Growing trade protectionism puts global growth at risk

Subject

Post-crisis trends in global trade and protectionism.

Significance

Global trade has not returned to its pre-financial crisis growth rates. In 2000-08, global trade grew at twice the rate of global output. Since the crisis it has barely been above the pace of global GDP growth. Exports have not contributed to economic recovery as might have been expected. While world leaders vowed at the height of the crisis to eschew protectionism, new trade barriers are again being raised.

Impacts

• The profitability of serving foreign markets will diminish, as growth stays weak in the euro-area and Japan.
• External restraints to prevent discrimination against foreign suppliers and investors are insufficient.
• The risk premium associated with foreign investment projects is likely to increase, as protectionism risk is unpredictable.
• Sectors particularly affected will be base metals, chemicals, agricultural products, machinery and steel.