WTO Chief Ngozi at Jackson Hole

World Trade Organization Director General Ngozi Okonjo-Iweala addressed central bankers in Jackson Hole last week, making the case for trade central bankers and the trade community to work together, along with a neologism that may take some further selling.   Below some of her presentation:

“That's why I left the G20 trade ministers' meeting in India at the halfway point and flew straight here to join you…

“Research shows that openness to international trade lowers macro-volatility more than specialization increases it…an underappreciated fact is that trade has been an important shock absorber.. 

“Flexicurity”

A retreat from open global trade would undermine this supply “flexicurity” that comes when firms and households have more outside options from which to purchase goods and services.    WTO economists estimate that if the world economy decouples into two self-contained trading blocs, it would lower the long-run level of real global GDP by at least 5%, with some developing economies facing double-digit welfare losses.

Streamlining Trade

“Between 1996 and 2018, trade costs fell by more than a quarter in countries like Vietnam, Poland, and India. There is still room to improve: trade costs in developing economies remain almost 30% higher than in high-income economies — and are 50% higher in Africa.

Trade policy and the WTO have played an important role in these reductions. The WTO Trade Facilitation Agreement lowered non-tariff trade costs by simplifying and harmonizing rules around border procedures. Average tariffs have fallen to about half their level in 1995 through unilateral reforms as well as WTO accession, plurilateral arrangements like the WTO's agreement on high tech goods, and regional agreements. 

Digital Services now 12% of Trade

“Another potential driver for trade and re-globalization is services, which are becoming increasingly tradeable.

Global exports of services delivered via computer networks — things like streaming entertainment, remote learning, software services and cloud computing — have more than tripled since 2005, growing far faster than exports of goods and other services. At $3.82 trillion in value, digitally delivered services accounted for 12% of total global trade in 2022, compared to only 8% a decade before. They also emerged as increasingly important inputs into the production of other services.

“At the WTO, we have an ongoing agenda to reduce services-related trade costs. About 70 of our members, together accounting for over 90% of global services trade, have signed on to an agreement on Services Domestic Regulation that cuts red tape, sets out best practices, and make rules more transparent. And a group of 90 members including the US, the EU and China, are currently negotiating a set of basic global rules for digital trade. 

Re-globalization requires a supportive trade policy environment, including action at the WTO and elsewhere to keep lowering trade costs, narrowing the digital divide, and making trade finance more available. 

A world that turns its back on open and predictable trade will be one marked by diminished competitive pressures and greater price volatility. It would be a world of weaker growth and development prospects, a slower low-carbon transition, and increased supply vulnerability in the face of unexpected shocks.