WTO Warns Against Protectionism As It Cuts 2013 Global Trade Forecast To 3.3%

Pair Of Scissors

The World Trade Organisation has issued a strong warning against the risks of protectionism as it slashed its forecast for global trade this year from 4.5% to 3.3%.

Pascal Lamy, director general of the Geneva-based body, said the failure of other policies to stimulate growth made it more likely that countries would resort to trade barriers.

"The threat of protectionism may be greater now than at any time since the start of the crisis, since other policies to restore growth have been tried and found wanting," he said on Wednesday.

Presenting the WTO's outlook, Lamy said it was "sobering" that 2012 had seen global trade increase by 2% – the second weakest annual performance since records began in 1981.

He added that the risks to the forecast for 2013 were "firmly rooted on the downside" given the continuing crisis in the eurozone.

The WTO is concerned that the failure of low interest rates, quantitative easing and higher government borrowing to bring strong and lasting recovery will lead to a return to the import curbs deployed in the 1930s.

So far, Lamy has been encouraged that there has been no widespread use of higher tariffs, quotas and red tape to restrict imports but it is closely monitoring the activities of its 159 member states.

Despite the hope of quickening trade this year and a provisional forecast of 5.0% growth in 2014, the annual rises are expected to stay below the historical trend of long-term growth, which was 6.0% for the 20 years leading up to the financial crisis but now stands at 5.3%.

"Traditionally we've reckoned on a 2:1 ratio of trade growth to GDP [gross domestic product] growth. This year it was 1:1 and we would expect to see that relationship re-establish itself," said the WTO's chief economist, Patrick Low.

Powered by Guardian.co.ukThis article was written by Larry Elliott, economics editor, for guardian.co.uk on Wednesday 10th April 2013 13.25 Europe/London

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