April 13, 2024

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WTO fears that the Ukraine conflict will halve global trade growth

The World Trade Organization (WTO) has lowered its global trade growth prediction for this year due to the Ukraine conflict.

The prior prediction of 4.7 per cent growth has been lowered to 2.5 per cent owing to “the impact of the war and related policies,” according to WTO Director-General Dr Ngozi Okonjo-Iweala.

The cut is also tied to ongoing global supply chain issues that resulted from the outbreak.

Following Russia’s invasion of Ukraine, several food items, notably wheat and corn, have been impacted.

Sunflower oil is in short supply in the EU, according to industry associations. According to S&P World, Ukraine accounts for 46.9% of global exports and Russia for 29.9%, but with Ukraine’s ports closed, it is struggling to export.

Using Africa as an example, the former Nigerian finance minister stated that 35 of the 55 countries there purchased wheat and other crops from Russia and Ukraine, as well as 22 countries imported fertiliser.

On the other hand, Dr Okonjo-Iweala expressed optimism that the supply issues might be resolved.

Amid concerns that the conflict and economic sanctions against Russia may cause supply interruptions, the cost of other commodities has risen to new highs.

Russia’s mining industry is crucial for many substances, including palladium, for which it produces 40% of the world’s supply. Palladium is a critical metal for carmakers.

Even before the war in Ukraine, the pandemic had created a supply-demand imbalance in many industries, driving up prices, and the International Monetary Fund has warned that high inflation may slow the global economy this year.

Many countries have used trade as a lever to put pressure on Russian President Vladimir Putin over his decision to invade Ukraine.

As a result of the conflict, Ukraine has severed commercial connections with Russia and has led efforts for its suspension from the World Trade Organization (WTO) as a result of the conflict. No country, however, has ever been removed from the WTO, which the Director-General described as “not an easy thing to accomplish.”

Even though some of the world’s top trade attorneys disagree, she claims there is no mechanism to kick Russia out.