Global Trade System at a Crossroads Amid Rising Protectionism, Warns Ex-WTO Chief

Supachai Panitchpakdi highlights challenges for developing nations in UNCTAD report presentation

 

The global trading landscape is at a critical juncture, grappling with a resurgence of non-tariff protectionist measures and increasing limitations on the movement of skilled labour, according to former World Trade Organization (WTO) Director-General Supachai Panitchpakdi. 

 

Speaking at a special lecture presenting the United Nations Trade and Development Report 2024, organised by the International Institute for Trade and Development (ITD) in collaboration with UNCTAD and the Harvard Club of Thailand on Thursday, Dr Supachai underscored the significant policy shifts shaping the future of international commerce.

 

He pointed to escalating geopolitical tensions, regional conflicts, and the rapid advancements in technology as further factors dramatically reshaping production and trade patterns worldwide.

 

While acknowledging the economic opportunities these changes could bring, he cautioned that without sound fiscal and monetary policies, particularly in emerging economies, they could morph into long-term risks.

 

In this climate of instability, Dr Supachai argued that multilateral cooperation and a unified negotiating stance on the global stage would be vital in safeguarding and promoting the sustainable interests of developing regions.

 

Furthermore, he stressed the importance of each nation charting an economic development course tailored to its own specific circumstances, rather than blindly adopting external models.

 

Policies that fail to align with a country's infrastructure, cultural norms, or social context, he asserted, are unlikely to yield truly lasting results.
  



 

Sustained Global Economic Slowdown

Cameron Daneshvar, Economic Affairs Officer at UNCTAD, echoed these concerns, stating that the global economy was locked in a prolonged slowdown that began over 15 years ago with the global financial crisis.

 

He projected a modest global growth of just 2.7% annually for 2024-2025, significantly below pre-pandemic levels. This persistent sluggish growth, which he termed a "new low-growth normal," presents a formidable challenge for developing nations.

 

While these economies are expected to see marginal growth in 2026-2028, it will likely fall short of what is needed for meaningful development. They also face mounting pressure from substantially increased public debt burdens in the wake of the COVID-19 pandemic.

 

This debt burden is forcing governments in developing countries to allocate more of their budgets to servicing loans and interest, at the expense of crucial development initiatives. The implementation of austerity measures to rein in public debt is further exacerbating the economic slowdown.

 

To counter these trends, Daneshvar suggested that developing countries should boost state revenues by tackling tax avoidance by multinational corporations and establishing multilateral frameworks to support negotiations on international monetary policy.

 

He also advocated for securing long-term financing through mechanisms such as leveraging international reserve assets issued by the International Monetary Fund (IMF), known as Special Drawing Rights (SDRs), and exploring new financial instruments, alongside expanding foreign exchange swap agreements.

  

Regarding inflation control, Daneshvar recommended focusing on reducing monopolies and improving the regulatory oversight of commodity trading.

 

In formulating monetary policy, he argued that beyond inflation targets and currency stability, broader factors such as public debt trends, the resilience of the financial system, and disparities in capital allocation should also be taken into account.

 

Furthermore, he highlighted the need for policies aimed at reducing income inequality, promoting strategically important industries, and enhancing governance structures and regulatory frameworks.

 



 

 

Call to Diversify Beyond Exports and Seek New Markets

Dr Nicolas Maystre, also an Economic Affairs Officer at UNCTAD, pointed out that despite a two-year high in merchandise trade growth in the fourth quarter of 2024, this might not signal a fundamental recovery.

 

He attributed the growth figures to stockpiling and advance orders placed ahead of new import tariffs.

 

Adding to this cautious outlook, new export orders (PMIs) from major exporting nations have dipped below the 50% threshold, and shipping rates have plummeted by over 40% in the first quarter of 2025, suggesting that the trade recovery is likely to be temporary.

 

While the services sector is projected to grow by a respectable 9.1% overall, including technology and digital services, Dr Maystre noted that these sectors are not yet generating significant employment in developing countries due to their reliance on high-level skills and automation.

 

Conversely, labour-intensive services such as tourism and construction, while economically important, have not yet demonstrated the capacity to significantly boost productivity or create deep economic integration.

 

Dr Maystre concluded that developing countries should broaden their development strategies beyond a heavy reliance on manufacturing and service exports, to drive productivity growth across their entire economic systems.

 

UNCTAD proposed three key strategic pillars for the services sector in developing nations:


Incentivising large service companies to increase their hiring of low-skilled workers.
Allocating public resources and improving access to investment to enhance productivity for small and medium-sized enterprises (SMEs).
Investing in upskilling the workforce to prepare for basic digital technologies, alongside promoting the adoption of technologies that enhance labour productivity for a more inclusive and sustainable economic transition.


 

UNCTAD believes that the data and recommendations presented in this report offer a crucial opportunity for developing countries to formulate new economic strategies to navigate the current highly uncertain and volatile global economic landscape.

 



 

Suphakit Chareonkul, Director of the International Institute for Trade and Development, observed that developing countries in Southeast Asia, including Thailand, are currently facing global economic volatility, unpredictable trade policies, and escalating geopolitical tensions.

 

However, he noted that the Southeast Asian region maintains strong intra-regional trade and plays a significant role in supporting the recovery of global supply chains.

 

Thailand, he added, is among the countries that have shown a particularly strong economic recovery following the COVID-19 pandemic, presenting both opportunities and challenges in accelerating economic growth.

(2025/05/02-00:00)