00:00Now the World Trade Organization has just in the past few hours released its updated global trade outlook
00:06and it's an unexpectedly resilient picture despite the impact of the conflict in the Middle East.
00:13Merchandise trade volume grew by 3.5% in the first six months of the year
00:17reflecting the ability of supply chains to adapt to shocks affecting energy, fertilizer and transport.
00:24Strong demand linked to AI helped offset the negative effects of the Middle East conflict in the first half of
00:31the year.
00:32Demand for goods like semiconductors and servers absolutely soared rising 67% year on year.
00:40Now WTO economists expect world merchandise trade volume to increase by almost 4% for the entire year.
00:47That is a big jump from less than 2% that was forecast in March.
00:52In 2027 that figure could increase by 4.1%.
00:59Now global GDP is forecast to grow 2.6% this year which is expected to rise to around 3
01:05% in 2027.
01:08AI related investment is expected to remain a key driver of merchandise trade through next year.
01:15Global AI infrastructure spending is projected to increase by nearly a third this year.
01:21But the outlook for services trade has weakened as the Middle East conflict continues to disrupt transport and travel.
01:30Commercial services trade volume is expected to grow by 3.3% this year.
01:36That is down from a previous forecast of 4.8%.
01:40Now at the same time the WTO director general Gauzi Okonjo-Eweila says there is an urgent need to strengthen
01:48global supply chains in the face of growing protectionism.
01:53Now Robert Steger is the WTO's chief economist.
01:56I've been chatting to him and he's been explaining to me how weak global trade cooperation could really impact growth.
02:02What the World Trade Report finds is that up to 7% of world GDP could be lost if the
02:13world fell into either the geopolitical block scenario
02:17or the discriminatory free trade agreement block scenario.
02:20On the other hand, if the active reforms that the WTO members are engaged in currently to upgrade and improve
02:30the rules of the world trading system were successful,
02:34that could increase world trade by 3%.
02:36So the punchline is that there's about a 10% difference in world GDP that is at stake for successful
02:48reforms of the world trading system.
02:50And I think that's partly what the director general is getting at is how important the rules are to allow
02:57economies to benefit from trade and the world to benefit from trade.
03:02Your report says China-U.S. trade decoupling remains a major source of trade fragmentation.
03:09What does that tell us about where global trade is heading, that the two major economies are moving further apart?
03:16Over the last five years, there has been a decoupling along geopolitical lines that is very clear,
03:23and we have some charts that show that there's less trade across geopolitical blocks relative to the trade within geopolitical
03:33blocks.
03:34But that trend has actually stabilized and, in fact, turned around in the last couple of years.
03:39What we are seeing is the trend continuing between U.S. and China,
03:45and that is really where the decoupling has occurred more strongly in 2025.
03:50Even that is beginning to turn around a little bit,
03:53but that is clearly where the decoupling seems to be most strong in the data.
04:01That you've upgraded your forecast for global goods trade this year to 3.9%,
04:06which sounds like fantastic news.
04:09AI plays a big role in that, but there's nuance. Tell us more.
04:12So back in March, we were trying to assess what might happen to that boom in 2025 in AI investment,
04:20and we figured that in 2026 it was probably going to moderate a little bit.
04:25It would still grow, but it wouldn't be at the strong pace in 2025.
04:31Well, we now have data for the first half of 2026.
04:34We can look at the investment in AI-enabling goods, and it has not moderated.
04:39It has not even been stabilized as the same level as 2025.
04:44It has actually accelerated dramatically.
04:47So we are in a real boom of investment in AI-enabling goods.
04:53Since those are very trade-intensive, that is driving the growth in merchandise trade that we are forecasting,
05:01and in fact seeing in the first six months of the year.
05:04The interesting nuance also, though, that you mentioned is if we look at trade and services,
05:10because that is where the Middle East conflict actually has had its biggest impact.
05:16The reason is that the Middle East is a hub for transport services and tourism services,
05:23and so the Middle East conflict really did reduce the amount of transport and tourism services at a global level.
05:34And for that reason, we have downgraded our growth forecast for services.
05:40We don't know how the conflict in Iran is ultimately going to play out,
05:45and there's still talk that there could be an AI bubble,
05:49and not everyone who invests is going to make a lot of money.
05:53Talk to us about the risk outlook here.
05:57Yeah, the risk is interesting, of course.
06:00This is well-known and often stated.
06:04You never know whether you're in a bubble in Telepop,
06:07so no one can really predict whether we are in an AI bubble or not,
06:12and we're certainly not predicting that.
06:15But we do see a little bit of data that's hinting that the AI investment boom will continue
06:22at least for the next few months and into early 2027.
06:27And on the Middle East conflict, as I mentioned, we don't predict these things.
06:32We just have scenarios.
06:33And our scenario for the Middle East conflict in our prediction
06:37is that the trade effects of the conflict will not carry through into 2027.
06:42And that's why we do predict that services trade growth will rebound in 2027.
06:482027.
