International trade: What you need to know this month

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Simon Lacey, Head, Digital Trade and Geopolitics, World Economic Forum, Sean Doherty, Head, International Trade and Investment; Member of the Executive Committee, World Economic Forum

• This monthly round-up brings you a selection of the latest news and updates on global trade.
• Top international trade stories: WTO conference assesses future of global trade; Mexico becomes top exporter to the US; EU launches mission to protect Red Sea shipping vessels from attacks.

1. WTO conference assesses future of global trade

The 13th Ministerial Conference (MC13) of the World Trade Organization (WTO) is being held in Abu Dhabi, with 164 members set to assess the state of international trade, which is at a “critical moment“, according to experts.

MC13 is being held as ongoing security concerns continue to threaten the global trade system, the fragmentation of which could cost the world economy 7% of GDP, warns the IMF. Meanwhile, efforts to green economies are also under strain by numerous headwinds facing supply chains and global economy at large.

“Uncertainty around market access weighs on your investment choices,” WTO Director-General Ngozi Okonjo-Iweala told participants in her opening remarks. “At this critical juncture for the multilateral trading system, and for all businesses that operate across borders, your engagement and support really matter.”

Alongside the conference, the TradeTech Forum took place on 27 February, a groundbreaking platform for global innovation in international trade technologies. Panellists explored how to boost innovative approaches and collaborative initiatives to streamline inclusive and sustainable global trade powered by technological innovation.

2. Mexico overtakes China as biggest importer into US

Mexico has become the top source of official imports to the United States, overtaking China for the first time in two decades, the New York Times reports.

In 2023, the US traded $798 billion with Mexico, with nearshoring being cited as the key driver behind the trading boom.

US consumers and businesses have increasingly turned to Mexico, Europe, South Korea, India, Canada and Vietnam for items including auto parts, toys and raw materials.

US year-ion-year imports from China fell approximately 20% in 2023, according to US government agency the Bureau of Economic Affairs.

At the same time, Imports from Mexico were up 5% from 2022 levels, marking the first time in two decades Mexico lead the world on trade into the US.

3. News in brief: Trade stories from around the world

The European Union launched a defensive naval mission to protect cargo ships in the Red Sea following ongoing Houthi attacks since November. Dubbed “Aspides” – the Greek word for shield – the mission has been deployed to “restore and safeguard freedom of navigation” for vital trade routes in and around the Red Sea, Reuters reports.

The UAE’s non-oil foreign trade hit record $953 billion in 2023, Prime Minister Sheikh Mohammed bin Rashid al-Maktoum announced on X (formerly Twitter), as diversifying income sources and economic sectors is helping the country reduce its dependence on oil.

The Indo-Pacific Economic Framework for Prosperity (IPEF) agreement on supply chains is now in effect, with 14 countries including the US and Japan aiming to agree a system to facilitate cooperation to strengthen supply chains and tackle disruption. The next ministerial meeting is set for March 2024.

The European Union and the US are in talks to merge their critical raw materials efforts, seeking to streamline their operations in a bid to break China’s dominance in minerals and materials essential to the energy transition.

Exports of auto and car parts to the US and Chinese demand for chip-making equipment drove Japanese export growth in January, despite worsening factory sentiment adding to concerns about wider economic conditions. The country’s exports rose 11.9% in January compared with the same month a year ago, beating the 9.5% increase predicted in a Reuters poll and 9.7% growth in December 2023.

CENTRE: REGIONS, TRADE AND GEOPOLITICS

How is the World Economic Forum improving trade for more resilient societies?

Thailand and Sri Lanka have signed a Free Trade Agreement aimed at enhancing market opportunities, with negotiations covering aspects such as Trade in Goods, Investment and Intellectual Property Rights. Sri Lanka’s economy contracted 3.8% last year, according to World Bank estimates – following a foreign exchange crunch that plunged it into a wider financial crisis – prompting a renewed focus on trade deals.

An agreement between India and the European Free Trade Association (EFTA), which includes Norway, Iceland, Liechtenstein, and Switzerland, is close to being finalized. The group will invest as much as $100 billion in India over 15 years, allowing Indian professionals greater access to the EFTA and creating more than one million jobs in the country.

Boston Consulting Group has developed its Trade Engagement Index, a tool to help governments and private-sector organizations navigate global trade more effectively. The tool uses BGC’s analysis of the free trade agreements of more than 100 economies and leading trade blocs.

4. More on trade on Agenda

Supply chain disruptions at key ocean shipping routes have become more prevalent in recent years. As 90% of traded goods are shipped by sea, keeping these waterways flowing is crucial. Read here about five of the most important ocean thoroughfares for global trade.

The Red Sea has long been a vital waterway for international trade. In recent months, Houthi attacks on ships in the Red Sea have caused major disruptions to commercial shipping. Here’s what the experts are saying about the impact on trade.

While top executives are optimistic about the future of trade flows, a shortage of tech-savvy workers in the logistics sector may derail recovery. This article explains why we must invest in talent and technology to transform the global supply chain.