The WTO needs a shake up before it’s too late

Our global trading system is in trouble, and it’s only going to be made worse by the coronavirus pandemic

On the other side of the coronavirus crisis there is another huge global issue to be faced. Even before the pandemic, the world’s trading system was in trouble.

Global trade actually slowed in the last quarter of 2019, before Covid hit, and foreign direct investment flows were the lowest for a decade.

On top of that, Roberto Azevedo, the head of the World Trade Organisation, has decided to step down early. Some see his successor as being handed a poisoned chalice; some a golden opportunity. What can be done to rescue the situation? First, we need to be able to answer some key questions.

The most important is “what is trade actually for?” For me, trade has never been an end in itself. It is how we help spread prosperity, enabling all parts of the globe to benefit from their own unique natural advantages, human talents and innovation.

It is part of an even more important continuum that we interrupt at our peril. Prosperity underpins social cohesion and that, in turn supports political stability – the building block of our collective security. Those who believe that economic nationalism and protectionism is a cost-free option do not understand the interdependence of the world in which we now live.

I believe in free, fair and open trade, not least because we have seen in the past how it can be used to raise living standards, creating one of the greatest liberations from abject poverty in human history.

But free trade cannot be a free for all. The alternative to the rules-based system I support is a return to the deals-based system where the strongest called the shots and the others scrambled for what they could get. That is why we created the WTO.

As president Ronald Reagan, whose administration launched the Uruguay Round that led to the creation of the WTO, put it: “The freer the flow of world trade, the stronger the tides of human progress and peace among nations.” We need to recapture that spirit to deal with the current problems of the organisation, which is potentially in danger of collapse.

There is a difficult and complex challenge awaiting the new director general relating to the functioning of the WTO itself which needs to be urgently addressed.

Trade disputes take too long to settle. There is too little transparency and oversight, so it is difficult to know who is following the rules. The richest countries have applied too many barriers – both tariff and non-tariff – so that it has become harder and harder for poorer countries to satisfy technical and quality standards, as well as to comply with administrative procedures. The Appellate Body in charge of dispute settlement has moved from arbiter to a quasi-judicial role, setting precedents in a way that many find an unacceptable extension of its role.

Yet it has done so because of the inability of the WTO to make decisions. That needs to change.

I believe it is morally unacceptable, as well as economically foolish, for those who have gained most from free trade to deny the benefits to others through the application of protectionist practices. Equally, it makes no sense for developing nations to characterise the WTO as a “rich man’s club” when so much can be done to open markets and help people trade their way out of poverty.

A good example is the issue of e-commerce, where access to internetbased trade can be a great leveller, as well as providing one of the greatest tools to help women, especially in developing countries, get access to trade. Making much more rapid progress on this front is one of the key tasks facing us.

Britain has a proud history in championing the cause of free trade, and we supplement this philosophical commitment with one of the world’s most generous and respected development programmes. Not only are we in the G7 and G20, but we are at the heart of the Commonwealth and support some of the smallest nations financially so that they can be represented in the WTO in Geneva.

We need to bring new energy to the global trade debate before it is too late. The challenges we were already facing will only be made more difficult by the Covid-19 crisis. We cannot simply close our eyes and hope the problems will go away. Only by innovative thinking, a willingness to reform and a genuine desire to make the benefits of free trade work for everyone will we achieve that vision of human progress and peace. Britain should relish the challenge to lead.