It’s been a turbulent year for world trade growth during 2016, as bumps and shakes were in the daily agenda over the course of the year. In a recent note, shipbroker Allied Shipbroking noted that “growing populist and nationalist movements in the Western world start to take hold. Trade openness has been on a slowing down path for several years now, with trade deals finding it difficult to take root and progress given the growing economic issues being faced.”
George Lazaridis Head of Market Research & Asset Valuations with Allied Shipbroking said that “the number of skeptics over globalisation and openness towards trends has risen sharply, as growing inequality, slow economic growth rates and increased trade deficits in most of the OECD countries causes excess internal political friction. Let’s not forget what a crucial role this has played in some of the biggest political upsets this year, all from the Brexit vote over to the U.S. presidential election results. This does not look like its in any mood of easing just yet and as things stand now, we are likely to see further upsets during the coming 12 months that could cause further turmoil in the global markets”.
According to Allied’s analyst, “behind the scenes this tension between trading partners has been growing further. A messy trade battle is currently underway within the World Trade Organisation, a battle unrelated to any Trump or Farage. China has for years been criticised by most of the OECD countries as not adhering to the international “fair play” of trade. Given its status under the WTO as a “non-market” economy, its trading partners were allowed to treat it as such and slap anti-dumping duties on Chinese imports in order to counter what they saw as unfair subsidised credit, energy and raw materials given to Chinese companies by the state. This was up until last Sunday, whereby this 15 year agreement giving China’s trading partners the ability to treat it as a “non-market” market economy was due to expire, though as it seems America and Europe were unwilling to do so. This contesting has now put forth in motion a lengthy (could take up to two years) legal dispute within the WTO court for which sloppy legal drafting of what the clear definition of what a “market economy” is will be disputed from both sides”, Lazaridis noted.
He added that “these sort of issues might not have imminent market effects but just go a step further to highlight the tensions that currently hold between nations for matters related to trade. All this therefore shows how hard it is nowadays to for further trade agreements to gain momentum and support, while older agreements are strongly contested and threatened of falling apart. It is not all doom and gloom, as at the same time we have recently seen glimpse of hope which have likely been motivated by the mistakes of the past and the growing fear that open and free trade could collapse at a drop of a hat. Over the weekend we had a statement by the EU’s chief trade negotiator with Japan announcing that the current free-trade deal being negotiated is close to being signed as early as next year. This is a fairly major deal, being between the world’s second and fourth largest economies by GDP and also by the fact that Japan is Europe’s second largest trading partner after China in the East. It is major deal under way like this and the recently signed deal between Canada and Europe that shows hope that there is still appetite for further openness to be achieved, while the recent criticism that has been reflected in major political polls and referendums is serving as more of a guidance to the undergoing negotiations that past mistakes must be avoided and more must be done at home to better balance the knock on effects and shifting production requirements. A difficult year lays ahead for free trade but it seems that there are still supporters out there who hold firm belief to its overall benefits”, concluded Allied’s analyst.
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Source: Allied Shipbroking