Trade authorities warn of increased protectionism

Global trade will fall to 32% and direct investment to 40%. Global GDP is recovering, but remains of the wreck that requires commercial stimuli.

 

The Great Pandemic continues to drain world trade. The latest WTO estimates speak of a contraction of up to 32% in the trade of goods, merchandise and services. A trail similar to that followed by Foreign Direct Investments (FDI), between 30% and 40%, according to joint predictions by the highest authority on international trade and the Unctad, the United Nations agency for Trade and Development. Despite the symptoms of global economic recovery in the second quarter of the year. In this case, due to the decrease in the profitability of investments, which are increasingly playing a more important role in direct investment flows, but also due to fewer mergers and takeovers and the less interest of parent companies in injecting funds to its foreign affiliates, claiming low levels of profitability. About the trade,The WTO is considering two scenarios : the most positive, estimates that the decline would be 12.9% if the planet’s GDP falls by 2.5%, but in the second it could reach 31.9% if GDP falls. it plummets 8.8%; A scenario that would return global trade flows to 2009 levels. And, although the organization foresees a strong takeoff, the next exercise will not be until 2022 when it acquires the rhythm prior to the Covid-19 epidemic.

The ebb of trade has also occurred – emphasized in the WTO – in a context in which countries have increased their restrictive trade policies ”. That is to say, in which protectionist measures have been put in place . At no less than $ 417.5 billion, their quantitative calculations say, which is the third-highest figure recorded since May 2012. Through tariff increases, import prohibitions, stricter customs procedures, export duties and other similar measures which, together, have affected 2.8% of the G-20 trade. In parallel, warns the WTO, the stock of restrictive measures on the acquisition of goods and services from abroad since the last recession to the present “continues to grow and now affects approximately 10.3% of imports from G-20 partners, where the EU is considered a single economy. In total, 1.6 trillion dollars. More than the size of the Spanish economy. International trade fell 18.5% in the second quarter. “Historic”, as the WTO emphasizes.

But trade globalization was already damaged by trade wars.

Trade in goods and services and capital flows were signaling an almost anemic situation at the end of 2019. In fact, WTO records, for example, showed a slight increase of 1.2% in trade in the past. year, far from the forecast of a rise of 2.6% in its spring report. It was the beginning of February and, then, without the expansion of the Covid under the official declaration of a planetary pandemic, it outlined a modest rebound of 2.7% for 2020. Three tenths below its previous calculation and subject to “downside risks” based on the “gradual normalization” of trade relations after the escalation in tariff barriers inaugurated in the first quarter of 2018 by the Trump Administration. Especially against China, in a battle with increasingly geostrategic overtones. But also against partners such as European countries, their Nafta neighbors, until the reconstruction of the North American customs union treaty with Canada and Mexico was consummated, against emerging markets such as India or Turkey and, even, scuffles of a certain entity with Japan, South Korea and some nations of Anglo-Saxon tradition such as Australia, New Zealand and, even, in the first months of Boris Johnson as British premier, with the United Kingdom. The diagnosis of the highest authority on international trade justified the reduction in trade “due to the intensity of these conflicts”, but also to the macroeconomic deterioration, “subject to shocks” – said its experts – and the “high volatility of financial markets.” A few brushstrokes covered the outer sectors with an area of ​​”uncertainty”.

Roberto Azevêdo, Director-General of the WTO, explained it with this overwhelming X-ray: “The darkening of the trade panorama is increasingly disappointing, although in no way unexpected”, because behind its direct effects are tariff tensions, which have “increased the storm clouds and have led certain business sectors to setbacks in productivity and a delay in investment projects that are essential to keep living standards up”. In his opinion, “job creation will also be affected, given that firms will use fewer labor to produce goods and services for export.” Azevêdo once again insisted on the legitimacy and convenience of nations resolving their trade disputes within the WTO. “We must return to the spirit of cooperation,” he said.

 

Globalization protectionism

Protectionist barriers

After the outbreak of the coronavirus crisis, he insisted on the protectionist barriers of medical-sanitary products, the fruit – he assures openly – of a career without prejudice that has closed the exit channels of these goods that, in 2019, totaled 597,000 million dollars , 1.7% of global goods trade and with the ten largest producing nations accounting for three-quarters of exports. But, with the spread of the pandemic, the rates on these types of products have climbed 4.8%. With 55% of the 134 WTO partners imposing additional tariffs, although another 52% reducing levies by 5%. Germany, the US and Switzerland manufacture 35% of medical products, with China, Germany and the US leading sales abroad (40%).

The United also warns of the severity that the coronavirus is transferring to the profit and loss accounts of the services sector. In particular, tourism, hospitality and retail trade. Those who have been led “almost to a state of destruction.” If the Covid-19 crisis persists – its experts explain – “the entire tourism industry as we know it in emerging markets could collapse”; latitudes where more than half of the jobs in this macro-sector are held by women. Restrictions on flights and passenger maritime routes, as well as remittances, are hurting developing countries that, in 2019, and according to World Bank data, had exceeded the foreign direct investment they absorbed and that, in total, reached $ 550 billion. The pandemic is going to reduce more than considerably. Especially in nations that, like Kyrgyzstan, Tonga or Tajikistan have a high dependence on money shipments from abroad. Specifically, and respectively, 35%, 33% and 31% of its GDP.

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