Global governance needs reform for full recovery of world trade

Despite improvements in the recovery of global trade in recent months, a slew of factors, including uncertain growth prospects in developed economies such as the United States, rising unilateralism and protectionism, and disruptions to international supply chains, are still posing challenges to global trade prospects.

Data from the World Trade Organization show that global trade in goods declined by 1.2 percent in 2023, mainly because of declining imports from major markets such as Europe and North America. However, with the weakening of global inflationary pressure and news coming in that major developed economies will cut interest rates, the outlook for global trade has begun to improve and the trade growth rate began picking up in the first quarter of 2024.

However, this does not change the fact that challenges to global trade growth remain.

First, weak growth in some advanced economies such as the US may affect the recovery of global demand. A series of data released in May showed that the US is seeing dampened consumption, weak manufacturing activity and a cooling labor market, which, coupled with the negative impact of high interest rates, is bringing the US economy onto a downward trajectory. Europe is expected to achieve moderate economic growth, but the strategic autonomy of the European economy is relatively limited, and its recovery always faces insufficient backup momentum. Japan's economy has been mired in stagnation for some time, and the recent fraud in its auto sector will further cast a shadow on its economic prospects.

Second, unilateralism and protectionism that undermine the recovery of global trade have recently intensified. Concocting China's "production overcapacity" theory, the US has decided to impose new tariffs on products imported from China. It has also gone all out to persuade other economies to join the containment of China's exports, especially exports of its new energy products. Washington's politicization and securitization of economic and trade issues have not only increased the risk of global trade fragmentation, but also hindered the free flow of production factors in many areas, bringing downside risks to global trade growth.

Geopolitical tensions are also an important factor affecting global trade trends. The crisis in the Red Sea and tensions in the Middle East could disrupt shipping routes, pushing up shipping costs, prolonging voyages and breaking supply chains.

It should be noted that as a representative of the developed economies, the US should have shouldered the responsibility of promoting global trade, but it has instead posed the biggest challenge to it. This justifies the urgent need for reforming and reconstructing global governance.

ECONOMIC DAILY