Any rollback of international trade deals would hurt global growth, which is already soft with only a modest recovery on the cards this year, the Organization for Economic Cooperation and Development (OECD) said on Tuesday.
The OECD did not mention US President Donald Trump by name, but warned that ripping up trade agreements hurts everybody, especially those who put up new obstacles to trade.
“An increase in trade barriers in the major global trading economies... would have a major adverse impact on trade and gross domestic product (GDP), particularly for those economies that imposed new trade barriers,” the OECD said in an interim version of its Economic Outlook.
The Paris-based OECD advises its 35 members, mostly developed countries, on economic development.
“There is significant uncertainty about the future direction of trade policy globally, in part because of falling public support for trade in advanced countries,” the report said.
“A rollback of existing trade openness would be costly, with a significant share of jobs in many countries linked to participation in global value chains,” it said.
Only last week, Trump’s administration made clear it did not feel bound by the World Trade Organization (WTO) rulings, saying it “will aggressively defend American sovereignty over matters of trade policy.”
Trump has also repeatedly trashed the North American Free Trade Agreement (NAFTA) and threatened to slap tariffs on imports from Mexico.
Trump also complained that the US gave up too much in the Trans-Pacific Partnership (TPP), an Asia-Pacific regional deal he scrapped immediately after taking office.
Meanwhile, the OECD said it stood by its 3.3 percent estimate for global gross domestic product (GDP) growth this year. It first gave the figure in November.
Most individual country forecasts were unchanged from the earlier estimate, but Britain is headed for 1.6 percent growth this year, up from the OECD’s earlier 1.2 percent projection. But several obstacles could still get in the way of the global recovery.
“Confidence has improved, but consumption, investment, trade and productivity are far from strong,” it said.
“Disconnect between financial markets and fundamentals, potential market volatility, financial vulnerabilities and policy uncertainties could, however, derail the modest recovery,” the report added.
One remedy would be for governments to use any leeway in public finances to help struggling demand.
“Countries should use increased fiscal space to implement effective fiscal initiatives that boost demand and make government taxes and spending more supportive of long-term growth and equity,” the OECD said.
European powerhouse Germany, which is running a record-high budget surplus, has recently come under increasing pressure from its EU partners to loosen its purse strings to push imports and consumer spending.

Source: Arab News