Global Trade Sees Moderate 2016 Growth

New figures show that global trade volumes experienced moderate growth in 2016, but the rate of expansion declined, when compared to previous years. Ignazio Coraci weighs in on what this means for the international air cargo sector, as it operates in an increasingly uncertain geopolitical climate.

Trade growth

The World Bank recently released its Global Trade Watch: Trade Developments in 2016 report. For the paper, the World Bank looked at trade in 18 countries, across 18 years, to deliver long-term trends. In 2016, global merchandise trade expanded by just over 1%, marking the fifth consecutive year of moderate expansion. But it was the worst year since the global economic crash of 2008 – 2009.

In contrast, trade volumes expanded by 2% in 2015 and by 2.7% in 2014. The weak expansion seen in 2016 was evidenced in developing and high-income economies, whereas in prior years, it was only experienced by either one or the other. The World Bank noted that an uncertain political environment potentially reduced trade growth by 0.6% last year – 75% of the difference between 2016 and 2015.

Uncertain politics

2016 was the year that broke the political mould, as anti-globalist sentiments swept the western world. In June, the UK chose to leave the EU, striking a blow against the continent’s integrated trading strategy, while in November, Donald Trump – a man who wants to end the US’ involvement in global trade deals, became its president. Air cargo depends upon the easy free-flow of goods across international boundaries, so if these developments damage trade, its fortunes could be impacted.

Speaking out on these findings, the paper’s authors were quoted by Global Trade Mag, a logistics sector publication, saying: “Policy uncertainty in Europe and the United States had a negative impact on trade by reducing overall global growth… In a more uncertain environment, firms may choose to postpone investment and export decisions and consumers may cut back spending. The threat of unravelling trade agreements may also hurt trade growth by adding to policy uncertainty.”

Spotlight on cargo

The World Bank also concluded that trade growth may have been impacted by declining productivity expansion, which has been reflected in the stagnation of global value chains. However, this seems to have had a minimal impact on global air cargo’s fortunes. Data shows that the sector experienced a Compound Annual Growth Rate (CAGR) of 0.7% from 2012 to 2016, but the pace of growth picked up towards the end of the year, and it’s expected to record a CAGR of 3.2% from 2016 to 2021.

Commenting, Ignazio Coraci said: “There’s no doubt that the rise of anti-globalist politics across the western world, which holds the planet’s most lucrative consumer markets, coupled with stagnating productivity, has impeded trade growth. It is key that firms face minimal barriers, when transporting goods across international boundaries, to keep their operating costs as low as possible. So this movement could have negatively impacted investor sentiment, in turn restricting trade growth.

“But this may not limit opportunities for global air cargo. This could be because of the onset of e-commerce, which allows consumers to purchase goods directly from anywhere. These consumers expect speedy service, so airplane is often the transportation mode of choice for e-commerce firms, bringing increasing flows of new business. Cross-border e-commerce is expected to grow rapidly in the next five years, so this could somewhat insulate the air cargo industry from anti-globalist politics.”

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