Okonjo-Iweala advocates open-trade market as panacea to price volatility, inflation

Ngozi Okonjo-Iweala, Director-General of the World Trade Organisation has cautioned that moving away from open trade will result in increased price volatility, inflationary pressures, and weakened growth prospects.

This was disclosed by the WTO DG on Tuesday at the Jackson Hole Economic Policy Symposium, which was organised by the Federal Reserve Bank of Kansas City in the United States.

Okonjo-Iweala stated that predictable commerce was a source of disinflationary pressure, decreased volatility, and increased economic resilience, whereas fragmenting trade into competing blocs “would be very costly.”

She said, “A world that turns its back on open and predictable trade will be one marked by diminished competitive pressures and greater price volatility.

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“It would be a world of weaker growth and development prospects, a slower low-carbon transition, and increased supply vulnerability in the face of unexpected shocks.”

She noted that sustained inflation had made a comeback across the rich world, with subsequent monetary tightening exacerbating debt distress and financial instability for dozens of developing economies.

She continued, quoting WTO economists, who predicted that if the world economy splits into two independent trading blocs, the real global GDP would decline over time by at least 5%, with certain emerging economies seeing double-digit welfare losses.

“Despite all the tensions and scepticism around trade, overall trade costs for agricultural products, manufactured goods, and services have fallen by 12 per cent over the past 20 years, with the increased digitalisation and trade in services potentially becoming a powerful disinflationary force.

“Falling trade costs for goods, and especially for services, mean that globalisation can still be an engine for increased growth, efficiency, and economic opportunities, while also contributing to price moderation,” the WTO director-general declared.

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