Global trade in Q4 of 2019 likely to be below trend: WTO

Global trade in goods is expected to be below trend in the fourth quarter of 2019 due to increase in trade tensions and tariffs in key sectors but there is a slight improvement since August this year, according to the latest projections by the World Trade Organisation’s Goods Trade Barometer. “The indicator’s reading of 96.6 marks a slight improvement compared to the 95.7 registered in August, but it remains well below the index’s baseline value of 100, signalling below average growth,” an official release stated.

For Indian exporters, who have been suffering a drop in exports over the last three months (August 2019-October 2019), the projected lackluster performance in world trade in the last quarter spells more trouble. This would mean that the revival they have been hoping for on the back of a rebound in world demand may take longer.

The Goods Trade Barometer, which comes up with quarterly projections, provides "real time" information on the trajectory of world merchandise trade volumes relative to recent trends.

One of the main reasons for the continued gloom in trade outlook is the trade tension prevailing around the world, as per the report. Although the report does not elaborate on this, the on-going trade war between China and the US, which is not showing any signs of dissipating, has affected global trade substantially. Moreover, increased protectionism by countries which are putting in place both tariff and non-tariff measures to slow down imports is also taking a toll.

On the positive side, the indices for export orders, automotive products, and container shipping have improved. But, the indices for international air freight, electronic components and raw materials have all deteriorated further below trend, as per the report.

Electronic components trade was weakest of all, possibly reflecting recent tariff hikes affecting the sector, it added.

The projections of the Goods Trade Barometer is in alignment with data on trade growth expectations, the release said. “Official data confirm the loss of momentum in goods trade foreseen by the Goods Trade Barometer earlier this year. According to the latest WTO quarterly trade volume statistics, merchandise trade rose by only 0.2 per cent year-on-year in the second quarter of 2019, compared with 3.5 per cent in the same quarter of last year,” it said.

In September, WTO economists brought down trade growth expectations for 2019 to 1.2 per cent from 2.6 per cent projected in April. This was attributed to a slowdown in economic growth, increased tariffs, the uncertainty unleashed by Britain’s decision to exit the EU and the monetary policies of developed countries.

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