Reenergizing the multilateral trading system
Trade has long proven to be an engine for growth and development, but now many argue that this is in need of repair
Trade has long proven to be an engine for growth and development, and in recent decades the countries of East Asia and the Pacific have been major beneficiaries of this phenomenon. However, many are arguing that this engine of growth and development is in need of repair. Global trade is facing challenging times.
In 2016, world trade grew at 1.3%, the slowest pace since the financial crisis. And despite signs that the figures will pick up this year, it seems quite likely that 2017 will be the sixth consecutive year with trade growth below 3% — a situation seen only once before in the 70-year history of the multilateral trading system.
At the same time, we are seeing a growing backlash against globalization. A concern that is often raised is that trade causes disruptions in the labour market. However, technology and innovation are having a much bigger impact.
Studies show that eight out of 10 jobs lost are due to new technologies, not to import competition. These concerns are legitimate and deserve to be responded to. But if we treat disruptions in the job market solely as a trade problem, then we will only be responding to one part — the smaller part — of the picture.
We need to embrace these forces and learn to adapt. Like technology, trade is indispensable for sustainable growth and development. Turning inward and closing ourselves to trade would only make the situation worse.
All this raises questions about the future of global economic cooperation, of the multilateral trading system and of the WTO. While these may be challenging times, the fact is that we need the WTO more than ever.
A strong, rules-based trading system is essential for global economic stability. It provides a framework to ensure that trade flows as smoothly and as predictably as possible, as well as a dispute settlement system, which ensures that trade differences do not spiral into larger conflicts.
The multilateral trading system was the world’s response to the chaos of the 1930s, when rising protectionism wiped out two thirds of global trade. The 2008 financial crisis tested the system, and it passed. We did not see a significant rise in protectionism. The share of world imports covered by import-restrictive measures implemented since October 2008 is just 5%. Of course it could be even lower — but it shows that the system did its job. While the system is not perfect, it is essential.
With all of this in mind, we must keep strengthening the system, delivering new reforms and resisting the creation of new barriers to trade. For many years up until 2013, the WTO was seen as a place where you could not do business. This is not the case anymore. We have been innovating, doing things differently and recent WTO negotiating successes prove that the system can deliver.
In less than three years, we delivered the Trade Facilitation Agreement, the expansion of the Information Technology Agreement, and the agreement to abolish agricultural export subsidies — among other important decisions. These are the biggest global trade reforms in a generation, and while they represent important economic benefits by themselves, they also show that WTO members are willing to be adaptable and dynamic to tackle the problems they face.
We are learning to be ambitious, but also to be pragmatic, realistic and flexible. We are learning to be creative, finding innovative solutions and engaging in flexible formats. At the end of 2017 the WTO will hold its biennial Ministerial Conference in Buenos Aires — and that could be another important opportunity for progress. Currently, WTO members are discussing a range of issues where further steps could be taken. Conversations are ongoing, for example, in agriculture, services and in fisheries subsidies — longstanding issues that are part of the Doha negotiations.
There is also growing interest in having a discussion at the WTO on issues such as e-commerce, facilitation of services and investment, and how to help small- and medium-sized enterprises to start trading across borders. Members have been very active and have been exploring different areas. But we need a greater sense of clarity and purpose to see what can be achieved. Continued political engagement will be vital.
Support for the multilateral trading system does not need to come at the expense of an active bilateral and regional negotiating agenda. It is not a zero-sum game as it is often portrayed. The Asia-Pacific region is a dynamic example of how trade initiatives being pursued in the region can have a significant and positive impact on the multilateral system. APEC is a key example of this, but there are many other regional and bilateral initiatives being pursued in the Asia Pacific region that can complement multilateral rules and act as building blocks for the global system.
However, even if all regional agreements could be completed tomorrow, we would still need the WTO. Almost none of the global trade challenges we face today, whether related to the digital economy, agricultural subsidies or fisheries subsidies, would be easier to solve outside of the multilateral system.
Cooperation at the global level will be essential to ensure that the system is as strong and as inclusive as ever. Reenergising the multilateral trading system can help to spread the benefits of trade more widely and ensure trade is a solution to the myriad of problems that leaders are wrestling with today. It’s time to reignite the trade engine to support jobs, growth and development around the world. The countries of East Asia and the Pacific have a key role to play.
Roberto Azevêdo is Director-General of the World Trade Organization.