WTO warns of global trade stagnation

The global demand for exports has considerably declined. The World Trade Organization (WTO) warned the global market of a likely stagnation in the pace of exports and imports in the coming months.

WTO’s Goods Trade Barometer shows a downward trend in automotive products, electronic components, and air freight exports. International commerce volume increased by 1.4% in the first half of the year. However, with the ongoing downturn, global trade is on track to rise at a rate lower than the 3% predicted by the World Trade Organization for this year.

Lower global demand has already eased pressure on vessel capacity and reduced freight costs. For example, according to consultancy Capital Economics, rates on routes to China dropped 9% last month, resulting in a 40% drop in a year.

China, the world’s greatest trading nation (in terms of both exports and imports), is now a source of concern again, with the implementation of fresh lockdowns in major production and export hubs such as Shenzhen, Dalian, and Guangzhou to combat a new wave of covid-19.

The sanitary restrictions in Chengdu could further depress factory operations of globally-renowned brands such as Apple, Foxconn Technology Group, Toyota Motor Corp., and Volkswagen AG. Manufacturers in southwest China, who rely heavily on hydropower, had to cut production recently because of a historic heat wave and drought. The number of containers passing through China’s ports decreased in August.

The slowdown in overseas sales is expected to last until next year in Asia, where exports are one of the forces that fuel economies. After that, according to UBS, much will rely on the extent of Europe’s recession and the trajectory of oil prices.

Export orders for semiconductors and steel fell in South Korea, while sales of vehicles and petrochemicals remained positive, although at a lower level. Electronic orders in Taiwan fell 4% in the last quarter compared to the previous quarter.

In terms of volume, Latin American exports increased by 4.6% in the first quarter and 0.6% in the second, which is consistent with the rising trend in agricultural commodity trade.

For the WTO, the war in Ukraine, inflationary pressures, and the expected rise in interest rates in developed economies will continue to foster uncertainties in global trade.

The extent of the recession that will impact the economy is a concern among Europeans, especially with the sharp climb in interest rates beginning this week.

Source: Valor Econômico

To read the full original article, please go to: https://valor.globo.com/mundo/noticia/2022/09/05/omc-indica-estagnacao-no-comercio-global.ghtml

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