The WTO is struggling – as many have noted (Wolf, 2022, Srinivasan 2020, Gao 20021, Hopewell 2021). It is easy to understand why.
Built around yesterday’s consensus to address yesterday’s challenge – the WTO is being pushed to the breaking point by today’s underlying disagreement. It needs to rethink its approach to the challenges facing humanity in the twenty-first century. And must get up.
In a new paper, we argue that the prospect of a return to a major multilateral trade agreement or a full restoration of the WTO’s judicial system may seem far-fetched, yet it must be restored with a WTO resource and political force to address humanity’s greatest challenges (Baldwin and Grozoubinski 2022). .1
Climate change, epidemics and constant economic and social inequality threaten the lives of millions of people. While trade alone cannot address these threats, we argue that effective trade requires more trade and stronger multilateral trade regimes. This means that world leaders must reconsider the WTO as important for saving lives, not just livelihoods – an important tool in the fight against the threat to humanity’s existence.
We argue that world leaders should provide the WTO with the necessary status and resources to meet the challenges. This is what we call ‘WTO Rising’.
In our concise paper, we focus on a few specific trade angles related to the two major challenges facing humanity: climate change, and the restoration of the pre-cowardly trend toward poverty reduction and sustainable catch-up growth in the Global South. Think of these as a challenge and a transformation.
Challenges: Climate change and trade
When it comes to climate change, trade goes hand in hand:
- A Contributors – through the carbon footprint of moving goods and services over wide distances between suppliers and consumers;
- Essential – Through the spread of green technology, their required skills and their required capital;
- A Potential risks – through regulatory arbitration by firms using foreign producers to avoid local sustainability systems; And
- Essential for mitigation – By increasing global resilience to local production shocks caused by extreme weather and other climate change factors.
There is another interaction here. If global warming and the loss of biodiversity are to be mitigated, the government must change business vigorously and aggressively. Such climate-linked policies will create winners and losers. Their trade will have an impact. And that means trade partners will complain. The resulting trade frictions in the form of WTO complaints will put a huge strain on the WTO dispute resolution process. How to fix this?
In a typical universe, all WTO members would unanimously agree on a single, binding intergovernmental agreement that would clarify the steps they deem appropriate to achieve the climate objective. This, of course, is not the case with the Tarot cards in front of us. WTO members are much more divided, and they still do not know that they want to recruit enough to keep their hands tied through the new rules.
In the absence of a single, climate-specific rule book, governments can go their separate ways. Policies designed with the purest purpose will be seen by some as a distorted market. This poses a risk of retaliation, especially if governments compete for some politically lucrative sectors, such as solar panels or electric vehicles. Worse, if WTO rules are used to prevent policies designed to reduce global warming or to adapt to its consequences, the credibility of the organization could be undermined.
To avoid a cycle of revenge and growth that renders a cure worse than disease, the WTO can, and indeed, play an important role in facilitating such friction through its generally neglected but important pillars: observation, transparency and dialogue.
If leaders reinvest in the organization, its established and authoritative committee structures and procedures provide the best hope for a multilateral space where new and thoughtful environmental policies affecting trade can be transparently shared and openly discussed; Where members can raise concerns, identify distortions and encourage change in measures that would harm their producers or consumers in ways that do not provide environmental benefits.
In order to be more substantially involved with the resources and political mandate supported by a secretariat, the WTO as an institution can support governments as they seek to navigate the complexities of the global fight against climate change.
Transformation: The telemigration and service revolution
Kovid-19 has destroyed life as well as livelihood. A recovery process is underway, but it is slow and uneven and has now been damaged by the economic shock caused by the war in Europe. However, recent developments in international trade have offered hope through the emergence of service trade, especially ‘telemigration’, which means international telework (Baldwin 2019).
Trade in goods has been stagnant for over a decade, but services have not been traded (Figure 1). In addition, two of the three regions most affected by the epidemic – Africa and Latin America and the Caribbean – saw a decline in exports of goods between 2011-2019 but an increase in services exports.
Figure 1 Export growth in goods and services trade, 2011-2019, and 2019 export shares
Comments: Travel and transportation services disrupted in 2019 and 2020 due to epidemic disruptions In 2020, global trade in goods and trade in world services amounted to $ 17.6 trillion and $ 4.9 trillion, respectively.
Formula: WTO Trade in Commercial Services (WTO Statistics), https://stats.wto.org/.
Digital technology has opened the door to this transition between trade and development. One key idea is trade in ‘intermediate services’ – services that go into the production of goods, but which are not delivered directly to clients. For example, the legal study behind filing in court is an intermediate service, while the court filing itself is the final service.
Before the information and communication technology (ICT) revolution made it easier to integrate complex processes over long distances, most intermediate services were adopted internally by the final service manufacturing company. Now, however, many intermediate services are provided by contract providers, who are stationed abroad.
It is creating export-linked jobs such as bookkeeper, forensic accountant, CV screener, administrative assistant, online client help staff, graphic designer, copy editor, personal assistant, travel agent, software engineer and so on.
Telemigration means more opportunities for some, but more competition for others. Governments are likely to back down. We believe that the WTO should be tasked with exploring how the inevitable tensions can best be resolved.
The measures we call for in our paper are not dramatic. The world finds itself in a situation where perfect is the enemy of progress. Rather, we focus on practical, politically achievable steps.
Recommendation 1: A revived WTO process to address climate-related disputes around trade policy
Together with the WTO leadership, members must begin to prepare the ground for climate-related disputes and, ultimately, with a stronger and better-funded secretariat within the WTO to mediate, negotiate, negotiate and possibly address climate-related conflicts – the new Need to build infrastructure. Judgment
In doing so, leaders should consider, among other things, the trade and environmentally sustainable structural negotiations (TESSD) that are already underway at the WTO. Given their openness to non-participants, members should consider participating positively in a TESSD meeting even if they are not formally ready to join the initiative or think of a rule that it may or may not create.
Recommendation 2: A new regular meeting on trade and climate at the Climate Change Conference of the Parties (COP)
Climate and trade communities are silent and isolated. This should end. The WTO should be explicitly included in efforts to advance, expand and coordinate climate rescue.
At a high-level meeting, in each COP, the Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC) or COP Presidency, as vice-president with the WTO, will indicate from above that trade policy is an ally of climate. War, and that climate is an essential consideration for trade policy.
Recommendation 3: A group of eminent persons to consider the inevitable response and development potential of telemigration.
A group of eminent persons should be formed to advise on how the WTO can anticipate and monitor the response, to update the rules-based multilateral trading system necessary to adapt to the rapid growth of service trade, and to reconsider trade-development relations. The role of the WTO.
Concluding remarks: ‘WTO is growing’ is essential
The WTO needs a supply of political capital to meet the challenges of the twenty-first century. Above all, a change of mindset is needed. Leaders must acknowledge that the WTO is not just about trade counts left to diplomats and trade ministers. It is about uniting to find ways to address the challenges that threaten humanity. It’s about saving millions of lives. It is about tackling development that threatens to plunge billions into perpetual poverty. It is a place where the attention of the head of state and the matching situation are required.
We argue that G20 leaders need to realize trade as part of resolving the challenge of human existence. It is mandatory for ‘WTO Rising’.
Baldwin, R and D Grozoubinski (2022), “Strengthening the Multilateral Trade System: ‘WTO Rising’ Necessary”, Upcoming Ing, LY and D Rodrik (eds), Indonesia G20: New General, New Technology, Economic Research Institute for ASEAN and East Asia and the International Economic Association
Gao, H. (2021), “WTO Reform and China: Defining or Degrading the Multilateral Trade System?”, Harvard International Law Journal 62: 1-38.
Hopewell, K (2021), “Trump & Trade: The Crisis in the Multilateral Trading System”, The new political economy 26 (2): 271–82.
Ing, LY and D Rodrik (eds) (2022), Indonesia G20: New generic, new technologyEconomic Research Institute for ASEAN and East Asia and International Economic Association (upcoming).
Srinivasan, TN (2020), Developing countries and multilateral trading systems: Uruguay round and future from GATTRoutledge.
Wolff, AW (2022), “WTO 2025: Restoring Binding Dispute Settlement”, PIIE Working Paper No. 22-5, Peterson Institute for International Economics.
1 Excerpts from the contents of Baldwin and Grozubinsky (2022) have been presented to the Government of Indonesia, the presidency country of the G20. Final editions will be published in Ing and Rodrik (2022).