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WTO head Roberto Azevedo renews his concerns over worrying political headwinds, especially protectionism.
Trade growth is becoming more synchronized across regions than it had been for many years, which could make the current trend self-reinforcing
World Economy

WTO Upgrades Global Trade Forecast to 3.6%

The World Trade Organization on Thursday upped its forecast for global trade growth in 2017 thanks to stronger than expected demand for merchandise in Asia and North America.
A previous projection of 2.4% growth for this year has been boosted to 3.6%, the organization said in a press release, headlined “WTO upgrades forecast for 2017 as trade rebounds strongly”, news outlets reported.
“Growth of 3.6% would represent a substantial improvement on the lackluster 1.3% increase in 2016,” the Geneva-based body said.
The positive news comes after the WTO had for years warned of a lackluster global trade climate that lingered in the wake of the 2008 financial crisis.
The better outlook was driven by improved trade flows within Asia and stronger demand for goods in North America through the first half of the year, the 164-member Geneva-based body said.

Warning Against Protectionism
While the organization's director general Roberto Azevedo applauded the return of good news, he renewed his concerns over worrying political headwinds, especially protectionism. "The improved outlook for trade is welcome news, but substantial risks that threaten the world economy remain in place and could easily undermine any trade recovery," Azevedo said in a statement.
"These risks include the possibility that protectionist rhetoric translates into trade restrictive actions, a worrying rise in global geopolitical tensions and a rising economic toll from natural disasters," he added.
Azevedo has firmly pushed back against the barrage of anti-trade commentary that emerged from Donald Trump's US administration. Trump and his trade team have also blasted the WTO, including charges it has been too kind to China.
In a continued defense of the multi-lateral trading system safeguarded by the WTO, Azevedo again urged world leaders to "resist the temptation of protectionism" while trying to improve, rather than restrict global trade.

Trade Growth More Synchronized
"However, trade growth was becoming more synchronized across regions than it had been for many years, which could make the current trend self-reinforcing," he said.
This is because the US and eurozone monetary policy expected to tighten and China likely to rein in easy credit to stop its economy from overheating.
The ratio of trade growth to GDP growth, which traditionally ran at about 2:1 but has slumped to about 1:1 in the decade since the financial crisis, should rise this year, with trade growing 1.3 times faster than the global economy, the WTO said, finchannel reported.
The modest bounce back in oil prices appears to have helped investment in the United States, the WTO said, noting however that current crude prices of around $50 per barrel were still well below 2014 peaks. The organization also stressed that rapid growth this year is unlikely to be repeated in 2018, in part because it will not be measured against the low 2016 base.
Also, "fiscal expansion and easy credit in China are likely to be reined in to prevent the economy from overheating," the statement said. That, combined with an expected interest rate rise and tighter monetary policy in major economies, will likely keep 2018 growth at around 3.2%, the WTO predicted.

Moderation
World trade rose 4.2% year-on-year in the first half of 2017 compared to the same period in the previous year. Developed economies' exports were up 3.1% over the same period while those of developing economies were up 5.9%. Meanwhile, imports were up 2.1% in developed countries and 6.9% in developing economies in the first half of the year.
The rapid pace of trade growth in 2017 is unlikely to be sustained next year for a number of reasons. First, trade growth in 2018 will not be measured against a weak base year, as is the case this year.
Second, monetary policy is expected to tighten in developed countries as the Federal Reserve gradually raises interest rates in the United States and the European Central Bank looks to phase out quantitative easing in the eurozone.
Third, fiscal expansion and easy credit in China are likely to be reined in to prevent the economy from overheating. All of these factors should contribute to a moderation of trade growth in 2018 to around 3.2% (the full range of the estimate being from 1.4% to 4.4%).

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