WASHINGTON – Fragmentation of the global economy and a retreat from global trade would make countries more vulnerable to production shocks arising from natural disasters and outbreaks of fatal diseases, the head of the World Trade Organization said.
WTO Director General Ngozi Okonjo-Iweala told an event hosted by the National Foreign Trade Council that economists estimated that a fragmentation of the global economy could reduce global gross domestic product by 5 percent in the longer run.
She said those losses would be compounded by higher transaction costs and balance of payments distress. It would also make it much harder to tackle problems such as climate change, or stabilizing global food and fertilizer markets that had been badly disrupted by the war in Ukraine.
WTO last month revised down its forecast for global trade growth this year to 3 percent from 4.7 percent because of the impact of the Russia-Ukraine war and warned of a potential food crisis caused by surging prices.
The report from the global trade watchdog said the conflict, now in its seventh week, had damaged the world economy at a critical juncture as the coronavirus pandemic – and Chinese lockdowns specifically – continues to weigh on the recovery.
Okonjo-Iweala also warned of a potential food crisis because of disruptions to exports from Ukraine and Russia, both major suppliers of grains and other commodities, that could hit poor countries, including some 35 African importers, the hardest.
She urged countries to remain committed to the multilateral trading system to stave off the risk of it splitting into two spheres. “I think the costs to the global economy will be quite significant if we do that,” she said. —Reuters
