UNCTAD Report: Tepid Growth, Support for G90

UNCTAD’s Trade and Development Report, released last week, paints a bleak future for the global economy. The report indicates that world economic output growth is anticipated to slow down to 2.4% in 2023, before experiencing a slight increase to 2.5% in 2024. These figures represent some of the lowest growth rates observed over the past four decades, barring crisis years.

Furthermore, the projected growth rate for 2023 falls below the conventional 2.5% threshold, which typically signals a global economic recession. All regions, with the exception of East and Central Asia, are forecasted to record slower growth this year than in 2022. Europe is set to experience the most significant decline, with a drop of 2.3 percentage points.

The report also projects that major emerging economies might not sufficiently counterbalance the sluggish growth in more advanced economies. As a result, developing and least developed nations are likely to face escalating challenges, with dim prospects of international trade serving as a growth catalyst.

Following a turbulent period from 2020 to 2022, global trade in goods and services is estimated to grow by merely 1% in 2023, a rate significantly below the world economic output growth. This rate is also lower than the average growth observed over the past decade, which itself was the slowest average growth period for global trade since World War II ended. The report suggests that, in the medium term, trade is reverting to its muted pre-crisis trend. In the short term, the trade figures are projected to dip even lower, despite the relative resilience shown by global services trade, as the growth of merchandise trade is expected to be negative in 2023.

Trade Policies Undermining Growth

The subdued trade outlook coincides with intensified focus on policy matters. The benefits that some nations have reaped from the international trading system have led to growing skepticism regarding the principles of global governance and even the concept of free trade itself. Buzzwords like "fragmentation," "deglobalization," "slowbalization," "reshoring," "nearshoring," "friendshoring," "de-risking," "decoupling," "open strategic autonomy," and "new industrial policy" encapsulate this skepticism, prompting policymakers to reevaluate the strategic importance they place on trade.

The report sheds light on the evolving policy discussions surrounding the regulatory framework of global trade. It notes a growing sentiment that the potential drawbacks of deeper trade relations are not merely peripheral. Additionally, the once-prevailing idea that deregulating reforms would naturally yield benefits is now being challenged.

To effectively navigate the contemporary global landscape, developing countries are advised to reassess their existing trade pacts at various levels. This will enable them to carve out the policy space needed to reconfigure their production, consumption, and trading dynamics.

Support for the G90 Proposal

In this vein, the report fervently backs the Group 90 proposal within the World Trade Organization. This proposal seeks a review of ten specific multilateral trade accords, including the Agreement on Subsidies and Countervailing Measures, the Agreement on Trade-Related Investment Measures, and the Trade-Related Aspects of Intellectual Property Rights. The G90 proposal aims to fortify the existing flexibilities available to developing members, making them clearer, more efficient, and operational. This enhancement will better position these nations to achieve their developmental objectives.

The report draws attention to recent initiatives by developed countries, such as the European Union's carbon border adjustment mechanism (CBAM) and the Deforestation Regulation. Both measures, the CBAM introduced this month and the EUDR effective since June 2023, have sparked global concerns, particularly among developing nations.

Several countries, China included, are poised to contest these initiatives at the WTO. Their objections stem from concerns that specific carbon pricing certificates based on a product's origin might contravene the WTO's "most favored nation" principle. Such measures could also disproportionately burden developing nations, given their often limited adaptability to new standards.

Additionally, by levying identical carbon taxes on both developed and developing countries, the proposed CBAM might breach the Paris Agreement's principle of "common but differentiated responsibilities." With regard to the EUDR, there are apprehensions that its traceability prerequisites might be impracticable, potentially acting as an implicit import prohibition.

The report emphasizes the unjust nature of imposing equal demands on nations with varying levels of affluence. It underscores the historical fact that wealthier nations have consistently contributed more to carbon emissions and deforestation. To address these disparities, a synthesis between the principles of non-discrimination and CBDR is essential.

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