Global Trade Growth to Improve but Still Below Pre-Pandemic Levels
Trade growth is set to improve this year; however, it will only reach half the average rate seen in the decade before the pandemic. By the end of 2024, global trade is projected to experience the slowest half-decade of growth since the 1990s. This is concerning, considering the significant role global trade played in lifting one billion people out of extreme poverty after 1990.
Despite the challenges, diversified global supply chains should be seen as a source of resilience rather than vulnerability. In 2023, trade in goods and services grew by a meager 0.2%, marking the slowest pace in 50 years outside of global recessions. Notably, trade in goods experienced a contraction of approximately 2%, which is the sharpest decline seen this century outside of a global recession. It is crucial to recognize that this rapid expansion of global trade after 1990 not only improved the livelihoods of individuals in developing economies but also drove the diffusion of technology worldwide.
However, the rise of misguided populism in many countries is now threatening global trade. Many nations have exhibited a loss of interest in new trade agreements, with an average of only five agreements being signed each year in the 2020s. This number falls significantly short of the rate seen in the 2000s. In 2023 alone, nearly 3,000 trade restrictions were imposed worldwide, which is nearly five times the number recorded in 2015.
To address this concerning trend, it is essential for the global community to strengthen the rules-based international order and provide support to the World Trade Organization (WTO) in fulfilling its mandate. Policies such as “friend-shoring” and “near-shoring” may appear appealing, but they could prove counterproductive as diversified global supply chains offer resilience. Policymakers who impede cross-border trade are effectively hindering their own progress.
Efforts to expand trade agreements should be resumed, with the African Continental Free Trade Area serving as a positive example. This agreement, which came into effect in May 2019 with 22 signatories, has already expanded to include 47 countries.
Governments worldwide would be wise to double down on their efforts to revive global trade by reducing trade-policy uncertainty, exploring new avenues for cross-border trade expansion, and restoring the rules-based global trading system. These steps are crucial in ensuring sustainable economic growth and improved standards of living for all.
Analyst comment
Neutral news.
The global trade growth is expected to improve this year, but it will still be below pre-pandemic levels. By the end of 2024, global trade is projected to have the slowest growth in decades. This is concerning considering the positive impact global trade had on poverty reduction and technology diffusion. The rise of populism threatens global trade, with fewer trade agreements being signed and increased trade restrictions. To address this, strengthening the rules-based international order and supporting the World Trade Organization is crucial. Efforts to expand trade agreements, like the African Continental Free Trade Area, should be pursued. Governments should focus on reducing trade-policy uncertainty and restoring the global trading system for sustainable economic growth.
