Remarks by the First Deputy Managing Director at the Ninth IMF-WB-WTO Trade Research Conference

October 25, 2023

Good morning. It is a pleasure to open the ninth IMF-World Bank-WTO Trade Research Conference.

Let’s begin by taking stock of where we are. World trade growth is historically low, with no signs of improvement. In fact, it is projected to decline from 5.1 percent in 2022 to 0.9 percent in 2023.

Meanwhile, the global trading system is facing several challenges: from geopolitical tensions and fragmentation, to industrial policies, to climate change.

As we prepare to discuss these challenges over the next two days, let me outline what we at the IMF see in the global trade landscape and how the international community can work together toward solutions.

Trade Policies and Rise in Trade Barriers

Weak global trade growth is likely to reflect not only the path of global demand, but also growing trade policy uncertainty and rising trade barriers.

Last year almost 3,000 trade restrictions were imposed—nearly 3 times the number imposed in 2019.

In addition, foreign direct investment is now increasingly driven by geopolitical preference rather than business fundamentals.

This points to a shift toward inward- and alliance-oriented policies, which often are ineffective.

For instance, a recent study by IMF and World Bank economists shows that US imports of Chinese goods subject to the 2018-2019 tariffs have been primarily replaced by exports from Vietnam and Mexico of firms that are intricately linked to China’s supply chains.

Rise in Industrial Policy

Of course, the surge in government intervention is tightly linked to a resurgence in industrial policy. In 2023 alone, the number of industrial policy measures increased nearly sixfold.

Most of that increase is driven by advanced economies, and has largely been motivated by strategic competitiveness, climate, or national security objectives.

Emerging markets have also increased their use of industrial policies, although they have relied less on subsidies and more on trade restrictions such as tariffs and export controls.

While industrial policies can help address market failures, they have historically been costly and often failed.

Many of these policies have an explicit trade policy component. Even in the absence of discriminatory features, industrial policies may still distort trade and FDI patterns, create negative spillovers, and risk retaliation.

According to one study, when the US, China, or the European Union put in place a subsidy measure, there's a 73% chance that one of the other countries will retaliate within 12 months.

Design matters and practical steps are needed to promote a more common perspective across governments on the use of industrial policies.


Stepping back, if these trends are not reversed, the risks could be significant.

Research by the IMF, WTO, and others shows that fragmentation could dramatically impact the world economy, costing up to 7 percent of GDP and possibly more for certain countries.

More recent IMF research which looks specifically at the impact of fragmentation on commodities shows the effects can still be sizable. Low-income countries could face long-term GDP losses of 1.2 percent on average, largely stemming from disruptions to agricultural exports. For some countries, especially commodity-dependent economies, losses could exceed 2 percent.

In addition to exacerbating food security concerns, fragmentation could also hinder the global green transition, as some critical rare minerals are highly concentrated. In fact, the three biggest suppliers of minerals account for about 70 percent of global production, on average. When unprecedented global cooperation to fight climate change is needed most, fragmentation threatens to derail our efforts.


So, how do we move forward amid these challenges? And how can trade policy help? 

First, we must secure the future by promoting trade openness and predictability, in collaboration with our partners at the World Bank and the WTO.

This includes addressing longstanding issues like subsidies and tariffs through strengthened trade rules. It also includes securing open markets in modern areas of the global economy, like services and e-commerce. And we look forward to progress towards the restoration of a dispute settlement system.

Second, we need to build supply chains that are resilient to trade shocks. To do that, countries must incorporate best practices such as greater diversification of input sourcing across countries; improving infrastructure, logistics and information systems; and reducing trade costs.

Third, we need to better understand the impact of countries’ unilateral actions. And we need to have clear-eyed discussions and cooperation to mitigate their spillovers.

Greater efforts to promote transparency, analysis, and dialogue on critical areas like subsidies and other industrial policies would go far to mitigate tensions. That is why this year, the IMF, OECD, World Bank, and WTO launched the Joint Subsidy Platform. This  data portal not only offers countries access to information about the nature, size, and economic impact of subsidies, it is also designed to facilitate dialogue on their appropriate use and design.


It is my sincere hope that the ideas shared here today can contribute to this important agenda.

This conference is a testament to what our institutions can achieve together, and the ways that we can shape global policy debates on critical issues in the global economy.

Thank you.