World Economy
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Global Trade Growth Slows

Global Trade Growth SlowsGlobal Trade Growth Slows
QNB’s analysts say slower demand in advanced economies outside the US and in China appear to be behind the decline in demand

A two-year rebound in world trade figures is showing signs of slowing as demand in advanced economies falls, according to a note published on Saturday by Qatar National Bank’s economic analysts.

The note said that although global trade volumes had rebounded strongly over the past two years after four years in the doldrums, “recently, important cyclical indicators and gauges for trade momentum are starting to weaken”, Reuters reported.

It said that average year-on-year growth in world trade volume jumped to 5.2% in January this year, having registered only 2.1% average growth between April 2012-April 2016, citing figures from the Dutch Bureau for Economic Policy Analysis.

Yet three-month average growth figures slowed by 1.5% between January and June, the note said, with the decline corroborated by lower cargo volume at major ports and purchasing managers’ index data suggesting that new orders peaked in the first half of the year.

“Slower world trade is somewhat surprising as commodity prices remain firm and consensus forecasts indicate that the world is on course to see a robust 3.7% growth in 2018, its best performance since 2011,” QNB’s note said.

  Trump Tariff Barriers

It added that although increasing trade frictions may lead to new tariffs being introduced, thus far only around 1% of trade has been affected by tariff barriers and that bilateral trade between the United States and China accounts for only 3.2% of world exports, citing data from London-based Capital Economics.

QNB’s analysts said that slower demand in advanced economies outside the US and in China appear to be behind the decline in demand, with consensus growth forecast for the eurozone for 2018 slipping to 2.1% from 2.4%, and forecasts for Japan dropping to 1%, from 1.4% previously.

The note also said that China’s growth had slowed due to regulatory efforts to slow credit growth that has targeted the country’s shadow banking system. This has led to a slowdown both in retail sales and fixed asset investment growth in China, it added. However, it also said that growth in China is likely to remain above 6% as “both fiscal and monetary policies are eased and authorities prioritize expansion over financial deleveraging”.

Downward Pressure

A separate note on the global economy published by National Bank of Kuwait last Wednesday also said that there had been “downward pressure” on China’s economy as a result of the government’s efforts to temper risky lending.

However, it added that the Chinese government also “announced a spate of fiscal measures to bolster economic activity, including tax cuts for research and development, speeding up special bond sales aimed at increasing government infrastructure spending and also urged local governments to spend unused funds”.

It said that China’s economic growth slowed to 6.7% in the second quarter of 2018, and that the government was targeting growth of 6.5% overall.

  Need for Fairer Trade

The current world trade system is not perfect and China supports reforms to it, including to the World Trade Organization, to make it fairer and more effective, Beijing’s top diplomat said.

China is locked in a bitter trade war with the United States and has vowed repeatedly to uphold the multilateral trading system and free trade, with the WTO at its center.

But speaking late on Thursday to reporters after meeting French Foreign Minister Jean-Yves Le Drian, Chinese State Councilor Wang Yi said some reforms could be good.

While certain doubts have been raised about the current international trading system, China has always supported the protection of free trade and believes that multilateralism with the WTO at its core should be strengthened, Wang added.

“At the same time, we do not believe that the current system is perfect and without flaws,” he said. “China supports necessary reforms and perfection of the current system, including to the WTO, to make it fairer, more effective and more rational,” Wang added.

The basic tenets of the WTO, in opposing protectionism and supporting free trade should not change, but the rights of developing nations should also not be overlooked, he said.

“The aim of reform should be to allow countries to enjoy the development fruits of globalization more fairly, not to further widen the differences between south and north,” Wang said.

WTO reforms need to include listening to voices from all parties and broad consultation, and should especially listen to and respect the opinions of developing countries, rather than just allowing “one person to have a say”, he added.

“The issue of WTO reform is extremely complex, and involves many areas. China hopes all parties remain patient, and advance step by step.”

  China Not to Bow

But China will not buckle to US demands in any trade negotiations, the major state-run China Daily newspaper said in an editorial on Friday, after Chinese officials welcomed an invitation from Washington for a new round of talks.

The official newspaper said that while China was “serious” about resolving the stand-off through talks, it would not be rolled over, despite concerns over a slowing economy and a falling stock market at home.

“The Trump administration should not be mistaken that China will surrender to US demands. It has enough fuel to drive its economy even if a trade war is prolonged,” the newspaper said in the editorial.

If the US imposed new levies on Chinese imports then Beijing “will not hesitate to take countermeasures against US tariffs to safeguard China’s interests,” it added.

The US administration is readying a final list of $200 billion in Chinese imports on which it plans to levy tariffs of 10-25% in coming days, which would ramp up the trade war between the world’s two largest economies.

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