Trade policy needs urgent updating. The Covid-19 pandemic has deepened inequalities within and between countries.
The recent record heat waves are a reminder that we must tackle the climate crisis before it is too late. And digitization offers new ways of delivering goods and services while raising new questions around its risks and regulations.
In this context, it is essential that we reassess where trade and investment have helped – and where they have hindered. We have to get back to basics: what is trade for? And how can it deliver better results for people and the planet?
Commercial relations have always been a means to an end. But that end has changed over the past century as global attitudes to trade and what it has to offer have evolved.
In the 1940s, the General Agreement on Tariffs and Trade enshrined growth as a key objective of international trade relations, suggesting that full employment and rising living standards would follow.
When the World Trade Organization was established in 1995, the trading system also had to address sustainable development and ensure that developing countries secured a share of the growth in trade.
Today, the trading system must adapt again to meet additional concerns of global resilience, sustainability and inclusiveness. The statement by the leaders of the G-20 described the key aspects of the recovery from Covid-19, namely, economic growth and job creation, health, digitization, sustainability and inclusion. Trade has an important role to play in realizing each of these dimensions.
According to a recent Ipsos-World Economic Forum survey, 75 percent of the global public supports expanding trade, but only half said they think globalization is good for their country, down 10 percentage points since 2019.
This ambiguity reveals a belief in the potential of commerce to improve lives but a deep unease about its current direction. Cooperation is needed to guard against a race to the bottom or adverse shocks while exploiting the benefits of trade.
So how can world leaders ensure that trade policies realize their potential for growing economies, reducing poverty and empowering people around the world?
First, Covid-19 has made it clear that trade is essential in preparing for and responding to health crises. Trade and investment are crucial in the research, development, manufacture and distribution of personal protective equipment, diagnostics, vaccines and therapeutics.
Governments should consider lowering tariff and administrative barriers, facilitating investment, improving supply chain transparency and refraining from restricting exports.
Second, digitization has brought significant benefits to people’s lives. During the closures, digital trade in services and e-commerce allowed a large part of the economies to function.
Creating and investing in an accessible and interoperable global digital ecosystem is a crucial part of future economic recovery and resilience.
Third, reducing the complexity of international trade will provide more opportunities for small businesses to diffuse innovation and boost employment, stemming the decline in foreign investment, which threatens development gains.
Governments should work towards streamlined, transparent and predictable investment procedures, provide technical assistance and support to developing countries and help them access international trade.
Fourth, greener global production and consumption depend on policies that encourage environmental innovation and defuse blame as an excuse for inaction.
Countries should consider reducing barriers and promoting trade in goods and services that support the Sustainable Development Goals, while phasing out fossil fuel subsidies, aligning with border carbon measures and facilitating cross-border carbon measures. green investments.
And finally, business benefits must reach stakeholders who have been left out for too long, including economically disadvantaged people, women, youth, ethnic and religious minorities, and indigenous peoples. The interests of disadvantaged groups must be taken into account in the development, implementation and monitoring of trade rules, as well as in national policies that may affect their ability to participate in trade, including labor laws. , property, contracts and more.
Some global leaders and companies are already reporting a change in approach.
For example, U.S. Trade Representative Katherine Tai emphasized the Biden administration’s worker-centric trade agenda and argued that trade policies must take into account their impact on workers, women and the ‘environment. A growing number of countries protect the rights of indigenous peoples and include gender provisions in their trade agreements.
Companies are making ambitious commitments to climate action, women’s economic empowerment and racial equity. More than 20 leaders from some of the world’s largest companies have joined a multi-party call calling on governments to refrain from protectionism and promote effective, transparent and inclusive trade policies.
The long-delayed World Trade Organization ministerial meeting in December provides an opportunity to reassess the role of trade in today’s world and to implement meaningful reforms. We cannot let disagreement cripple us or shrink us from the potential for progress. Together, we can chart the course for the sustainable and inclusive trade of tomorrow.
- Mr. Brende is President of the World Economic Forum and Mr. Vinals is Group President, Standard Chartered. This article is published in a special collaboration with the World Economic Forum.