Trade is declining---pandemic and global populism.
Kose and Mulabdic 24---Ayhan Kose is the Deputy Chief Economist of the World Bank Group and Director of the Prospects Group. He is a member of the Chief Economist’s leadership team overseeing the Bank’s analytical work, and policy and operational advice. Alen Mulabdic is a Senior Economist in the Development Economics Prospects Group of the World Bank, working on international trade and macroeconomic issues. He holds a Ph.D. in Economics from the Graduate Institute of International and Development Studies (IHEID) in Geneva, Switzerland. (“Global trade has nearly flatlined. Populism is taking a toll on growth”, World Bank Blogs, 2-22-2024, https://blogs.worldbank.org/en/voices/global-trade-has-nearly-flatlined-populism-taking-toll-growth)//AN
The World Trade Organization's (WTO) top decision-making body will have every reason to fret when it meets on February 26. International trade—a key engine of global prosperity since the fall of the Berlin Wall— has ground nearly to a halt and is set to remain anemic in the coming years. In 2023, trade in goods and services expanded by the slenderest of margins, an estimated 0.2 percent, the slowest pace in 50 years outside of global recessions. It would have declined outright but for the growth of trade in services. Trade in goods shrank roughly 2 percent, the sharpest contraction during this century outside of a global recession. Trade growth will improve this year but it will still be half the average rate in the decade before the pandemic. In fact, by the end of 2024, global trade will register the slowest half-decade of growth since the 1990s.
Global Trade Growth is Slowing
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That is an ill omen for people's living standards everywhere. The rapid expansion of global trade after 1990 enabled one billion people to escape extreme poverty. It souped up growth in developing economies, enabling many of them to narrow the income gap with wealthier economies. During the first decade of this century, per-capita incomes in developing economies grew 3.5 percentage points faster than in developed economies. Trade also sped up the diffusion of technology, contributing to productivity growth across the world.
Yet memories are short. Today, misguided populism in many countries is doing serious damage to global trade. Many countries have lost their appetite for new trade agreements. In the 2020s so far, an average of just five agreements have been signed each year—less than half the rate of the 2000s. Their appetite for trade restrictions, meanwhile, seems insatiable. In 2023 nearly 3,000 trade restrictions were imposed across the world—roughly five times the number in 2015. Not surprisingly, the protracted weakness in trade has coincided with a pronounced slowdown in investment.