00:00It's been quite a week here in Davos. I mean, we have many speeches. There was a lot of anxiousness.
00:04Is there anything that gives you hope that actually free trade will prevail compared to inward-looking countries?
00:12Well, first, thank you. And you're right, Francine. I think the atmosphere went from a great deal of apprehension
00:17to one of a little more hope by the end of the meeting.
00:21And I think what gives me hope that we can get back on the agenda on trade
00:26is the resilience of the trading system, the global trading system that I showed.
00:32Of course, there's been tremendous disruption, the biggest we've seen in 80 years.
00:36But we still find that about 72 percent of world trade is still going on on WTO terms.
00:42And I think when members of my organization hear that here at the World Economic Forum,
00:50it gives them, I think, what they need in terms of an impetus
00:54to then do the necessary reforms that can really help the organization meet the future,
01:00deal with issues like the new technologies in AI, the opportunities in services trade,
01:06in trade over computers, which we call digitally delivered services trade.
01:11There are many opportunities.
01:13How would the WTO survive if the U.S. were to retreat from it?
01:17Well, the U.S. does not signal that it's retreating.
01:20The U.S. is still a member, you know, has also, you know, paid its dues
01:26and is looking towards paying the next ones.
01:29And they're active.
01:31They've put out a paper on what they think the reforms of the WTO should look like.
01:35So we're happy they're there and that they're engaging.
01:38It's not easy, to say the least, but they're engaging.
01:42So with a very constructive approach.
01:45So that's the that's what we see.
01:47Director General, I mean, it's very clear that despite, you know,
01:50the tariff wall that we've seen from the Trump administration in 2025,
01:54their economy is is good.
01:56It's fine.
01:57You look at inflation, you look at services.
01:59How do you explain that?
02:01Well, let me also explain it by explaining that trade was the trade growth in 2025
02:07was better than we had projected after the August tariffs.
02:11We projected 0.9 percent growth in merchandise trade.
02:15And we saw 2.4 percent at the end of the year.
02:18And you know why?
02:19Part of it was front loading of goods ahead of the tariffs.
02:23But the big part was trading AI products.
02:26Forty two percent of the growth in trade in goods trade in 2025 was driven by AI trade.
02:33And so and that's why we also say this is the investment propelling growth in the U.S. economy as well.
02:41Part of it anyway.
02:43Director General, AI trade in terms of what?
02:45So this is what the shift is for building of data centers?
02:48So they need equipment.
02:50I see.
02:50So all the equipment, the hardware, software, all the things being traded to make it possible to build these things
02:57contribute a 42 percent to growth in merchandise trade.
03:02And, you know, the WT also has an agreement called the Information Technology Agreement
03:07that covers about three trillion dollars worth of goods that power AI.
03:13And so tariffs are low to zero on these goods.
03:16And that is also helpful towards propelling this trade.
03:20That's incredible numbers.
03:21Yeah.
03:21Are you expecting that to even increase in 2026?
03:24We are.
03:25We are projecting a lower merchandise trade growth this year of 0.5 just because we think that there'll be no more front loading.
03:33The impact of the tariffs will begin to come in.
03:36However, we see a real potential upside.
03:40If this kind of pace of trading AI goods continues, then we see potentially larger numbers than what we've projected.
03:49Director, how do you see a lot of the reroutes being changed, actually, or being rerouted in trade?
03:55I know there's also a lot of anxiousness about what happens in Iran, although that hasn't really been discussed here,
03:59this trade of Hormuz.
04:00What are you expecting for this year?
04:02Well, we see a lot of businesses are adapting.
04:05And that is why the private sector, you know, they look at the landscape and they try to adapt if they are left alone and given the right signal.
04:14So what we see is increasing diversification of trade and people trying to root their supply chains in ways where they can avoid tremendous ways they can deal with uncertainty,
04:27because that is the big problem that they have.
04:29Businesses don't like uncertainty.
04:30So you're seeing more regionalization in the trade.
04:35Supply chains are becoming more regional within East Asia in particular.
04:38We are seeing a lot of this happening.
04:41And we actually in the WTO welcome that because we want supply chains to diversify.
04:47We have a term for it called reglobalization.
04:49But we would like them to go beyond East Asia to Latin America, Central Asia and Africa.
04:55But is there, I mean, does it make it more expensive?
04:57But because it's more predictable, they prefer these routes anyway.
05:02Well, I think in some cases, you know, efficiency.
05:06So before, you know, conduct of trade was based a lot on efficiency and trying to get the lowest costs.
05:13And that is no longer quite the standard now because of the geopolitics.
05:18Some are reshoring, you know, some are producing for the U.S. in the U.S. market, for China in the China market, maybe for the rest of the world, some in Europe and other places.
05:29So, yeah, the costs will be higher.
05:32But I guess you have to balance resilience with efficiency.
05:36Back in October, the WTO, I think, saw global merchandise trade growing just to 0.5 percent this year.
05:42But given the truths we had with China, could that be higher?
05:44Yes. No, absolutely. For this year, we're seeing a potential upside.
05:50And we're going to look at our numbers again very soon, particularly if the truth between U.S. and China maintains, which we're very happy about.
06:00And the EU and China also having very productive discussions.
06:03We have those big trading blocks, you know, at a steady state.
06:06We have AI trade improving.
06:09The economy is growing a little bit better, more resilient than we thought.
06:14Yes, we could see an upside.
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