That is the admission of the director general of the World Trade Organization (WTO), Dr Ngozi Okonjo-Iweala. “We are seeing increasing protectionism, some undermining of the WTO rules, and some of this is leading to fragmentation,” she tells the BBC.
“Global trade is really part of the lifeblood for making countries resilient – and also for underpinning growth, so we are concerned about that.”
In recent weeks and months these fragmentations have come to the fore with the EU imposing provisional tariffs of up to 37.4% on imports of Chinese electric vehicles (EVs). It followed after the US in May introduced 100% tariffs on Chinese EVs.
Both Brussels and Washington accuse the Chinese government of unfairly subsidising its EV sector, allowing producers to export cars at unfairly low prices, and threatening jobs in the West.
President Biden has also increased import taxes on a range of other Chinese products that he said formed “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 been pouring billions of dollars of government money into green technology, through its Inflation Reduction Act, which aims to reduce a reliance on Chinese imports.
EU trade commissioner Valdis Dombrovskis tells the BBC that Europe does not want to close the market for EVs. “We welcome imports, we welcome competition, but this competition must be fair,” he says.
Last year, the volume of global trade fell for just the third time in 30 years, according to the WTO. It says the 1.2% decline was linked to higher inflation and interest rates, and is forecasting a recovery this year.
However those factors have their roots in events that are continuing to fundamentally reshape the global economy, the International Monetary Fund’s (IMF’s) first deputy managing director Gita Gopinath explained in a recent speech.
“What we’ve seen in the last few 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.”
“The last few years, you’ve had numerous shocks, including the pandemic. We had Russia’s invasion of Ukraine, and following these events, increasingly, countries around the world are guided by economic security, and national security concerns, in determining who they trade with and who they invest in,” she said.
That’s affecting countries as far apart as Peru, Ghana and Vietnam as they increasingly find themselves having to choose between strengthening economic ties with the western powers, or a China-Russia axis.
“We’re also concerned about the emerging fragmentation that we see in the trade data,” says the WTO’s Dr Okonjo-Iweala. “We’re seeing that trade between like-minded blocks is growing faster than trade across such blocks.”
She warns that “it will be costly for the world” to continue down this path. WTO research has estimated that price at 5% of the global economy, whilst the IMF has suggested it could be nearer to 7% or $7.4tn (£5.8tn) of lost output in the long run.