Globalisation stalling amid trade slowdown: OECD

It trims global growth forecast, warns of falling living standards

PARIS • A collapse in trade growth suggests that globalisation may be stalling and is contributing to a stagnation in world economic output, said the Organisation for Economic Cooperation and Development (OECD) yesterday.

The organisation trimmed its global growth forecasts by 0.1 point for this year to 2.9 per cent, down from its last estimates in June and the lowest rate since the global financial crisis of 2008-2009.

The volume of world trade declined in the first quarter and will fall short of overall output growth in the full year, it said in a report.

  • 2.9%

    Global growth forecast for 2016

    3.2%

    Global growth forecast for 2017

A growing backlash against trade liberalisation as well as recessions in some big commodity-producing countries were adding to the trade slowdown, which the OECD warned could erode already flagging productivity and thus ultimately living standards.

"Trade growth rates have deteriorated dramatically since the financial crisis," OECD chief economist Catherine Mann said in an interview. "Some people might say this is a good thing. No, this is damaging and it shows up as a decline in productivity growth."

Increasing trade fuelled the expansion of the world economy between the mid-1980s and the mid- 1990s, with trade growing at more than twice the pace of global output by the end of the final decade of the last century.

Since the 2008 financial crisis, policymakers have struggled to revive both trade and growth.

The OECD yesterday also warned that the expansions in developed economies are weakening as major emerging market commodity producers show only a "gradual improvement".

With global growth seen picking up to only 3.2 per cent next year - trimmed from 3.3 per cent in June, Ms Mann warned that that would be too little to generate the jobs that youth expected and to respect pension promises to the elderly.

"This is not a pretty picture for global growth," she said.

A backlash against trade has surged onto the political agenda of several countries facing elections in the coming months.

Mr Donald Trump, the Republican candidate in the US presidential election, has campaigned hard to roll back trade liberalisation while Germany and other European countries saw tens of thousands of people protest last Saturday against planned free trade deals with the United States and Canada.

Ms Mann said that while voters could easily see losses from increased trade in the form of job cuts, the gains - lower prices for goods and more choice - were less visible.

"Erosion of trade in some ways is death by a thousand cuts with protectionism encroaching here and there," Ms Mann said.

"If we could get global trade back on track, we would be able to recover something."

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on September 22, 2016, with the headline 'Globalisation stalling amid trade slowdown: OECD'. Print Edition | Subscribe