Trade slowdown not all bad

Malcolm Latarche
Malcolm Latarche

29 September 2016


News that the World Trade Organization (WTO) has slashed its forecast for global trade growth for 2016 by over a third from 2.8% in April to just 1.7% this week has raised fears that anti-globalisation sentiment is a growing threat. Trade has grown 1.5 times faster than gross domestic product over the long term - but the WTO say it will only grow 80% as fast this year. That would be the first reversal of globalisation since 2001 and only the second time this has happened since 1982. But while some businesses fear globalisation there are many observers who feel that the backlash offers opportunities and is a rebalancing of an effect that has gone too far. Certainly consumer purchasing power is dropping in the west mostly due to the loss of so much manufacturing to Asian countries. Once prosperous manufacturing centres are now often unemployment blackspots and while a small number of individuals have benefitted from growth in the service sector most have not. Reversing globalisation is seen by a growing number of politicians as the means of gathering voter support and the rebalancing of world trade that results could be of benefit to ship operators. Because shipping is involved in the transport of physical goods and not intangible things such as financial services and intellectual property, the effect of globalisation has been more to change trade routes rather than the actual quantity of goods and commodities carried beyond what might have been expected due to a growing world population. The fall in western manufacturing over recent decades has meant lower imports of raw materials and exports of finished goods. This has hit all vessel sectors to some extent but containers probably the hardest. Shipping will have little say in whether or not globalisation is rolled back but if it is, the industry will need to respond to the new opportunities that will be offered. It may well find that the good points outweigh the bad.