A breakdown in trade relations among major players could threaten the ongoing economic expansion and put many jobs at risk, the World Trade Organization has said, amid an escalating US-China trade war.
Noting that global cooperation will be essential in easing tensions and safeguarding the strong growth that they are being seen now, Roberto Azevedo, Director-General of the WTO, said the trade body which was created as a forum for members to hold each other to account, will play its proper role in this process.
“The improved outlook for trade is welcome news, but there are a number of downside risks threatening the world economy and the recovery of world trade. Economic factors include the expected tightening of monetary policy in developing nations and the reining in of credit and fiscal expansion in large emerging market economies,” Azevedo told the annual spring meeting of the International Monetary Fund.
“However, the larger threat is posed by increasing trade tensions and the possibility that we enter a sequence of unilateral, tit-for-tat measures, all of which generate uncertainties for global trade and GDP growth. It is not possible to accurately map out the effects of a major escalation, but clearly they could be serious,” he said.
Poor countries stand to lose the most
“A breakdown in trade relations among major players could derail the recovery that we have seen in recent years, threatening the ongoing economic expansion and putting many jobs at risk. In an interconnected economy, the effects would likely be globalised, reaching far beyond those countries who are directly involved. In this scenario, poor countries would stand to lose the most,” Azevedo said.
Indeed, it can be argued that without the WTO, a wave of protectionist measures would have been stirred up by the 2008 crisis, significantly worsening the economic effects of that downturn, he said.
Azevedo said a strong, rules-based multilateral trading system — as embodied in the WTO — provides the necessary stability and predictability for global commerce to function smoothly and play its full role in supporting economic growth and development.
But the system can be continually strengthened and improved. Since 2013, WTO members have delivered a number of important reforms, he argued.
Breakthroughs include the Trade Facilitation Agreement, the agreement to eliminate agricultural export subsidies, and a series of steps to support our least-developed members. In addition, a group of members struck a deal to expand the Information Technology Agreement, which eliminates tariffs on a wide-range of information technology products, he said.
A potential trade war has been brewing between the two nations since April 2017 when Trump directed the Commerce Department to investigate whether imports of foreign steel from China and other countries could be a threat to national security.