International trade creates wealth and opportunities around the world. But the richest countries must take care to foster, not weaken the poorest, writes Anabel Gonzalez.
Anabel Gonzalez is the World Bank Group’s Senior Director for Trade and Competitiveness and the former Trade Minister of Costa Rica.
Just months into 2015, the world is poised to reset the stage of international trade. A new negotiating agenda is gaining momentum. Leaders are striking up important conversations about trade openness and making progress in mega-regional trade deals. This is good news. But if 2015 is the year of action in trade, let’s make sure all are included.
The past 20 years has seen spectacular growth in world trade – new countries have joined the global marketplace, creating opportunities in places that otherwise might still be mired in poverty. The World Trade Organization (WTO) has helped to drive growth and poverty reduction in ways that would have been hard to imagine at its founding 20 years ago.
Yet today, world trade is fragile. Before the 2007-08 crisis, trade was growing at almost twice the level of real global
But 2015 could be a turning point. Disappointment at the slowing engine of trade may provide fertile ground for policy action. Indeed, there are signs of new energy already.
For one, there is the WTO Bali agreement, the most significant since the WTO was established 20 years ago and a strong endorsement of multilateralism. The cornerstone of this achievement – the Trade Facilitation Agreement – promises to reduce trade costs in countries around the world. It is also a call for international assistance to developing countries, a rallying cry to help the world’s poorest governments remove trade barriers, integrate into global value chains, and upgrade the value they bring to the global market.
There have also been significant signals recently that the United States, the world’s biggest economy, stands behind global trade. One such is the discussion around the Trade Promotion Authority (TPA), which would speed the country’s ability to approve trade deals.
Yet another sign is the growing energy around the Trans-Pacific Partnership (TPP), a landmark preferential trade agreement. The TPP would define trade rules for an area covering 40 percent of global output and set a new standard. Countries negotiating other preferential trade agreements would likely attempt to match the quality and depth of integration codified in the TPP. This dynamic would give new momentum to discussions between the US and European Union on the Transatlantic Trade and Investment Partnership (TTIP), and negotiations on the Regional Comprehensive Economic Partnership (RCEP), a trade agreement involving 16 countries in the Asia-Pacific, including China.
In this new context, the international community must ensure the preservation of an inclusive system that gives voice to poor countries and maximises their gains from trade.
Three priorities would help make this happen: First, we need to bolster the strength of the WTO, where low-income countries are guaranteed a voice. The best guarantee of an inclusive trade system is progress in multilateral trade negotiations. This means taking concrete steps toward closing the Doha Round: the G20 Trade Ministers meeting next October will be an important milestone, as will the December Nairobi Ministerial Conference of the WTO.
Second, preferential trade agreements should be as open as possible, maximising gains for outsiders and minimising discrimination against them. Some changes through the mega-regionals will benefit all – improving transparency, streamlining regulation and opening the services sector, for example. But to maximise the long-term gains, membership should ultimately be available to all countries willing to meet the standards. International organisations should collect and analyse information on the terms of these deals. We must help countries identify policies that have harmful side-effects for countries not party to them, or policies that reduce the efficiency of the global trading system.
Finally, we should continue to provide development assistance. To build a strong and inclusive multilateral trading system, we must help poor countries meet the standards set in mega-regional deals. These agreements must provide an opportunity for faster, deeper international integration, while still preserving a sense of unity in the broader trade regime.
None of this will fall into place automatically. Leadership from key players is essential to make it happen. The World Bank Group is ready to play its part.