Digest Content
- Global trade rebound beats expectations but marked by regional divergences
- WTO launches new online tool to help users navigate changes in product nomenclatures
- General Council chair briefs members on work towards MC12 outcome document
- Investment facilitation talks explore future Agreement integration into WTO legal structure
- DG Okonjo-Iweala on World Cotton Day: Cotton is crucial for sustainable development
Global trade rebound beats expectations but marked by regional divergences
The resurgence of global economic activity in the first half of 2021 lifted merchandise trade above its pre-pandemic peak, leading WTO economists to upgrade their forecasts for trade in 2021 and 2022.
The WTO is now predicting global merchandise trade volume growth of 10.8% in 2021 – up from 8.0% forecasted in March – followed by a 4.7% rise in 2022. Growth should moderate as merchandise trade approaches its pre-pandemic long-run trend. Supply-side issues such as semiconductor scarcity and port backlogs may strain supply chains and weigh on trade in particular areas, but they are unlikely to have large impacts on global aggregates. The biggest downside risks come from the pandemic itself.
Behind the strong overall trade increase, however, there is significant divergence across countries, with some developing regions falling well short of the global average.
The large annual growth rate for merchandise trade volume in 2021 is mostly a reflection of the previous year’s slump, which bottomed out in the second quarter of 2020. Due to a lower base, year-on-year growth in the second quarter of 2021 was 22.0%, but the figure is projected to fall to 10.9% in the third quarter and 6.6% in the fourth quarter, in part because of the rapid recovery in trade in the last two quarters of 2020 (Chart 1). Reaching the forecast for 2021 only requires quarter-on-quarter growth to average 0.8% per quarter in the second half of this year, equivalent to an annualized rate of 3.1%.
Trade volume growth is set to be accompanied by market-weighted GDP growth of 5.3% in 2021 and 4.1% in 2022 (revised up from 5.1% and 3.8% previously). GDP growth has been spurred on by strong monetary and fiscal policy support, and by the resumption of economic activity in countries that have been able to deploy COVID-19 vaccines at scale.
In the years before the global financial crisis (1990-2007), world merchandise trade grew around twice as fast as world GDP at market exchange rates, but subsequently slowed to about the same rate on average. The current trade projections imply that the ratio of trade growth to GDP growth will rise to 2.0:1 in 2021 before falling back to 1.1:1 in 2022. If the forecast is realized, this would indicate that the pandemic will not have had a fundamental structural impact on the relationship between world trade and income.
Overall, the trade recovery continues to diverge by region. In particular, the Middle East, South America and Africa look set to have the weakest recoveries on the export side, while the Middle East, the Commonwealth of Independent States, and Africa will have the slowest recoveries on the import side.
If the current forecast is realized, by the final quarter of 2022 Asia’s merchandise imports will be 14.2% higher than they were in 2019. Over the same period, imports will have risen by 11.9% in North America, 10.8% in South and Central America, 9.4% in Europe, 8.2% in Africa, 5.7% in the Commonwealth of Independent States and 5.4% in the Middle East. Asia’s exports will have grown 18.8% over that period, while all other regions will have recorded more modest increases: North America (8.0%), Europe (7.8%), CIS (6.2%), South America (4.8%), the Middle East (2.9%) and Africa (1.9%).
The forecast projects export volume growth in 2021 will be 8.7% in North America, 7.2% in South America, 9.7% in Europe, 0.6% in the CIS, 7.0% in Africa, 5.0% in the Middle East and 14.4% for Asia. Imports in the same year are set to grow by 12.6% in North America, 19.9% in South America, 9.1% in Europe, 13.1% in CIS, 11.3% in Africa, 9.3% in the Middle East and 10.7% in Asia. Exports and imports of LDCs will increase by an estimated 5.3% and 5.5%, respectively, in 2021.
As with the quarterly figures above, annual trade growth figures for 2021 are to a considerable extent a function of the decline suffered by each region in 2020. The pandemic’s impact on trade is better illustrated by looking at cumulative growth over the two years from 2019 to 2021. If the second half of this year turns out as expected, world merchandise trade will be up 4.9% compared to 2019. Over that period, export growth will be -0.6% in North America, 2.2% in South America, 1.0% in Europe, -1.0% in the CIS, -2.4% in Africa, -7.2% in the Middle East and 14.7% in Asia. Meanwhile, import growth between 2019 and 2021 will be 5.7% in North America, 8.1% in South America, 0.8% in Europe, 7.5% in the CIS, -1.0% in Africa, -5.9% in the Middle East and 9.4% in Asia. For LDCs, the volume of merchandise exports will increase by 3.2% between 2019 and 2021, while their imports are set to decrease by 1.6% over the same interval.
WTO launches new online tool to help users navigate changes in product nomenclatures
The WTO on 7 October launched a new online tool for keeping track of changes in the Harmonized Commodity Description and Coding System (HS), the system used for the classification of traded goods. The HS Tracker, developed with the support of the World Customs Organization (WCO), is also aimed at helping customs officials and traders prepare for HS amendments that will enter into force on 1 January 2022.
The HS Tracker brings together relevant information and documents relating to revisions to HS product nomenclatures, often resulting from changes in manufacturing processes and technological advancements, or developments in environmental and social issues. Since the creation of the HS in 1988 as a standardized language for classifying products, WCO contracting parties have introduced and adopted seven official amendments with HS 2022 as the latest version.
The HS plays a key role in world trade as it is used in customs tariffs, trade statistics, and trade negotiations, among others. The system is intended to assist trade officials, statisticians, lawyers, researchers, and businesses.
In the new tool, the “Subheading Visualizer” displays how a specific HS code has changed across different versions of the HS, with an explanation from the WCO on why the changes were undertaken. “HS at a Glance” provides a broad overview of the HS amendments by consolidating the different versions of the HS in a single combined structure. The filters and search functions make it possible to browse multiple HS nomenclatures simultaneously for a particular set of codes and determine whether they were affected by a specific amendment to the HS.
Access the HS tracker here https://hstracker.wto.org/
General Council chair briefs members on work towards MC12 outcome document
The chair of the General Council, Ambassador Dacio Castillo of Honduras, briefed WTO members on 7 October regarding his consultations on a possible outcome document for trade ministers to adopt at the WTO’s upcoming 12th Ministerial Conference (MC12). He encouraged delegations to continue to work towards producing a draft document by the end of October.
“Work towards a possible MC12 outcome document is a member-led process,” the chair declared.
Ambassador Castillo has been assisting WTO members in his capacity as General Council chair with work on the first part of the outcome document, which would cover: (i) the context in which MC12 takes place; (ii) broader political messages; and (iii) guidance from ministers on additional elements members may agree on.
The chair said that, based on the preliminary exchanges in the small group, members believe the first part of the outcome document should take into account both the external and internal environments in which MC12 is taking place, namely the pandemic, the changed trading landscape, and the systemic/internal challenges that the WTO is facing.
Members have also expressed views that “political messages” should note the need for greater solidarity and collaboration amongst members, the role of international trade and the WTO in global economic recovery, a reaffirmation of the principles enshrined in the Marrakesh Agreement, and the needs and interests of developing country members, in particular the least developed members.
Ambassador Castillo also briefed on his consultations with members regarding the WTO’s Work Programme on Electronic Commerce as well as the possible continuation of the e-commerce moratorium. Since 1998, WTO members have periodically renewed the moratorium at each Ministerial Conference and have continued addressing e-commerce related issues in the Goods Council, the Services Council, the TRIPS Council and the Committee on Trade and Development as part of the e-commerce work programme.
Following the chair’s intervention, Ambassador David Walker of New Zealand provided his report on his consultations within the Facilitator-led Multilateral Process on the WTO response to the COVID-19 pandemic. Ambassador Walker said a large number of delegations in the consultations he undertook as facilitator attached high priority to a meaningful outcome at MC12 on the use of export restrictions and prohibitions in the context of the pandemic, with discussions underscoring the importance of keeping markets open.
Investment facilitation talks explore future Agreement integration into WTO legal structure
WTO members taking part in the discussions on investment facilitation for development (IFD) made steady progress in negotiating a future Agreement at a new round of meetings on 4-5 October 2021.
Participants discussed the different options bearing in mind the specificities of the IFD Agreement, including its scope (applies to both goods and services); the “erga omnes” nature of most provisions (they would be implemented de facto on a non-discriminatory basis); and the strong development component (calling for comprehensive technical assistance and capacity building for its implementation).
While participants stated that their preferred option would be to achieve a “multilateral outcome” benefiting all WTO members (ideally an Agreement under Annex 1 of the Agreement Establishing the WTO, applied on an MFN-basis), they also remained open to consider other options. At the same time, participants highlighted that their priority, at this stage, was to advance as much as possible on the text of the Agreement.
Participants were also asked about their intention and readiness to apply the future IFD Agreement on a most-favoured nation (MFN) basis, thus conferring rights also to non-participants and potentially facilitating the consensus required for incorporating an IFD Agreement outcome into Annex 4 (Plurilateral Trade Agreements) of the Agreement Establishing the WTO.
Finally, delegations shared their views on the application of a future Agreement on a provisional/interim basis and on the possibility of such provisional application being agreed in the margins of a Ministerial Conference.
Further negotiating meetings are scheduled for 2-3 November and 24 November, with intersessional meetings on 20-21 October and 16-17 November 2021.
DG Okonjo-Iweala on World Cotton Day: Cotton is crucial for sustainable development
On 7 October, the WTO celebrates World Cotton Day to reaffirm cotton’s vital role in the livelihoods of millions of people around the world. Director-General Ngozi Okonjo-Iweala said the cotton sector has a crucial role to play in contributing towards the achievement of sustainable development goals. A wide range of activities are taking place at the WTO and on online platforms to mark the day.
The WTO is hosting an exhibition on cotton in its headquarters in Geneva from 6 to 8 October, with contributions from the WTO Secretariat, WTO members and partner organizations. Further information is available on the WTO’s World Cotton Day webpage “WTO/Celebrating World Cotton Day: an opportunity to recognize the global importance of cotton”. Also on the eve of World Cotton Day, the WTO and the International Trade Centre (ITC) organized a webinar on “how to develop a sustainable cotton to clothing value chain in Africa”.