"De globalization" without data support, WTO calls for "re globalization"

It's time to use data to observe global trade trends again.

On the 12th, the 2023 Public Forum of the World Trade Organization opened in Geneva, Switzerland. The WTO released the 2023 World Trade Report, which showed that despite some fragmented features, international trade is still thriving throughout 2022, which means that the overall discourse on de globalization has not been supported by data.

The WTO called for "re globalization" at the meeting. On the same day, WTO Chief Economist Osama introduced the report at the opening ceremony of the forum, stating that if we want to overcome the most urgent challenges we are currently facing, we need to embrace trade rather than reject it. He said, "The report specifically mentions expanding trade integration to more economies and people, which is a process we call're globalization '."

"Starting to see several cracks appearing in the system"

WTO Director General Okonjo Ivira stated that the international economic order after 1945 was based on the concept of strengthening trade and economic ties, interdependence among countries, and promoting peace and common prosperity.

"For most of the past 75 years, this philosophy has guided policymakers, laying the foundation for an unprecedented era of growth, higher living standards, and poverty reduction," said Okonjo Ivira.

In the past few decades, the growth rate of global trade has far exceeded the growth rate of global gross domestic product. Osa stated that this trend came to a halt during the global financial crisis of 2008-2009 and has since been almost stagnant.

Osa said, "Although we are still quite far from de globalization, we are starting to see several cracks in the system." He refers to the trend of trade fragmentation shown in this report.

The WTO stated that the degree of decoupling, friendly outsourcing, and de globalization can easily be exaggerated, while also warning of the hidden dangers in this trend.

According to the voting model of the United Nations General Assembly, the WTO calculated two hypothetical geopolitical groups, and the results showed that the growth rate of goods trade flow between the two groups was 4% -6% slower than the growth rate of trade flow within these groups. The report states, "There are preliminary signs of trade readjusting in a geopolitical direction."

This trend is also evident in foreign direct investment flows. "Foreign direct investment, global supply chains, and international trade flows are closely linked. Therefore, FDI, along with geopolitical differentiation, may indicate similar development trends in global trade flows in the future," the report warns.

The WTO also warned that if global trade were to split, it could result in a loss of 5% of global GDP. "If left unchecked, this trend may ultimately lead to the fragmentation of the world economy," said Okonjo Ivera

The WTO has observed that more and more countries such as the United States are imposing bans on strategically significant trade in goods and services on the grounds of national security risks. Between 2017 and 2022, WTO members filed 38 complaints against such measures, which is twice the number from 2011 to 2016.

At the same time, complaints from WTO members about trade barriers to goods are also constantly increasing. For example, the number of cases of imposing tariffs on imported products has doubled compared to the period from 2011 to 2016, reaching 164 cases between 2017 and 2022.

However, the report states that discussing "de globalization" is still too early. Data shows that in 2022, global commodity trade increased by 12% to reach $25.3 trillion, partly due to global inflation.

According to WTO statistics, China US trade reached a new high in 2022. The WTO investigation found that the trade volume of products not affected by tariffs between China and the United States is still increasing, but trade in certain categories such as pharmaceutical products and semiconductors is decreasing.

At the regular press conference of the Ministry of Commerce in February this year, some media questioned that "according to US data, the total amount of goods trade between the United States and China reached $690.6 billion in 2022, setting a new historical record." In response, spokesperson for the Ministry of Commerce, Shu Jueting, stated that economic and trade cooperation between China and the United States is related to the vital interests of the two peoples and plays a crucial role in global economic growth. In 2022, statistical data from both sides showed that the bilateral trade volume between China and the United States reached a historic high, demonstrating strong resilience. This fully demonstrates the essence of highly complementary economic structures and mutually beneficial economic and trade cooperation between China and the United States.

New Power of Global Trade: Re globalization

The aforementioned report also shows that in the past year, there have been new trends in trade in services, trade in environmental products, and global value chains. The global service trade volume in 2022 was 6.8 trillion US dollars, a year-on-year increase of 15%.

According to data from the Ministry of Commerce, China's service trade continued to maintain a growth trend in the first half of 2023. The total import and export volume of services reached 3135.84 billion yuan, a year-on-year increase of 8.5%. Of note is the increase in the proportion of knowledge intensive service trade.

Zhou Nianli, a researcher at the China World Trade Organization Research Institute of the University of International Business and Economics, stated in a recent interview with First Financial News that the increase in the proportion of knowledge intensive service trade reflects the optimization of China's service trade structure.

"The main non-tariff trade barriers encountered in service trade are policy and institutional barriers such as non mutual recognition of professional qualifications. It is not as obvious as tariffs and is relatively hidden. Now, we mainly reduce and eliminate these implicit non-tariff institutional barriers by accepting high standards of international economic and trade rules, promoting the liberalization and facilitation of service trade." She explained.

The WTO proposes that, based on evidence, "re globalization" is a new driving force for incorporating more people, economies, and urgent issues into global trade, and is a more promising solution than global trade fragmentation. Re promoting integration and "re globalization" is the way out to address current security, poverty, and climate change issues.

The report shows that trade openness can reduce the likelihood of conflicts and promote a sharp decline in poverty rates over the past forty years. In addition, the technological progress brought about by trade has also had a huge impact on carbon reduction.

Okonjo Ivera stated that "re globalization" will bring more economies and sectors into the new driving force of world trade flow, which will help reduce poverty, address climate change through the dissemination of green technologies, and enhance security.

"The WTO is imperfect and far from perfect. However, the reasons for strengthening the trading system are much more sufficient than the reasons for abandoning the trading system," said Okonjo Ivera.