WTO: Trade slowing due to supply chain issues
The WTO goods trade barometer, published on a quarterly basis by the intergovernmental organisation, signals changes in world trade growth two to three months ahead of official merchandise trade volume statistics.
In sharp contrast to August’s barometer, which marked the highest growth pace on record, the most recent read-out of 99.5 indicates growth is slightly below the baseline trend, which reflects what the WTO calls “a broad loss of momentum in global goods trade”.
The index’s current reading comes as little surprise, and is broadly consistent with a revised trade forecast published by the WTO in early October which foresaw global merchandise trade volume growth of 10.8% in 2021 – up from 8.0% forecasted in March – followed by a 4.7% rise in 2022. The forecast also predicted that the post-pandemic rebound in global merchandise trade levels would taper off in the second half of 2021.
The barometer is comprised of various individual indices that are combined to provide an overall score. The WTO notes that all of these fell in the latest period, although some sectors fared worse than others.
The index for automotive products saw the steepest decline, falling from 106.6 to 85.9, dropping below trend as a shortage of semiconductors hampered vehicle production worldwide.
This shortage of semiconductors, also known as chips, was also reflected in the electronic components index (99.6), which fell from above trend to on trend.
Indices for container shipping and raw materials also returned to near their recent trends: container shipping saw its score fall from 110.8 to 100.3, while raw materials dropped from 104.7 to 100.
Only the air freight index (106.1) remained firmly above trend as shippers sought substitutes for ocean transport – a key indicator of the extent to which supply chain issues are hindering international trade.
“It now appears that demand for traded goods is also easing, as illustrated by falling export orders, which further weighed down the barometer. Cooling import demand could help ease port congestion, but backlogs and delays are unlikely to be eliminated as long as container throughput remains at or near record levels.”
Across the board, global trade is expected to post a marked recovery this year. In September, the UN Conference on Trade and Development said that while there are disparities in the recovery in goods trade globally – with the UK, Africa and the Middle East lagging – real growth in goods and services will total 9.5% in 2021.
But there are potentially significant downside risks, including regional disparities, continued weakness in services trade, and the lagging vaccination rates in developing countries.
Speaking in October, the WTO’s director-general Ngozi Okonjo-Iweala said: “Inequitable access to vaccines is exacerbating economic divergence across regions.”
“The longer vaccine inequity is allowed to persist, the greater the chance that even more dangerous variants of Covid-19 will emerge, setting back the health and economic progress we have made to date.”
According to the latest WTO quarterly trade volume statistics, year-on-year trade growth as a result of a lower base in the second quarter of 2021 was 22%. As supply chain issues continue, the figure is now projected to fall to 10.9% in the third quarter and 6.6% in the fourth quarter.