Growing tide of protectionism threatens already weak outlook for global trade
Global trade is experiencing a dramatic slowdown, just as leading political figures in the United States and elsewhere show an unusual level of hostility toward globalization.
The World Trade Organization announced Tuesday that the global trade will expand at the slowest pace this year since the financial crisis, reflecting weak economic growth and low levels of investment in factories and infrastructure in China, Brazil and North America. The group slashed its estimates for 2016 trade growth by more than one-third, to just 1.7 percent, and also cut its estimate for 2017 trade growth to a range of 1.8 percent to 3.1 percent, down from a previous estimate of 3.6 percent.
The night before, both major party presidential candidates, Donald Trump and Hillary Clinton, staked out positions skeptical of increased trade, expressing strong opposition to the big Asia trade deal that President Barack Obama hopes to pass before his term runs out.
Meanwhile, across the Atlantic, Britain is contemplating how to begin extricating itself from the European Union after voters chose in a referendum in June to leave the economic and political alliance.
“There is this strong anti-globalization movement that’s really dangerous,” said Caroline Freund, a senior fellow at the Peterson Institute for International Economics and a former top economist for the World Bank. “One thing we know for sure is that closing our borders is not going to support growth or living standards in the U.S.”
Politicians blame trade deals – instead of automation, digital tech – for economic ills
Freund said the global slowdown in trade was due to a broader slump in investment that has clamped down on the purchases of goods used in factories and on construction sites, like machinery and equipment, as well as a general slowdown since the rapid economic growth and ample liberalization measures of the 1990s.
However, she cautioned that rising protectionism and the lack of a push toward free-trade policies could contribute to a further slowdown of trade growth in the future.
Freund also cited a growing political tendency to blame trade deals for a wide host of American economic ills, including the decline of manufacturing jobs, rising unemployment and growing inequality.
Economists say these economic ills are probably due to a combination of trends beyond just trade, including the rise of automation, the transformative effects of digital technology, and the long-term decline of labor unions, she added.