015 and 2022," WTO said in a report.

The report pointed at rapid expansion of trade in digital services and environmental goods, but said a further increase in unilateral measures could yet fragment the world economy. It argues a renewed drive towards integration - "re-globalization" - is the way to tackle current problems of security, poverty and climate change.

WTO also touched upon growing skepticism about progress of globalization.

Discussions about the stagnation, or even decline, of the role played by international trade in the global economy pointed towards the rise in new industrial strategies, limits to global supply chains expansion as well as rising geopolitical tensions, WTO said.

Trade strategies to re-shore manufacturing production would lead to an overall decline in the importance of trade in the global economy.

“Other strategies such as bringing production closer to large markets (near-shoring) or strengthening production networks with like-minded countries (friend shoring) would lead to fragmentation of the global economy along regional and geopolitical lines," it added.

Source: Mint