Too much business with friends may be the enemy of growth. That’s the warning from the World Trade Organization (WTO) as ‘friendshoring’ takes its toll.
The WTO says many countries are trading more with their allies, and less with states that take opposing stances on key issues.
Its latest report says “geopolitical tensions are beginning to affect trade flows” in ways that threaten “the future of an open and predictable global economy.”
The organization tracked trade between states which tend to vote the same way in the United Nations General Assembly. It compared that with deals between countries which took different stances at the UN.
Trade between so-called friends either surged or remained stable at various points in 2022. It was a different story among political ‘rivals’, with average trade growth starting to slow after the Ukraine conflict began in February last year.
The WTO is pointing to data from November, saying trade flows between these states were almost 10 percent lower than they were at the start of 2022.
International trade remains a crucial part of the global economy, and major powers are still doing massive amounts of business with each other.
Trade between the U.S. and China, for example, hit record levels last year, climbing to $690 billion despite a long-running dispute over tariffs.
But the WTO is raising the alarm, saying “trade fragmentation threatens to unwind growth and development.”