Director General of the World Trade Organisation (WTO), Dr Ngozi Okonjo-Iweala, said that turning away from open trade would only lead to greater price volatility, inflationary pressures and weaker growth prospects overall.
Speaking at a recent economic policy symposium that had in attendance, global leading central bankers, policymakers and economists, she said predictable trade is a source of disinflationary pressure, reduced volatility, and increased economic resilience whereas fragmentation of trade into rival blocs would be very costly.
Sustained inflation has made a comeback across the world, with subsequent monetary tightening exacerbating debt distress and financial instability for dozens of developing economies, like Nigeria. Some policymakers have looked at these shocks, alongside rising geopolitical and regional tensions, and concluded that globalization needs to be rolled back.
However, WTO economists estimate that if the world economy decouples into two self-contained trading blocs, this would lower the long-run level of real global GDP by at least five per cent, with some developing economies facing double-digit welfare losses.
Despite all the tensions and skepticism around trade, overall trade costs for agricultural products, manufactured goods, and services have fallen by 12 per cent over the past two decades, with the increased digitalization and trade in services potentially becoming a powerful disinflationary force.
