WTO needs to address two challenging but foundational issues with global trade
Trade ministers from around the world have convened in Abu Dhabi for the 13th Ministerial Conference of the World Trade Organisation. The event is a biennial opportunity for the 164 members of the WTO to meet at the highest level to review the functioning of the multilateral trading system and decide on its future.
The Ministerial Conference comes at a moment where the global economy is in a fragile state, with the World Bank projecting a decade of historically low growth ahead of just 2 per cent annually. Trade has long been a driver of growth and poverty eradication, having lifted one billion people out of destitution in recent decades. It is now facing strong headwinds as protectionist forces mount.
With leaders in many countries questioning the value of participating in a globalised world economy, the growth of geopolitical-driven protectionism threatens to limit the gains of globalisation.
Against this backdrop, it is not an overstatement to say the conference in Abu Dhabi will be critical to determine the future of global trade. As countries “re-shore” and “friend-shore” their value chains because of legitimate national security concerns, it is essential for ministers to reshape the global trade system to prevent these trends from resulting in severe fragmentation, which could cost the global economy 7 per cent of gross domestic product, according to the International Monetary Fund.
WTO Director General Ngozi Okonjo-Iweala has been acutely aware of the importance of the moment and has appealed for the need to “be ready to roll up our sleeves and work in Abu Dhabi”. But what would this work need to look like to make a real difference?
On the agenda will be efforts to advance international trade and reform the WTO itself, such as eliminating subsidies that encourage overfishing, extending the moratorium on duties on cross-border e-commerce and restoring the system for settling disputes.
Yet, as important as these issues are, addressing them individually – with success uncertain, given the need for consensus to forge an agreement – may have, at best, a marginal impact on global trade. The necessary decision to admit two new members, Timor-Leste and Comoros, into the WTO also cannot be considered significant progress if important topics are yet again kicked down the road.
Leaders meeting in Abu Dhabi will need to be ambitious and focus on solving the underlying challenges affecting the trade system. They will need to address two factors that have enabled deglobalisation to take hold despite the overall benefits trade has delivered over the past three decades: first, that trade is seen as being misaligned with global priorities; and second, that gains from trade have not been equitably distributed within and between countries.
Strengthening the trade system should mean expanding the trade agenda beyond delivering efficiencies. Instead, trade needs to advance climate action and social inclusion through multilateral commitments against a “race to the bottom” on environment, labour and consumer standards.
Participating in global value chains can help the spread of climate-friendly technologies, such as solar panels or drought-resistant seeds. The broader the benefits delivered by trade, the more firmly it will be aligned with global priorities such as the Sustainable Development Goals. This, in turn, will enable trade to engender more trust of governments and citizens as they see the real value of it. Trade can thus be “fenced off” from geopolitical rivalry rather than disrupted for near-term political wins.
Here, inspiration can be taken from the African Continental Free Trade Area Agreement, which aims to create a single market for goods and services on the continent and enable the free movement of people. Its Protocol on Investment is designed to support the continent’s green transition by promoting investment in green sectors, encouraging incentives for low-carbon investments, and developing green investment standards.
Second, more inclusive trade mechanisms must be developed. In particular, least-developed countries with structural constraints such as fragile institutions, weak markets and a limited knowledge base, face difficulties taking full advantage of the opportunities offered by globalisation.
Between 2011 and 2020, exports of goods and services from least-developed countries contracted, and their share in global exports stagnated. What little economic growth that has taken place has in most cases failed to trickle down to the poor. More public-private consultations centred on the Global South are needed to ensure that multilateral trade policies prioritise the sustainable development of countries with the least economic power.
Trade-restrictive measures based on legitimate national security concerns are likely to remain a feature of global trade. To improve transparency, certainty and mutual trust, such measures must be ring-fenced, meaning focused, proportionate and time-bound.
The aspiration of a rebalanced global trade agenda can’t be achieved easily in times when trust is being eroded by geopolitical rivalry. But if ministers leave Abu Dhabi with little more than symbolic achievements, a chance will have been lost to strengthen a system of economic interdependence that has delivered immense, albeit imperfect, benefits. The alternative – a more fragmented, protectionist global economy – will make everyone worse off and will be a missed opportunity to strengthen collective action on the environmental, economic and societal issues most countries care about.
There is much to do at the Abu Dhabi conference to reverse the direction of travel towards protectionism