Recently the World Trade Organization (WTO) released two important documents — (i) World Trade Statistics 2023; and (ii) World Tariff Profile 2024.
While both contain detailed and apparently boring data tables and refrain from presenting any analysis, sifting through these documents are a number of interesting trends in the current global trade scenario emerge.
Recent Trends
Traditionally, the first document, World Trade Statistics 2023 highlights trends in global merchandise trade and trade in services on an annual basis. According to this, merchandise trade and trade in commercial services are showing a different trend for the year 2023! Specifically, the following trends are worth noting:
* In volume terms, global merchandise trade declined by 1.2 per cent in 2023. The decline is sharper in terms of value, which contracted by 5 per cent in 2023. Apart from lower volumes, declining commodity prices, and exchange rate fluctuations could have led to this decline.
* On the other hand, in 2023, trade in commercial services grew by 9 per cent in value terms, led mostly by travel, computer services, research and development and business services. Higher global risk emanating from geopolitical tensions, supply chain disruptions and climate change related uncertainties led to high growth of the insurance services sector, which grew at 18 per cent in 2023.
* Overall, the combined value of international trade in goods and services has declined by 2 per cent in 2023.
The possible reasons behind this unusual slowdown of trade could be attributed to increasing geopolitical tensions and their impact on the shipping routes, growing protectionism across the world, a rise of unilateral policy measures taken by various countries and an incipient trend of fragmentation of international trade among various trade blocs.
It is also possible that high inflation coupled with some contractionary economic policy measures in some developed countries contributed to the decline in merchandise trade.
Where does India stand?
Interestingly, in both merchandise trade and trade in services, India has improved its position in 2023. In merchandise exports, India was ranked 18th in 2022 with a market share of 1.8 per cent. In 2023, India’s exports have declined to $432 billion but India has managed to become the 17th largest exporter in the world. In commercial services exports, India’s rank moved from 8th in 2022 to 7th in 2023, with a marginal increase in its market share.
In 2023, India is ranked 2nd in ICT services exports in 2023 with exports growing at 13 per cent. Apart from the ICT services exports, India also features among the top 10 exporters of the following services subsectors: Other commercial services (4th), Other business services (4th), Personal, cultural and recreational services (5th), Construction services (7th), Financial services (9th) and Insurance and pension services (10th).
The second report, World Tariff Profile 2024 provides comprehensive information about tariff and non-tariff measures (NTM) used by the WTO Member countries in 2023.
There are four main types of NTMS as per WTO: (i) trade remedial measures, such as, anti-dumping duties and countervailing duties; (ii) safeguard measures used by countries to temporarily restrict imports when there is an import surge; (iii) product standards, such as, the Sanitary and Phytosanitary Standards, used to protect human, animal, or plant life and health from specific risks; and (iv) technical barriers to trade (TBT). The report published data for the first two type of NTMs but not on SPS and TBT.
This report shows that India has been one of the most prolific users of Non-Tariff Measures (NTMs) in international trade. Specifically, for the calendar year, 2023, 186 anti-dumping investigations were conducted by the WTO member countries, and on 86 occasions anti-dumping measures were implemented.
The top three countries which implemented maximum anti-dumping measures against other exporting countries in 2023 were: the US (14 measures), India (14 measures) and European Union (5 measures). India was also at the receiving end of anti-dumping measures imposed in 2023.
Countervailing measures are imposed against subsidised exports which do not fulfil certain WTO legal requirements. In 2023, a total of 11 countervailing measures were imposed by WTO member countries.
Among these, India imposed three measures, and five were imposed by the US. India was also at the receiving end of these countervailing duties as three out of the total 11 were imposed against Indian exports. India has also been a user of the WTO safeguard provisions in 2023. Out of the total six times such safeguard measures were used, India used it two times.
Why NTMs?
There are a few possible reasons for India’s usage of NTMs. First, India can legitimately have an active and interventionist trade policy regime that uses tariffs and NTMs to optimise its trade flows according to domestic requirements.
Second, India has a broad and diversified industrial base, so the demand for trade policy measures can be on the higher side.
Third, China’s economic slowdown and demand compression have led to an aggressive export push by Chinese firms. To protect domestic producers from these artificially cheap Chinese exports, many countries, including India, use different trade policy measures, including NTMs.
Overall, these data are perhaps in sync with the hypothesis that globally, countries are focusing more on economic independence and self-sufficiency. This current policy ideology seems markedly different from the principles of comparative advantage, free trade, and global cooperation on which the globalization stood.
Has a time come for the engraving of the epitaph of free trade? Let us watch.
Pal is a Professor of Economics at the Indian Institute of Management Calcutta, Kolkata; and Ray is Director of the National Institute of Bank Management Pune. Views expressed are personal