WTO sees signs of fragmented trade, but no de-globalisation

GENEVA (Reuters) – Global tensions have started to fragment trade as rival trading relationships form, the World Trade Organization (WTO) said on Tuesday, but argued it is premature to declare that globalisation has gone into reverse.

The Geneva-based body said it had observed a sharp rise in unilateral trade restrictions and a growing view that cooperation with a more limited group of friendly counties and “de-risking” was the right course.

Since Russia’s invasion of Ukraine, trade between two blocs of countries with different United Nations voting patterns has grown by between 4% and 6% slower than trade within these blocs.

In the latest UN vote related to Ukraine, calling on Russia to withdraw its troops, 141 members voted in favour. Seven voted against and 32 abstained, including China, India and South Africa.

The WTO report said the divergence, which excludes figures for Russia and Ukraine, had been similar for foreign direct investment.

Trade flows between China and the United States had realigned, with increases for products not subject to tariffs and sharp reductions for some categories such as pharmaceutical products and semiconductors.

“The China-USA story is a very important one there in the data, but it’s not limited to that,” WTO Chief Economist Ralph Ossa told Reuters in an interview.

Trade concerns raised at WTO committees, seen as early warning indicators, have spiked as unilateral trade restrictions have grown.

However, overall trade had continued to grow, even between the United States and China where trade reached a record high in 2022, and the WTO said the worst predictions of supply shortages and sharply higher food prices had not materialised.

The report points to the rapid expansion of trade in digital services and environmental goods, but said a further increase in unilateral measures could yet fragment the world economy.

It argues a renewed drive towards integration – “re-globalisation” – is the way to tackle current problems of security, poverty and climate change.

(Reporting by Philip Blenkinsop; Editing by David Holmes)