Issue Briefs

The Current State of Global Trade: Takeaways from the 2024 World Trade Report

The World Trade Organization (WTO) recently published the 2024 edition of the World Trade Report, which offers context and commentary on the current state of global trade, trade policy, and the multilateral trading system.

The report highlights recent trends and developments in the global economy and notes that global per capita incomes, adjusted for inflation, increased by 65% over the 1995- 2023 period. Per capita incomes in low- and middle-income countries grew by more than 191%, almost three times the global rate. The rise in incomes in the low-and middle-income economies was supported by a concomitant increase in their share of global trade, which increased from 21% in 1995 to 38% in 2022, resulting in improved earnings.

However, while trade has played a critical role in promoting economic convergence in terms of per capita incomes, the report also highlights that the process of economic convergence and global integration has been uneven and decelerated in the years following the financial crisis.

The report states that trade reforms have played a significant role in promoting income convergence in low- and middle-income countries. According to the WTO, access to foreign markets, foreign direct investment (FDI), and integration into global value chains (GVC) has promoted technological diffusion and production upgradation into these countries which has boosted economic growth in these economies by 1 to 1.5%.

Therefore, the WTO recommends that diversifying GVCs, increasing trade in services, and promoting renewable solutions, technological adoption, and critical minerals exports could be potential steps that low- and middle-income countries could take to increase future trade growth. At the same time, a significant minority of countries have not benefitted from the increase of global trade due to high trade costs, a lack of adoption of foreign technologies, and limited diversification in their export and production baskets.

While at a macroeconomic level, income convergence between low-, middle-, and high- income countries has been positive, and poverty has reduced in low- and middle- income countries, the benefits of increased trade in low- and middle-income economies have not been equitably distributed within the individuals of these economies. Trade has shifted employment demographics within countries with certain sectors of the economy contracting and experiencing job losses due to increased competition from abroad; however, at the same time, new opportunities are created as export baskets diversify and new forms of employment are created.

The WTO notes that 28% of global employment is dependent on exports, which has grown from 20% in 1995, but also notes there are communities that have been significantly impacted by the shift in skill demand and that mobility obstacles such as gender-based discrimination and socioeconomic status may prevent sections of the global labour market from being able to participate and compete.

Inclusivity is another central theme of the paper, and it is suggested that domestic policy within countries must support diverse economic participants including women, youth and the MSMEs, to mitigate economic inequity and support inclusive and sustainable growth. Supporting complementary domestic policy through institutional reforms, sustainable debt management, and vocational training and unemployment benefits for workers displaced by open markets and competition from abroad could improve inclusiveness and promote equitable participation in the labor market.

The nineteen countries and two regional bodies (European Union and African Union) of G20 account for approximately 85% of global GDP and 75% of global trade. Therefore, the G20 grouping has significant influence over global trade and can work together to promote inclusivity and convergence in trade growth between low-, middle-, and high- income countries.

Based on the recommendations put forth in the recently released B20 Brasil Executive Communique as well as those from the 2024 WTO World Trade Report, the G20 countries could provide financing for micro, small, and medium sized enterprises in low- and middle-income nations to improve their ability to adapt to new trends in GVC through breakthrough financing models. Through financing and promoting these companies in least developed countries (LDC), the G20 could improve the share of these countries in global exports of goods and commercial services, which is a key KPI of the B20 recommendations.

Furthermore, G20 nations could support trade openness through harmonizing customs processes to facilitate smoother international trade, another key recommendation from B20 Brasil. Additionally, to address workers that may be displaced from increased competition from open, global trade and a transition in skills demanded in the digital era, in line with B20 recommendations, the G20 could develop high-quality work-integrated learning solutions and digital skills development through emerging technologies workshops.

Source: WTO for trade, consensus estimates for GDP