The World Trade Organization (WTO) has called on world leaders to keep markets “open and predictable” to avoid a worsening of the global economic outlook, as new data shows G20 countries applying export restrictions at an increased pace over the last six months.
The 28th WTO Trade Monitoring Report, released this week, reveals that the group of the world’s major economies introduced 47 trade-restrictive measures on goods in the period between mid-May and mid-October this year, covering trade worth US$160.1bn. These include export bans, licensing requirements, quotas and duties.
At the same time, the accumulated stockpile of import restrictions, such as tariffs, quotas and permits, has continued to grow, with 11.6% of G20 imports affected by trade-restricting measures implemented since 2009 and still in force.
“While some trade-restrictive measures have been lifted by G20 countries, the report indicates that the trend has been going in the wrong direction,” says WTO director-general Ngozi Okonjo-Iweala, adding that G20 economies must build on their collective pledges from the 12th Ministerial Conference and demonstrate leadership to keep markets open and predictable in order to “get global value chains back to the disinflationary role that they have played in the past”.
This comes as inflation across the G20 has surged to levels not seen in several decades, prompting a third of G20 countries to identify rising prices as their top concern, according to a recent survey by the World Economic Forum’s Centre for the New Economy and Society.
According to figures released today by the Office for National Statistics, inflation in the UK hit 11.1% in the 12 months to October 2022, up from 10.1% in September – marking a 41-year high and rattling exporters.
Half of financial decision makers polled by working capital company Taulia in October believe inflation will get worse in the next 12 months, with 87% concerned about the impact of inflation on their business.
“The alarm bells have started to go off for a significant number of businesses in the face of spiralling inflation and soaring borrowing costs. Many finance directors are very clearly articulating their doubts about how long they can sustain such pressure,” says Alistair Baxter, Taulia’s head of receivables finance.
In a joint declaration released today as the 17th G20 Summit draws to a close, the group highlighted the need for temporary and targeted measures to be “well designed” to avoid adding to high inflationary pressures, saying: “We highlight the importance of enhancing market predictability, minimising distortions, increasing business confidence, and allowing agriculture and food trade to flow smoothly. We reaffirm the… importance of not imposing export prohibitions or restrictions on food and fertilisers in a manner inconsistent with relevant WTO provisions.”
However, the WTO report shows that overall, the pace of implementation of new export restrictions by WTO members has increased since 2020, first in the context of the pandemic and subsequently with the war in Ukraine and the food crisis.
As of mid-October 2022, WTO members still had in place 52 export restrictions on food, feed and fertilisers, in addition to 27 export restrictions on products essential to combat Covid-19. Of these, 44% of the export restrictions on food, feed and fertilisers, and 63% of the pandemic-related export restrictions, were maintained by G20 economies, and many remain in place beyond their envisaged termination date.
Given that trade barriers such as tariffs contribute to inflation by causing an increase in the price of goods and services, the WTO, the Organisation for Economic Co-operation and Development and the United Nations Conference on Trade and Development are now calling for G20 members to “set an example for others” by rolling back export restrictions to ensure the free flow of trade.