WTO Warns of Growing Fragmentation in International Trade

WTO Warns of Growing Fragmentation in International Trade. Tang Ke/for China Daily

Trade Concerns Surge: WTO Highlights Rise in Trade Disputes

The World Trade Organization (WTO) has raised concerns about the increasing fragmentation in international trade, citing a significant rise in the number of trade concerns raised over the past six years. These trade concerns, addressed within WTO committees, serve as early indicators of potential trade disputes.

Key Concerns and Unilateral Measures

The UN trade body identified several unilateral measures as the chief concerns expressed by nations, including:

Indonesia’s export restrictions on raw materials.
China’s restrictions on gallium and germanium exports.
The European Union’s Carbon Border Adjustment Mechanism (CBAM) and other EU Green Deal measures.
The US Inflation Reduction Act (IRA).
Warning Against Unilateral Trade Measures

WTO cautioned that such unilateral trade measures could trigger a cycle of retaliatory responses and lead to a more fragmented global trade landscape. This could result in the dominance of regional trade blocs, a trend that could be challenging to reverse. The report highlighted a ninefold increase in the number of trade concerns raised at the Council for Trade in Goods between 2015 and 2022.

Impact on the Global Economy

The rapid expansion of trade in digital services and environmental goods was also noted, with WTO emphasizing that further unilateral measures could exacerbate the fragmentation of the world economy. The report stressed the need for a renewed push towards integration, referred to as “re-globalization,” as a means to address current challenges related to security, poverty, and climate change.

Challenges to Globalization

WTO’s report touched upon growing skepticism about the progress of globalization, citing factors such as new industrial strategies, limitations in the expansion of global supply chains, and increasing geopolitical tensions. Trade strategies aimed at reshoring manufacturing production could result in a decline in the overall significance of trade in the global economy. Additionally, strategies like near-shoring and friend-shoring could lead to further fragmentation along regional and geopolitical lines.

In summary, the WTO’s warning underscores the importance of addressing trade concerns and pursuing collaborative approaches to ensure the continued stability and integration of the global economy.