India needs to invest in education and skilling to address the shortage in high-skilled labour, to support growth in advanced manufacturing, WTO chief economist Ralph Ossa has said.
While no major changes were expected in world trade growth projections immediately, the WTO is concerned about growing geopolitical tensions and the first signs of fragmentation in trade, Ossa said in an interview with businessline.
On India’s prospects, the WTO chief economist underlined that the country was already a global leader in services, ranking fifth in commercial services exports. However, its merchandise exports, ranked 13th, suggest room for growth.
“To increase its share in global trade, India could benefit from investing in education and skills training to address gaps in high-skilled labour, which may support growth in advanced manufacturing. This could help diversify its trade base and enhance its position in global trade,” Ossa pointed out.
Commenting on the expected trajectory of world trade growth amidst the continued geopolitical turmoil, Ossa said the WTO would come up with its fresh projections next month, which will be an update on its April forecast, but the broad numbers may largely remain unchanged.
According to projections made by the WTO in April, world trade would grow at 2.6 per cent in 2024 and 3.3 per cent in 2025, after it declined 1.2 per cent last year.
“We have to wait until the new forecast on October 10, but I can tell from the sense that I have from looking at the data that has been coming in so far. I don’t expect any major corrections to the aggregate numbers. But I do expect some corrections to regional trends,” Ossa said.
Europe, on the whole, was doing less well than expected, while Asia was doing better than predicted, he said, reiterating that overall big changes were not expected.
The growing geopolitical tensions in the world were of concern to the WTO and it was keeping a watch.
“In terms of geopolitical tensions, we are observing it, we are concerned about it and and we are also seeing some impact on trade,” he said.
For example, the Middle East conflict has changed shipping routes quite substantially.
“About 12 per cent of world trade used to go through the Suez Canal. That number has dropped significantly. Ships need to take the longer trip round the Cape of Good Hope, affecting travel cost and freight. This has affected Europe particularly, as that is an important trade route between Asia and Europe. This is something we are monitoring,” Ossa said.
However, the conflicts have not had much effect on the energy markets yet and hence not affected the global macro economy.
Trade fragmentation due to geopolitical tensions was something the WTO was increasingly concerned about, Ossa said.
“Since the escalation of trade tension (between the US and China) when Trump had assumed Presidency (of the US), we see the trade between these two countries has been growing 30 per cent less quickly than between either of these countries and third countries. This means that trade shares have been shifting away and there are some signs of decoupling,” he said.
The WTO has also looked more generally at the kind of fragmentation of the global economy that may be taking place. “We split the world into hypothetical, geo political blocs. We observed that trade between these blocks is growing slower than trade within these blocks. So you see some first signs of fragmentation,” Ossa said.
(The reporter is in Geneva at the invitation of the WTO)