BOC's Poloz: Weaker Global Trade Not Sign of Impending Recessn
–Calls In Speech For Support For New Free Trade Deals
OTTAWA (MNI) – Bank of Canada Governor Stephen Poloz said Tuesday that the present “striking weakness of international trade” will improve, if only slowly, and does not foretell a recession.
International trade has reached “a new balance point” wherein the main gains to be had from global economic and commercial integration have been largely exploited,” he said in New York.
“The weakness in trade we’ve seen is not a warning of an impending recession,” Poloz said in the text of remarks for American and Canadian financial executives in New York.
“Rather, I see it as a sign that trade has reached a new balance point in the global economy – and one that we have the ability to nudge forward,” Poloz told audience members from Securities Industry and Financial Markets Association of New York and the Investment Industry Association of Canada
While there can be some improvement in global trade by further improvements in integration of supply chains and other methods of the past decades, any new wave of opportunity has to come from the creation of new firms, new technologies and more trade liberalization, Poloz said.
He called for support for new trade liberalization programs, which are under attack by many in the United States, Europe, and beyond, such as the TransPacific Partnership and the free trade deal between Canada and the European Union which has been reached by Canada and the EU but which has yet to be ratified.
Such trade agreements as these would support “a new wave of integration and global trade growth,” he said.
Poloz spoke as the IMF and other international institutions have marked down, again, estimates of global economic growth, and the recent Monetary Policy Report of his BOC reduced its 2016 estimate of global growth to 3.0% from 3.3%, and to 3.4% from 3.6% for 2017.
The main opportunities in economic globalization have been exploited, Poloz said, adding, “China can join the WTO (World Trade Organization) only once.”
Global trade looking forward is likely to grow more slowly than in the past because “global investment is in a lull,” and because China’s long expansion is subsiding to a more sustainable shift toward domestic consumption from production for export and thus “less trade,” he said.
A “balance point” is being reached from two decades of globalization and that level can only be improved in three ways, Poloz said. They are:
– Creation of new firms providing new productivity growth, a stronger element in the United States than in Canada. Creation of new firms “could be the most promising source of new trade and productivity growth,” Poloz said;
– Companies and investors finding new ways to improve upon efficiencies in the present global supply chains, in good part through new free trade agreements;
– New technologies, which could “allow the global economy to take its next giant step forward.”
** MNI OTTAWA **