Trades Transformative Role - WTO Report

Posted Friday, September 13, 2024 9:50 pm

World Trade Organization Director-General Ngozi Okonjo-Iweala touted the trade’s “transformative role in reducing poverty and creating shared prosperity – contrary to the currently fashionable notion that trade institutions like the WTO, have not been good for good for poverty or for poor countries, and are creating a more unequal world.”

Ahead of the WTO’s public forum, the WTO released the World Trade Report 2024 to showcase the gains from globalization following the establishment of the WTO based on the Uruguay Round negotiations.

The report offers important insights on how to make “trade and WTO work better for economies and people left behind during the past 30 years of globalization,” according to the DG.

The report says that trade cost reductions between 1995 and 2020 led to a 20 percent to 35 percent faster income convergence of low- and middle-income economies.

It says there is weak correlation between trade openness and within-country income inequality. “Less trade will not promote inclusiveness, nor will trade alone,” WTO chief economist Ralph Ossa said. “True inclusive ness demands a comprehensive strategy – one that integrates open trade with supportive domestic policies and robust international competition.”

Read the Full Report Here

Major Findings

The report outlines several major findings, emphasizing the need for a comprehensive strategy that integrates open trade with supportive domestic policies to make trade more inclusive. The key points are as follows:

Living conditions and prospects for many people have dramatically changed over a few decades, while recent debates about trade, development, and inclusiveness sometimes overlook these achievements.

The *World Trade Report 2024* explores how international trade and policies contribute to a more inclusive global economy, Integrating open trade with key policy areas to spread trade benefits broadly.

While income convergence has progressed over the past 30 years, it slowed post-2007-08 financial crisis and regressed during the COVID-19 pandemic.

Trade reforms have driven structural transformation in low- and middle-income economies, contributing to income convergence, however, convergence and global integration remain uneven, leaving some economies behind.

Challenges to Convergence:

High trade costs and limited diversification hinder convergence.
Impediments to structural transformation and the inability to adopt foreign technologies prevent some economies from benefiting fully from trade.
Geopolitical tensions, technological advancements, and climate change threaten economic convergence, endangering both past achievements and future prospects.

Trade-Led Growth & Policy Needs:

Reducing trade costs is critical for future trade-led growth.
Trade policy must be complemented by policies supporting structural transformation and technology absorption.
Inclusiveness across economies fosters inclusiveness within economies, and vice versa.
Trade has significantly reduced poverty in low- and middle-income economies.

Distribution of Gains from Trade:

Over the past 30 years, global income inequality has remained high but has evolved differently across economies.
Gains from trade are unevenly distributed among individuals but do not inherently increase inequality.
Some individuals may face long-term losses, even as trade benefits many.
Mobility obstacles reduce trade gains and exacerbate losses.
Protecting specific groups from the disruptive effects of trade can be costly and negatively impact other segments.

Inclusiveness in Trade Policy:

Making trade more inclusive is essential amid rising geopolitical tensions, technological changes, and climate concerns.
Removing discriminatory trade barriers affecting vulnerable groups could foster a more inclusive trading system.
Domestic policies are necessary to complement trade and enhance inclusiveness.
The WTO promotes inclusiveness by fostering an open, rules-based, and predictable multilateral trading system.

Role of the WTO:

WTO rules contribute to governance improvements through economic reform, fostering sustained growth.
Flexibilities in WTO rules aim to enhance trade opportunities for developing economies, including LDCs.
*Aid for Trade* projects and similar technical assistance have expanded export opportunities for developing economies.
Efforts to include left-behind economies require a more effective and inclusive WTO.
International trade cooperation is necessary to address evolving challenges in services, digital, and green trade.
Balancing binding commitments with effective flexibilities is essential for inclusiveness across economies.
Trade agreements increasingly include provisions related to inclusiveness within economies.

Furthering Inclusiveness:

WTO rules support inclusiveness within economies.
Non-discriminatory complementary policies for inclusiveness are not restricted by WTO agreements.
WTO members are discussing how to make trade more inclusive, focusing on the participation of women and MSMEs.
Trade-related technical and capacity-building initiatives are advancing inclusiveness.
The WTO can address inclusiveness through transparency and monitoring functions.
Involving vulnerable groups in WTO commitment implementation can enhance inclusiveness.

Today’s “trade and” challenges demand a coordinated “WTO and” approach to