WTO Director-General expects lasting impact on trade from Middle East war
Amman2 min read
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Ngozi Okonjo-Iweala, Director-General of the World Trade Organization, said on Thursday that geopolitical shifts and wars in Ukraine and the Middle East will have a lasting impact on global trade flows as companies hedge against future shocks.
She added in the interview that trade has seen a sharp contraction in the Middle East as a result of the Iran war, despite the existence of a series of solutions and alternative routes, and that recovery will take some time, noting that some of these shifts may become permanent. The WTO has projected a 17% decline in exports this year and a drop in imports of about 15%.
She said that private sector experts had expected a recovery once the war ends and the Strait of Hormuz is opened because it provides a less costly route for trade, but repeated conflicts have underscored the need for diversification and contingency planning, and some alternative trade routes are likely to persist.
She continued on the sidelines of the annual meetings of the IMF and the World Bank, "We have confirmed that bottlenecks and assets that pose an obstacle are things we must think about for the sake of the world."
She added, "I believe some alternatives will remain because countries and companies alike want to hedge against possibilities."
She said she expects broader diversification efforts to continue across regions and countries, given the repeated shocks caused by wars and other trade disruptions, including the massive wave of tariffs imposed by US President Donald Trump.
She continued, "There is absolutely no doubt that supply chains are undergoing restructuring." She noted that business leaders have proven their creativity in finding new trade routes, even though they are more expensive.
She mentioned that regional trade will also continue to expand, noting that African countries, for example, can significantly boost growth and trade by increasing intra-continental trade.
She added, "Africans can trade among themselves, create real value, and create jobs." She explained that intra-African trade now accounts for about 20% of the continent's trade, while trade within the European Union accounts for about 60% of its trade.
Okonjo-Iweala said the future remains uncertain in light of ongoing conflicts, tariffs, and fears that the artificial intelligence boom will fade or collapse.
She continued, "The impact of artificial intelligence casts a shadow over other trends in trade, which are not on the positive side."
