Dr. Ngozi Okonjo-Iweala, Director General of the World Trade Organization (WTO), asserted that moving away from open trade will only result in more price volatility, inflationary pressures, and generally worse growth prospects.
She claimed that predictable trade is a source of disinflationary pressure, reduced volatility, and increased economic resilience, whereas fragmenting trade into rival blocs would be very expensive, speaking at a recent economic policy symposium that was attended by leading central bankers, policymakers, and economists from around the world.
She stated, “A world that rejects predictable and open trade will be one marked by diminished competitive pressures and increased price volatility.”
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Globally, persistent inflation has returned, aggravating debt hardship and financial instability for numerous emerging economies, including Nigeria, as a result of following monetary tightening. Some officials have come to the conclusion that globalization needs to be reversed after considering these shocks as well as escalating geopolitical and regional conflicts.
WTO economists predict that if the world economy splits into two independent trading blocs, the real global GDP would decline by at least 5% over time, with some emerging economies suffering double-digit welfare losses.
Despite all the disagreements and doubts surrounding trade, the overall costs of trading in agricultural goods, manufactured goods, and services have decreased by 12% over the previous 20 years. The rising digitalization and trade in services may eventually become a major disinflationary driver.
‘“Falling trade costs for goods and especially for services mean that globalization can still be an engine for increased growth, efficiency, and economic opportunities, while also contributing to price moderation,” the Dr. Ngozi Okonjo-Iweala stated.
Increased digitalization and trade in services boosted by initiatives such as the agreement on Services Domestic Regulation, concluded by WTO members accounting for over 90 percent of global services trade, and the ongoing talks on electronic commerce now being negotiated among 90 WTO members, could become a powerful disinflationary force, she noted.
“Seizing these opportunities requires open and predictable international markets, anchored in a strong and effective rules-based multilateral trading system. Rather than deglobalization, there is a strong case for diverting some of the energy behind re-shoring to re-globalizing production instead,” Okonjo-Iweala noted.
She continued by pointing out that nations like Vietnam, Cambodia, Romania, Morocco, and Turkey, all of which have increased their participation in value chains across a variety of goods and services, are already showing signs of re-globalization.
“Today, as businesses recalibrate how they think about scale efficiencies versus concentration risks, they have an opportunity to bolster supply chain resilience by taking this diversification process further, to encompass more places in Africa that have good macroeconomic fundamentals but remain stuck on the margins of the global division of labour. Re-globalisation is a far better alternative and I urge us all to embrace open trade, multilateral cooperation,” she concluded.