Global Trade Outlook & Statistics Report

What’s in today’s article?

• Why in the News?
• About World Trade Organisation
• Global Trade Outlook & Statistics Report

Why in the News?

The World Trade Organisation has published the latest edition of the Global Trade Outlook & Statistics Report.

About World Trade Organisation

• The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade between nations.
• It came into operation in 1995, following the 1994 Marrakesh Agreement.
• It replaced the General Agreement on Tariffs and Trade (GATT) that had been established in 1948.
• It facilitates trade in goods, services and intellectual property among participating countries by providing a framework for negotiating trade agreements, which usually aim to reduce or eliminate tariffs, quotas, and other restrictions.
• These agreements are signed by representatives of member governments and ratified by their legislatures.
• Members:
  • WTO has 164 member states which represents over 96% of global trade and global GDP.
• Headquarters: Geneva, Switzerland.
• Decisions are reached by consensus amongst all the 164 member states. Hence, all the members enjoy veto powers.

Global Trade Outlook & Statistics Report

• The WTO’s “Global Trade Outlook and Statistics” analyses recent global trade developments up to the fourth quarter of 2023 and presents the organization’s forecasts for world trade in 2024 and 2025.
• Breakdowns of merchandise and commercial services trade by sector and region are provided, together with details on leading traders.
• Key Takeaways from the Report:
  • World merchandise trade volume is projected to grow 2.6% in 2024 and 3.3% in 2025, following a larger-than-expected decline of -1.2% in 2023.
• Import demand in real terms was weak in 2023 in most regions, especially in Europe but also in North America and Asia.
• The main exceptions were the Middle East and the Commonwealth of Independent States (CIS) region, where imports surged.
• World real GDP growth slowed from 3.1% in 2022 to 2.7% in 2023.
  • However, it is expected to remain mostly stable over the next two years at 2.6% in 2024 and 2.7% in 2025.
  • The contrast between the steady growth of GDP and the slowdown in merchandise trade volume is linked to inflationary pressures, which had a downward effect on consumption of trade-intensive goods, particularly in major traders.
• The US dollar value of world merchandise trade fell 5% in 2023 to US$ 24.01 trillion.
  • However,this decline was mostly offset by a strong increase in commercial services trade, which rose 9% to US$ 7.54 trillion.
  • The decline in merchandise exports was partly due to falling prices for commodities, such as oil and gas.
  • Meanwhile, commercial services trade was lifted by recovering international travel and surging digitally delivered services.
• World trade has been remarkably resilient in recent years despite the presence of several major economic shocks.
  • By the end of 2023, merchandise trade volume was up 6.3% compared to 2019.
  • Commercial services also increased, with annual US$ values up 21% between 2019 and 2023.
• In 2024 and 2025, inflation is expected to gradually abate.
  • This will allow real incomes to grow again in advanced economies, boosting consumption of manufactured goods.
  • A recovery of demand for tradable goods in 2024 is already evident.
  • This is related to an increase in household consumption linked to improved income prospects.
• Risks to the forecast are on the downside due to current geopolitical tensions and policy uncertainty.
  • Conflict in the Middle East has diverted sea shipments between Europe and Asia while tensions elsewhere could lead to trade fragmentation.

Rising protectionism is another risk that could undermine the recovery of trade in 2024 and 2025.

Q1. What is a Free Trade Zone?

A free-trade zone is a class of special economic zone. It is a geographic area where goods may be imported, stored, handled, manufactured, or reconfigured and re-exported under specific customs regulation and generally not subject to customs duty.

Q2. What is a Custom Union?

A customs union is generally defined as a type of trade bloc which is composed of a free trade area with a common external tariff. Customs unions are established through trade pacts where the participant countries set up common external trade policy.