The annual meetings of the International Monetary Fund and the World Bank take place in Washington this week, against a backdrop of gloomy predictions for the future of global trade.
According to its latest prediction forecasts, the World Trade Organisation expects total trade to grow by its slowest pace since the financial crisis this year, with global merchandise volumes set to rise by just 1.7 per cent.
That’s a marked downward revision on the 2.8 per cent growth expected in April and the weakest rate since 2009.
Moreover, for next year it predicts that trade volumes will grow between 1.8 to 3.1 per cent, which compares with average annual growth rates of 5.4 per cent in the past twenty years.
So what are the causes, and the consequences?
The WTO’s sober assessment partly reflects the continued weakness of global demand.
The downturn in China, the economic crisis in Brazil, stagnation in Japan and many parts of Europe have crimped demand for imports.
In particular, the weakness of business investment is believed to have had a disproportionate impact as capital goods like manufacturing plant and machinery typically have large import content.
Furthermore, shifts in tastes as economies develop may have led to a relative increase in demand for services, which tend to be less internationally tradable.
But other factors may also have been in play.
The strong growth in global supply chains that occurred as a result of the surge in globalisation may now be slowing down.
And, in the week that Theresa May announced that she will trigger Article 50 before the end of March 2017, creeping protectionism and a weakening in trade liberalisation also appear to be playing a role.
This is evidenced by the growing populist rhetoric against open borders and the problems in pushing EU and North American trade deals over the line.
Causes for concern
Global trade is also slowing when compared with the growth of world GDP.
Over the long term, trade has typically grown 1.5 times faster than GDP, with the former widely acknowledged as a key driver of the latter. In recent years, the ratio has slipped to around 1.1.
Notably, the WTO predicts that year’s ratio will slip below one for the first time in 15 years – an ominous sign that globalisation has stalled.
Read more: What now? The UK and the EU Single Market
The slowing in world trade and the shift in the relationship with world growth are both big causes for concern: history clearly demonstrates that open borders foster global economic prosperity.
It has allowed countries to focus on the production of those goods and services in which they have a comparative advantage – to the benefit of all.
If the world enters a more protectionist era, it is likely to be the costs from weaker growth and higher inflation that become more widely shared.