Comments echo WEF report which also warned risk managers that weakened political commitment to globalisation could cripple global supply chains and reduce economic activity
World Trade Organization (WTO) Director-General Roberto Azevêdo has warned the world is at risk of a trade war in the wake of US President Trump’s announced tariffs of 25% on steel imports and 10% on aluminum.
“In light of recent announcements on trade policy measures, it is clear that we now see a much higher and real risk of triggering an escalation of trade barriers across the globe. We cannot ignore this risk and I urge all parties to consider and reflect on this situation very carefully,” Azevêdo told heads of WTO delegations at a closed-door meeting in Geneva yesterday.
“Once we start down this path, it will be very difficult to reverse direction. An eye for an eye will leave us all blind and the world in deep recession. We must make every effort to avoid the fall of the first dominoes. There is still time,” he continued.
The news comes off the back of the World Economic Report 2018 which forewarned risk managers that political commitment to globalisation has weakened in the wake of the global financial crisis and even minor disputes could trigger an unravelling.
”Against a backdrop of deepening protectionist sentiment, trade disputes could spread rapidly by triggering adverse impacts and retaliatory moves along global value chains,” said the report. ”The same pressures fomenting trade disputes would also undermine the already-weakened institutions designed to resolve them, potentially leading to multilateral rules being openly breached.
The report also issued a stern warning for businesses that the breakdown of the global trade system ”would roil supply chains and reduce overall economic activity”. Adverse impacts such as lower output and employment would be unevenly distributed within and between countries, creating new inequalities and frustrations. If this, in turn, fuelled more aggressive mercantilism, the risk would increase of proliferating trade-related disputes triggering deeper geopolitical tensions and policies of gunboat diplomacy on trade.”
Whatever the settled position on global trade is to be, more deliberation and consensus-building would bolster its legitimacy. A period of de-globalization may be seen by many as a welcome corrective, but rejecting current frameworks in favour of binary nationalistic approaches would cause significant disruption. Securing durable and worldwide support for globalization would be made easier by an increased domestic policy focus on cushioning the impact on individuals and regions affected by transitions in economic activity.