The future of free trade looks uncertain. The World Trade Organization has slashed its forecast for international trade growth this year from 2.8% to just 1.7%. This would be the slowest growth since the financial crisis, when it declined. In 2017, the WTO is unsure what will happen. It has forecast trade growth in a huge range of between 1.8% and 3.1%. That’s less than the 3.6% previously forecast in April.
The WTO is unsure because we are in the midst of an international backlash to free trade. In the first US presidential debate last night, Donald Trump called NAFTA the “worst trade deal ever.” Hillary Clinton is less than enthusiastic about free trade. Last week thousands of people gathered in Brussels to protest trade agreements between the European Union and the US and Canada. Meanwhile, the British Brexit vote means the UK is will have to renegotiate its trade deals with Europe and the rest of world.
“The dramatic slowing of trade growth is serious and should serve as a wake-up call,” said Roberto Azevêdo, Director-General of the WTO. “It is particularly concerning in the context of growing anti-globalization sentiment. We need to make sure that this does not translate into misguided policies that could make the situation much worse.”
The WTO said in a statement Sept. 27 that trade contracted more in the first half of the year than expected because of slower global economic growth. The report also notes that the relationship between trade and global GDP doesn’t look good either.
In the long term, trade has grown 1.5 times faster than GDP. Next year trade is set to be slower than economic growth. While there are some indications that trade will be better in the second half of the year, Azevêdo says now is the time to recommit to open trade in order to spur economic activity long term.