WEF president: ‘It’s time to revitalize trade—and reverse the trend of Slowbalization’

The alternative, trade deterioration, put our current prosperity at risk. The World Trade Organization (WTO) and others have calculated that the direct cost to global output from trade fragmentation and technological decoupling could reach 8-12% in most-affected economies. U.S.-China trade skirmishes have already led to significant trade diversion and income losses. A more uncertain environment depresses economic growth by reducing consumer confidence and spending and removing firms’ reasons to invest.

The lower prices and consumer choice that come with trade help low and middle-income consumers. In advanced economies, trade is estimated to have reduced household consumption costs by two-thirds for low-income households, compared to one-quarter for high-income households. Deglobalization has potentially serious inflationary consequences.

Nonetheless, one lesson from the pandemic we must not ignore is the need for greater substitutability in inputs and increased diversification through trade. We must take “re-globalization” to heart.

Trade barriers and trade gains

Today, emerging markets play a far larger role in world trade than two decades ago. Trade in services has also seen healthy growth. Thanks to technology, trade costs in services, which have traditionally been far higher than for goods, are dropping more quickly. Still, the Organisation for Economic Co-operation and Development (OECD) reports average services trade barriers of over 170% in tariff equivalents in emerging markets and 80% in advanced economies. Services trade barriers are becoming ever…