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WTO Cuts its Global Trade Growth Forecast for 2016 and 2017

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The World Trade Organization has lowered its projection for trade growth this year to its lowest rate since 2009.  The trade body cut its forecast for exports and imports this year, and it now sees growth of just 1.7% for 2016.  Next year’s expectations were also revised lower, with a current projected trade growth rate between 1.8% and 3.1%, down from its previous expected growth rate of 3.6%.  Forecasts were cut in large part because of weak trade growth in China, North America, and Brazil over the first half of the year.

It is widely believed that increased trade helps to foster competition and ultimately allocates production to the most cost-efficient location.  Going along with this sentiment, the WTO has warned that a slower trade growth could negatively impact long term economic growth.  Roberto Azevedo, the organization’s director-general, said that the slowdown of trade growth is important to take note of, and that it “should serve as a wake-up call”.  Mr. Azevedo also made a note of the rise in anti-trade rhetoric occurring across the political spectrum.  An example of this rhetoric can be seen in the US presidential election, where both Donald Trump and Hillary Clinton seek to block the Trans-Pacific Partnership.

“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, not only from the perspective of trade but also for job creation and economic growth and development which are so closely linked to an open trading system”-Roberto Azevedo.

The World Trade Organization’s projection for this year will be the first time in 15 years where it believes that trade will grow slower than gross output.  Typically, world trade grows about 1.5 times as fast as total output.

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