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Context

• The World Trade Organization (WTO) anticipates a gradual recovery in global trade, with a projected increase of 2.6% in 2024 and a further rise of 3.3% in 2025.
• These forecasts follow a 1.2% decline in 2023, primarily attributed to inflationary pressures and higher interest rates.

Key Takeaways from the Report:

Reasons for Optimism:

• According to the WTO's chief economist Ralph Ossa, the expected rebound is driven by the normalization of inflation and monetary policy. These factors, which hindered trade in 2023, are anticipated to ease.

Broad-Based Recovery:

• The trade recovery is expected to be broad-based, encompassing regions like Europe, which experienced significant declines in trade volumes in 2023 due to geopolitical tensions and the energy crisis triggered by Russia's invasion of Ukraine.

Persistent Risks:

• While global trade has shown resilience, the WTO warns of lingering geopolitical risks.
• Ongoing conflicts, such as the Israel-Palestine conflict, pose potential disruptions, particularly if they affect energy markets.

Geopolitical Fragmentation:

• The WTO's report highlights a trend of trade fragmentation along geopolitical lines, with slower growth observed between certain blocs.
• Trade tensions between major economies like the U.S. and China have contributed to this phenomenon.

Continued U.S.-China Tensions:

• Recent statements from U.S. Treasury Secretary Janet Yellen and European Commission chief Ursula von der Leyen indicate renewed tensions with China over trade practices.
• Allegations of unfair practices, including the dumping of subsidized goods, remain contentious.

Regional Outlook:

• While the WTO report does not provide specific forecasts for China, it anticipates a 3.4% increase in Asia's exports for 2024 and 2025. Despite this, sector-specific surges are possible.

Conclusion:

• The global trade landscape is poised for recovery, driven by factors like inflation normalization and increased economic activity.
• However, persistent geopolitical tensions and trade disputes continue to pose challenges to sustained growth.

READ ALL ABOUT WTO: https://www.iasgyan.in/daily-current-affairs/wto

PRACTICE QUESTION Q. Discuss the importance of WTO reforms for global trade. Evaluate challenges in implementing reforms and suggest strategies for enhancing WTO effectiveness.