The year-end festivities ended a couple of weeks ago without leaving us a greater degree of certainty as to whether the world economy will be much better off than last year. Many countries still deal with the long-lasting impacts of trade wars, the Covid-19 pandemic, volatility of food and energy prices, war in Ukraine, long-term climate issues, debt traps, and high inflation. 

Yet, since the second half of 2023, our world has been confronted by extreme El Niño, genocide in Gaza, increased tensions in the Korean Peninsula, a new conflict at the Red Sea, and potentially a military standoff in the South China Sea. Predicting the specific details of global trade in 2024 is therefore challenging due to the dynamic nature of the global economy and the influence of various factors.

One report by the World Bank entitled “Global Economic Prospect 2024” suggests that as we are nearing the midpoint of what we expected to be a transformative decade for development, the global economy is set to rack up a rather disappointing record by the end of 2024, which is the slowest half-decade of GDP growth in 30 years. 

It may be true that the global economy looked slightly better last year as the risk of global recession receded. In fact, UNCTAD reported that global FDI in 2023 grew by 3 percent as recession fears eased. But mounting geopolitical and military tensions may bring down the global economy this year much deeper than one can predict.

Persistent conflicts, intensifying climate crises, a fragile global economy and the potential risks of new technologies have indeed created a complex global security environment. This was acknowledged by a high-level panel top diplomats and security officials at the World Economic Forum (WEF) held in Davos on January 16, 2024. 

The session, which discussed the issue of “securing an insecure world,” was attended by Nigerian Foreign Minister Yusuf Tuggar, NATO Secretary-General Jens Stoltenberg), Saudi Foreign Minister Prince Faisal bin Farhan Al Saud, Finnish Foreign Minister Elina Valtonen, US Senator Christopher A. Coons, WEF-Geneva President BØrge Brende, and German Foreign Minister Annalena Baerbock. 

Unsurprisingly, while all the panelists were on the same page to recognize how fragile our world is these days, they held different views on what to prioritize to fix it. Some suggested to re-develop frank conversations through diplomacy, some others proposed to first build confidence by scaling down military conflicts and show-offs, while others called for self-restraint from provoking adversaries.

In her relentless efforts to fix the multilateral trading system in a time of great turbulence, and as a lead-up to the 13th WTO Ministerial Conference (MC13) on 26 – 29 February in Abu Dhabi, WTO Director-General Ngozi Okonjo-Iweala called on member countries to roll back recent food export restrictions as well as the accumulated stockpile of longstanding trade-restricting measures. She urged members to do their part to put the world economy on firmer footing by working collectively to reinforce the multilateral trading system and delivering results at the MC13. 

This was followed by a report from Geneva on December 18, 2023, suggesting that the ongoing informal talks on reforming the WTO’s dispute settlement rules -- one of the most contentious issues in Geneva -- were nearing their conclusion and that the “finish line is within reach.”

On January 17, 2024, WTO Deputy Director-General Angela Ellard offered her observation that a key priority for MC13 is to build on the achievements of the previous June 2022 Ministerial Conference (MC12) by concluding the second wave of negotiations on fisheries subsidies and ensuring the entry into force of the Agreement on Fisheries Subsidies. 

Other negotiating priorities include dispute settlement reform and extending the moratorium on the imposition of customs duties on electronic transmissions, which will expire if members do not renew it at MC13. 

In addition, the negotiations on agriculture continue, with many members pointing to food security as an important priority.  

However, the talks remain difficult as members have different views on issues such as public stockholding for food security purposes, domestic support, and market access.

Our world today bodes ill for any hope that global trade will pick up any time soon to its pre-trade wartime and regain its role as a main engine of growth. Confronted by the vagueness of the global economy, governments and businesses will likely keep on adapting and adjusting themselves to the changing realities. 

Observers and practitioners generally believe that there will be more on-shoring and friend-shoring, diversification of export markets and import sources, a “tit-for-tat” approach, trade coercions, and restrictions on inbound and outbound investment. It is also believed that the global economy will not recover strongly any time soon, which is anticipated to slow to 2.4 percent this year before creeping up to 2.7 percent next year. 

But there are other developments to observe which may slow down the global growth even further. 

First, conflict in areas critical for food and energy supplies. Any escalation in these parts of the global supply chains will hamper the fights against high inflation and thus lower the prospects for stronger growth. 

Secondly, the anticipated economic slowdown in China. Due to its massive economic presence around the globe, a slowdown in China’s economy will adversely affect other countries that depend heavily on trade with China. 

Third, while there are signs of an easing of interest rates in most countries, its pace is not fast enough and may be compounded by new military conflicts or China’s economic slowdown. 

Add to this is the fact that more than 35 countries will hold their general elections this year, and some of them are countries of politically and economically global influence. Due to the current global economic, political, and security tensions, economic nationalism has become a major theme for those running for political positions in those countries. 

It can be expected, therefore, that global trade will continue to be fragmented along geopolitical considerations, thus amplifying the trends we have been witnessing in the last two to three years. International cooperation will become more challenging to pursue except amongst allies and politically like-minded countries.

But perhaps one should observe the world economy today from a different angle. 

While there is growing dissatisfaction with the concept of globalization, the strong return of cross-border trade, capital and people flow in the last two years may indicate that much of global integration is not easily rescindable. 

In other words, globalization is not dead yet but, instead, it is undergoing a reconfiguration process along geopolitical lines. Governments and businesses need to adjust and adapt to it without knowing -- at least at this point in time --what would be the end game.

---

Iman Pambagyo is the Indonesian Ambassador to the WTO from 2014-2015.

The views expressed in this article are those of the author.