After another year of weak growth in 2016, trade should rebound this year but protectionist policies could undermine the recovery, according to the World Trade Organization.
The WTO forecast that the volume of world merchandise trade will expand by 2.4% in 2017, up from just 1.3% last year. But citing “deep uncertainty” about economic and policy developments, particularly in the U.S., it said growth could range between 1.8% and 3.6%.
“The unpredictable direction of the global economy in the near term and the lack of clarity about government action on monetary, fiscal and trade policies raises the risk that trade activity will be stifled,” the organization said in a news release. “A spike in inflation leading to higher interest rates, tighter fiscal policies and the imposition of measures to curtail trade could all undermine higher trade growth over the next two years.”
Restrictive trade policies, the WTO said, “could affect demand and investment flows, and cut economic growth over the medium-to-long term” and, as a result, “there is a significant risk that trade expansion in 2017 will fall into the lower end of the range.”
The release did not specifically mention President Donald Trump, who has made reducing U.S. trade deficits a key focus of his economic agenda and criticized trade pacts with China and Mexico.
But WTO director-general Roberto Azevedo told a news conference that if “policymakers attempt to address job losses at home with severe restrictions on imports, trade cannot help boost growth and may even constitute a drag on the recovery.”
“We are waiting to see the new [U.S.] trade team really in place, waiting for the new [U.S. Trade Representative] to be confirmed so that we can have a more meaningful dialogue,” he added. “We are still waiting to see how the trade policy itself is going to shape up in the United States.”
For 2018, the WTO is forecasting trade growth between 2.1% and 4%. “We should see trade as part of the solution to economic difficulties, not part of the problem,” Azevedo said.