Global trade is stagnating and that will have an impact on global economic growth. These two are closely linked, so policies that impact trade will place a constraint on global growth. While many have focused on the current Sino-US trade wars, the movement to greater protectionism has been growing since the Financial Crisis. This movement to protectionism is a global problem not just a US and China problem.
The US is just one of many who have moved to undercut the free trade environment. The sobering data and analysis on this movement to protectionism is given in the latest Global Trade Alert Report, Jaw Jaw not War War Prioritising WTO Reform Options The 24th Global Trade Alert Report by Simon J. Evenett and Johannes Fritz. All countries are behaving with domestic self-interest and not a global perspective.
When growth is under pressure, free trade is only paid lip service. Policies that subsidize exports and offer protection become the easy solution in a slowdown. Unfortunately, the G20 has done little to promote free trade. The WTO is not being used as a mechanism to solve disputes. There is a breakdown in the international trade order that will only get worse and further spillover to the international financial order.
The importance of these changes in the global trade order will have more than just a growth impact. It will change the value of companies. Trade focused firms will see an increase in the cost of business and a slowdown in growth potential. Firms offered subsidies will improve but only through the largess of government programs. Equity valuation will require a macro trade policy focus to make sense. If this protectionist trend is not reversed, any global recession will be further mired is a slow recovery. A capitalist liberal order with strong global organization is still needed for the common good.
The US is just one of many who have moved to undercut the free trade environment. The sobering data and analysis on this movement to protectionism is given in the latest Global Trade Alert Report, Jaw Jaw not War War Prioritising WTO Reform Options The 24th Global Trade Alert Report by Simon J. Evenett and Johannes Fritz. All countries are behaving with domestic self-interest and not a global perspective.
When growth is under pressure, free trade is only paid lip service. Policies that subsidize exports and offer protection become the easy solution in a slowdown. Unfortunately, the G20 has done little to promote free trade. The WTO is not being used as a mechanism to solve disputes. There is a breakdown in the international trade order that will only get worse and further spillover to the international financial order.
The importance of these changes in the global trade order will have more than just a growth impact. It will change the value of companies. Trade focused firms will see an increase in the cost of business and a slowdown in growth potential. Firms offered subsidies will improve but only through the largess of government programs. Equity valuation will require a macro trade policy focus to make sense. If this protectionist trend is not reversed, any global recession will be further mired is a slow recovery. A capitalist liberal order with strong global organization is still needed for the common good.
