Hormuz disruption threatens global trade, WTO chief warns
Global trade is facing its most serious disruption in decades as disruptions in the Strait of Hormuz threaten supply chains and could push up food, fertilizer and energy prices, World Trade Organization Director-General Ngozi Okonjo-Iweala warned.
Speaking on the sidelines of the WTO Public Forum in Geneva, Okonjo-Iweala said the global trading system remained resilient but was facing a major test from the conflict in the Middle East.
Trade growth outpaces expectations
Global trade in goods grew by 4.6% this year, according to Okonjo-Iweala, significantly above the WTO’s earlier full-year projection of 1.9%.
She said first-quarter growth reached 3.2%, exceeding expectations, while about 72% of global commerce continued to operate under WTO rules.
Artificial intelligence drives trade
Okonjo-Iweala said part of the stronger-than-expected performance was driven by rapidly expanding trade linked to artificial intelligence.
She said low- or zero-tariff arrangements covered about $3 trillion in semiconductor and chip shipments, although she cautioned that the momentum may not be sustainable.
The benefits have also been concentrated largely in North America and East Asia, raising concerns about whether the expansion is reaching developing economies.
Hormuz disruption raises costs
National reserves have so far helped shield markets from some of the effects of disruptions in the Strait of Hormuz, Okonjo-Iweala said.
But she warned that prolonged blockades of the strategic waterway would eventually increase agricultural costs and put further pressure on global markets.
The WTO has previously estimated that crude oil prices reaching $90 a barrel could reduce global trade growth by 0.5 percentage points. Oil prices have since moved above that level.
Rerouting puts pressure on supply chains
Shipping companies have maintained trade volumes by diverting vessels around alternative routes, but the longer journeys are adding significant costs and premiums.
Okonjo-Iweala warned that continued reliance on lengthy detours could raise questions about the long-term stability of global supply chains.
Governments are meanwhile preparing contingency plans to protect their economies from future disruptions at key trade chokepoints.
WTO faces calls for reform
The disruption has also intensified discussions within the WTO over the need to modernize global trade rules in response to technological and geopolitical changes.
Okonjo-Iweala said institutional reform was necessary to promote more equitable global development and urged developing countries to play a greater role in shaping new policies.
A recent WTO report warned that a collapse in multilateral cooperation and failure to modernize trade regulations could eliminate up to 10% of potential global economic growth by 2050.
Source:AA
