Global imbalances: What role for the WTO?
Juan A. Marchetti, Michele Ruta, Robert Teh 02 January 2013
Globally, large current account imbalances prevail. This column argues that they also continue to represent a systemic risk for the world economy. The WTO has a clear-cut role in the institutional effort to address these imbalances. However, this role has more to do with opening services and government procurement markets than with the often invoked trade sanctions in response to exchange rate misalignments.
The world witnessed a large build-up of current account and merchandise trade imbalances, both in absolute and relative terms, prior to the global financial and economic crisis (see Table 1 and Figure 1). Current account/merchandise trade surpluses were most pronounced among the East Asian economies (e.g. China), oil exporters (e.g. Saudi Arabia) and the ‘core’ Eurozone countries (e.g. Germany). The US and the Eurozone periphery countries had large and persistent deficits. While imbalances contracted after the crisis, they remained large both in absolute terms and in relation to GDP.
WTO, trade, liberalisation, current account imbalances