The Week in Trade: WTO predicts trade recovery, UK services boom and ECB sticks on interest rates

Fri 12 Apr 2024
Posted by: Benjamin Roche

It has been a week of reports, as Allianz Trade yesterday (11 April) published findings suggesting that the Border Target Operating Model (BTOM) could add £2bn in costs to consumers. The World Trade Organization (WTO), meanwhile, released its own figures suggesting that trade globally will bounce back this year after a disappointing 2023.

There is also a warning for China from the US, a rejection of rejoining the EU Customs Union by the shadow business and trade secretary, and an out-of-this-world MoU between the UK and Canada in this week’s trade news.

The big picture: The WTO published its ‘Global Trade Outlook and Statistics’ report yesterday, where it predicted “improving conditions for trade” following signs of recovering demand for goods.

The WTO recorded a 1.2% drop in world merchandise trade volume in 2023, which it attributed to inflation and the high price of energy. It now expects that number to increase by 2.6% in 2024 and 3.3% in 2025.

While the WTO notes that it has yet to see a “sustained trend toward de-globalisation”, it nevertheless warns of the continuing effects of geopolitical tension and supply chain disruption. It draws on the example of US import of IT services, where imports from North American partners increased from 15.7% in 2018 to 23% in 2023, while imports in the sector from Asian nations fell from 45.1% to 32.6%.

Ralph Ossa, chief economist at the WTO, said that “some governments have become more sceptical about the benefits of trade and have taken steps aimed at re-shoring production and shifting trade towards friendly nations.”

“The resilience of trade is also being tested by disruptions on two of the world's main shipping routes: the Panama Canal, which is affected by freshwater shortages, and the diversion of traffic away from the Red Sea. Under these conditions of sustained disruptions, geopolitical tensions, and policy uncertainty, risks to the trade outlook are tilted to the downside.”

Good week: The UK jumped from seventh to fourth place in the UN rankings of exporting countries this week, as a services boom lifted it up the table. A boost in demand for its IT, consulting and other services is behind the positive figures, and business and trade secretary Kemi Badenoch said the UK was “punching above its weight”.

Bad week: The Energy and Climate Intelligence Unit (ECIU) published an analysis of the government’s performance in meeting the objectives set out two years ago in its British Energy Security Strategy. ECIU energy analyst Jess Ralston summarised the findings by stating that “the UK has had two energy security strategies within two years and we’re still going backwards, becoming more dependent on foreign imports”.

The week in customs: HMRC called for UK traders to take part in the development of the Single Trade Window (STW) this week, publishing its March update on the project on Monday (8 April).

Institute of Export and International Trade (IOE&IT) senior trade and customs expert Anna Doherty said it was “an opportunity for traders of all sizes to be involved, regardless of whether they complete their customs declarations in-house or if they are using an intermediary, and would like to see what the new system could offer them”.

IOE&IT trade and customs expert Lyn Dewsbury answered common questions about the STW in a member-exclusive feature on the subject on Wednesday.

How’s stat: 4% – the European Central Bank (ECB) interest rate after it announced yesterday (11 April) that it would hold the rate its current, all-time-high level. The ECB suggested that it would be interested in cutting the rate if progress towards its 2% Eurozone inflation target continues.

Quote of the week: “Labour has long been clear that we are committed to making Brexit work. We have set out clear red lines on the future of our relationship with the European Union: no return to the single market, the customs union or return to freedom of movement.”

Shadow cabinet minister Nick Thomas-Symonds on the prospect of a Labour government rejoining the EU Customs Union.

What else we covered this week: The UK Trade Remedies Authority (TRA) published a new three-year strategy that it said would help to protect UK firms against unfair practices in a “rapidly changing global trade environment”.

US Treasury secretary Janet Yellen warned China that it would not accept cheap Chinese goods flooding its market and undercutting domestic producers in a repeat of the ‘China shock’ of the early 2000s, which decimated US manufacturing.

Results from South Korea’s elections are still rolling in, and we explored how South Korea’s foreign policy was likely to affect its import activity after a developing rivalry with China over tech.

True facts: On this day in 1961, the Soviet Union notched a space race win for the nation – and earthlings – by sending the first ever man to space. Yuri Gagarin orbited Earth for 108 minutes before returning in his Vostok 1 spacecraft.

The UK’s Memorandum of Understanding with Canada on cooperation in space, signed yesterday, could yet yield increased trade among the stars.