Businesses reliant on international trade have been waiting for global growth to return to a reliable upward trend for a number of years. Ever since the economic downturn in 2008, trade growth has been intermittent and unreliable, denting corporate confidence and preventing the world economy from regaining its pre-recession footing.
However, recent reports have offered cause for optimism that merchandise trade volumes are starting to firm up, underpinned by a returning appetite for investment and improving business conditions. The latest analysis from the World Trade Organization has confirmed this, suggesting that international trade growth is expected to remain strong in 2018 and 2019.
Despite this, a number of threats continue to threaten this burgeoning recovery, particularly the recent rise of protectionist anti-globalization sentiments in many parts of the world. As such, the WTO is calling on the world's governments to renew their commitment to the principle of liberalized trade, or risk putting the health of the global economy at risk.
Strong global trade prospects...
According to the WTO's data, there is much to be gained in the current marketplace for those that remain dedicated to exploring new free trade opportunities. Its calculations show that merchandise trade volume growth is expected to hit 4.4 per cent in 2018, which is only slightly below the 4.7 per cent increase recorded for 2017.
Growth is expected to moderate further in 2019 to four per cent, which is lower than the average rate of 4.8 per cent since 1990, but considerably higher than the post-recession average of three per cent. Increased investment and consumption expenditure have been cited as key drivers of these recent improvements, leading to better sales volumes and higher prices.
Given that trade volume growth was limited to only 1.8 per cent as recently as 2016, the latest WTO forecasts are indicative of a much healthier marketplace, with rising import demand seen across multiple regions, but most notably in Asia and developing economies. Meanwhile, an index of container port throughput was close to the highest level ever recorded in February 2018, suggesting these trends are continuing to gather pace.
...but protectionism and trade wars threaten this growth
However, the encouraging prospects highlighted by these figures may be offset by growing concerns about anti-trade sentiments that are emerging in many parts of the world, most notably the US, where President Donald Trump has been espousing strong protectionist rhetoric since taking office.
Most damagingly, the US recently enacted controversial new tariffs on steel and aluminum imports, prompting an angry response from China that has led to the world's two largest economies trading threats of an escalating series of levies on each other's exports. Although future negotiations may succeed in diffusing these tensions, the prospect of a trade war of this magnitude could seriously undermine economic growth and confidence.
Additionally, unanticipated hikes in inflation could also pose a threat, as this would cause monetary authorities to raise interest rates and slow down economic growth, with negative consequences for trade. As such, the WTO has called on lawmakers worldwide to consider the potential impact their policies could have on trade.
WTO director-general Roberto Azevedo said: "The strong trade growth that we are seeing today will be vital for continued economic growth and recovery and to support job creation. However, this important progress could be quickly undermined if governments resort to restrictive trade policies, especially in a tit-for-tat process that could lead to an unmanageable escalation. A cycle of retaliation is the last thing the world economy needs.
"The pressing trade problems confronting WTO members are best tackled through collective action. I urge governments to show restraint and settle their differences through dialogue and serious engagement."