GENEVA: The de-globalization of world trade is far from a reality, but “the first signs of fragmentation” are appearing, the WTO warned on Tuesday, which expressed concerns about the effects of the phenomenon on development and growth.
The idea of “de-globalization” has gained traction since the Russia-Ukraine war and Covid-19 pandemic-related lockdowns in China prompted major disruption to global supply chains.
In its annual report on world trade, economists with the World Trade Organization argued in favor of “re-globalization” as the first signs of trade fragmentation threaten to slow development and growth, according to AFP.
WTO chief economist Ralph Ossa said that for several decades, the expansion of international trade has surpassed global economic growth, but the trend kind stopped around the global financial crisis of 2008–2009, and since then, it has been kind of stagnating.
He said that after this phase of slowing globalization, the question is whether the world moving towards a phase of deglobalization, as the report shows geopolitical tensions are starting to have an impact on trade flows across the world.
Ossa said that the world is quite far away from deglobalizing, but at the same time, it has started seeing the first cracks in the system. He said that trade fragmentation tends to follow geopolitical divisions, especially since the Russian invasion of Ukraine.
WTO calculates trade between two geopolitical blocs
The WTO calculated trade between two geopolitical blocs that were split according to how they voted at the United Nations General Assembly.
It did not identify states by name, but tensions have risen between the Western nations, China and Russia in recent years.
The report said the flow of goods between the two sides has increased between 4 and 6% slower than within each bloc.
WTO research economist Victor Stolzenburg, who coordinated the report, said that the world is really at a crossroads.
The WTO warned that a division of world trade into two distinct blocs would cost the globe an estimated 5% of real income, with some developing economies facing double-digit losses.
