“We hope we don't see a return to the protectionism of the 1930s”

Global trade is not doing well at the moment.

This is what the Director General of the World Trade Organization (WTO), Dr Ngozi Okonjo-Iweala, agrees. We are seeing increasing protectionism, some undermining of WTO rules and some of this is leading to fragmentation, she tells the BBC.

Global trade is really part of life for making countries resilient – and also for supporting growth, so we are concerned about that.

In recent weeks and months, these divisions have come to the fore with the EU imposing a provisional fees up to 37.4% on Chinese electric vehicle (EV) imports. It followed the US presentation in May 100% fees. in Chinese electric vehicles.

Both Brussels and Washington accuse the Chinese government of unfairly subsidizing its EV sector, allowing manufacturers to export cars at unfairly low prices and threatening jobs in the West.

President Biden has also raised import taxes on a number of other Chinese products that he said form the “industries of the future.” These include EV batteries and the minerals they contain, the cells needed to make solar panels and computer chips.

Meanwhile, the US has poured billions of dollars of government money into green technology through it Law on reducing inflation, which aims to reduce a dependence on Chinese imports.

EU trade commissioner Valdis Dombrovskis tells the BBC that Europe does not want to close the market for electric vehicles. We welcome imports, we welcome competition, but this competition must be fair, she says.

Last year, the volume of global trade fell for only the third time in 30 years, according to the WTO. He says the 1.2% decline was related to inflation and higher interest rates and predicts a recovery this year.

However, these factors have their roots in events that are continuing to fundamentally reshape the global economy, explained First Deputy Managing Director of the International Monetary Fund (IMF), Gita Gopinath. the last speech.

“What we've seen in recent years, I would say, especially when it comes to global trade relations, is nothing like we've seen since the end of the Cold War.”

In recent years, you have had many shocks, including the pandemic. We had the Russian invasion of Ukraine, and after those events, increasingly, countries around the world are driven by economic security and national security concerns in determining who they trade with and invest in, she said.

This is affecting countries as far apart as Peru, Ghana and Vietnam, as they increasingly find themselves having to choose between strengthening economic ties with Western powers or a China-Russia axis.

We are also concerned about the emerging fragmentation we see in trade data, says WTO's Dr Okonjo-Iweala. We are seeing trade between like-minded blocs growing faster than trade across such blocs.

She warns that it will be costly for the world to continue down this path. WTO research has assessed that price in 5% of the global economy, while the IMF has suggested that it could be close to 7% or $7.4 trillion ($5.8 trillion) in lost output in the long run.

The EU's introduction of tariffs on Chinese-made electric vehicles follows a surge in their exports to Europe in recent years. Exports rose from $1.6 billion in value in 2020 to $11.5 billion last year, for a study which said they now accounted for 37% of all EV imports into the EU.

BYD, Geely and SAIC are some of the Chinese electric vehicle makers said to have benefited from billions of dollars worth of government aid.

After years of support, Chinese electric vehicle companies no longer need that help, says Jens Eskelund, president of the European Union Chamber of Commerce in China. They are just too competitive today on their own terms. I think the imposition of tariffs is a symptom that something is out of balance.

When it comes to the wider relationship, Eskelund says he is concerned that since 2017 the volume of goods the EU has sold to China has fallen by around a third, even though China's economy has been growing steadily.

Citing Chinese restrictions on market access for overseas firms and tough security regulations, he adds: I think it's fair to say that Europe still remains a significantly more open market for Chinese companies then the other way around. And this is definitely something that needs to change.

The latest chamber poll showed members have the lowest confidence on record to invest in China.

It comes as the EU tries to reduce its economic dependence on China. European Commission President Ursula von der Leyen last year described the need not to risk and not to sever her relationship with China.

Brussels' concerns include Beijing's use of sensitive technology for military purposes and its support for Russia as it continues its offensive in Ukraine.

Companies including Ikea, Nike and Apple are also trying to become less dependent on China.

As the EU and China are set to hold talks on possible EV tariffs, Chinese state media have reported that retaliatory measures are being considered for EU goods, including pork, cognac and luxury cars.

However, there are other obstacles that global trade must overcome, including two of the most important arteries for the movement of goods around the world.

This year Panama Canal officials had to reduce the number of ships allowed to pass through the waterway. This is due to the lack of rainfall to fill the lake that feeds the canal.

Meanwhile, the Suez Canal has been effectively cut off due to constant attacks on merchant ships by the Houthi rebels in the Red Sea. Traffic through the canal is down 90%, according to logistics firm Kuehne+Nagel.

Rolf Habben Jansen, chief executive of German shipping giant Hapag-Lloyd, says the disruption means his firms' rates have risen between 30% and 40%.

While shipping costs are a small fraction of retail prices, Mr. Habben Jansen says these additional costs are ultimately passed on to consumers. This could end up pushing inflation higher just as central banks are showing signs of bringing it under control.

This would be detrimental to consumers, says WTO Dr Okonjo-Iweala.

Despite all the tensions, she says trade has shown signs of resilience and adds that her organization can help countries resolve their disputes.

Meanwhile, Dr Okonjo-Iweala admits that some WTO rules will need to change to help meet the challenge of climate change. I firmly believe that some of our [global trade] rules, we have to look at them,” she says.

When they were put in place, decades ago, we weren't facing the kind of climate change threats we face today.

Regarding the increased use of tariffs, she adds: We hope we don't have a repeat of what we saw in the 1930s. We had retaliatory tariffs, and it was downhill from there and everyone lost.

So I hope we don't enter that kind of era again.