Deteriorating international cooperation and trade could have a negative impact on global economic growth, affecting the poorest countries the most, an International Monetary Fund (IMF) study said.
Among the main problems, the IMF pointed to measures taken by some countries that restrict trade, immigration and cross-border capital flows. These and other factors could lower world GDP by 7% in the long term, fund analysts said. If the restrictions affect the exchange of technology, the negative effect might amount to 8-12% of GDP for some countries.
“The world economy may be on the verge of moving away from the consistent course towards integration seen in the second half of the 20th century,” the paper notes. – Fragmentation may bring strategic advantages to some countries in individual cases, but overall it entails significant economic damage”.
These damages would take the form of “higher import tariffs, market segmentation, reduced access to technology and labour, both skilled and unskilled, and ultimately a reduction in productivity and living standards,” the IMF warns.
In particular, barriers to labour movement between countries could slow innovation and technology diffusion. In addition, fragmentation will reduce options for cross-border investment, hampering economic development.
Global trade was hit hard by the coronavirus pandemic and Russia’s full-scale war against Ukraine, while the economy was just beginning to recover from the 2008 global financial crisis, as well as the UK’s exit from the EU and the US trade war with China, the fund said.
To improve the situation, the IMF recommends strengthening trade partnerships in the area of trade exchange, ensuring fair competition and taking measures to protect the most vulnerable groups of citizens.
