Enhancing multi-lateral trade
The World Trade Organization is marking its 20th anniversary this year. While these two decades have brought numerous challenges, the WTO has succeeded in significantly enhancing the multilateral trading system.
The WTO has broadened the trading system considerably since 1995, welcoming thirty-three new members, including giants like China and Russia. Today almost all of the world’s economies are now part of a single trading system. International rules, not power, increasingly govern trade relations, and conflicts are settled, not in trade wars, but in the WTO’s dispute settlement system – which serves as a global trade court. Trade barriers continue to fall – to the point where well over half of global trade is now tariff free – and economies are becoming ever more interconnected. In this context the WTO provides a key forum for policy dialogue, information sharing, and economic cooperation among its 161 members – making it an increasingly critical pillar of today’s system of global governance.
While progress in the Doha Development Agenda – the latest in a long line of trade ’rounds’ – has proved very difficult, a growing list of new WTO agreements – covering everything from customs reform, to information technology products, to government procurement, to financial and telecommunications services – are opening up new trade opportunities, in new sectors, often in innovative ways. It is estimated that the 2013 WTO Trade Facilitation Agreement alone could have a bigger impact on reducing trade costs than the elimination of all remaining global tariffs. The July 2015 agreement to expand the scope of the WTO Information Technology Agreement, promises to eliminate tariffs on high tech products which represent 7 per cent of global trade – more than trade in textiles, apparel, iron and steel combined. The WTO’s 10th ministerial conference in Nairobi this December (the first such event to be held in Africa), will be an opportunity to advance negotiations and to deliver some further significant outcomes in support of growth and development.
Indeed, supporting development is now a central element of the WTO’s work. Since 1995, the developing countries’ share of global merchandise trade has grown from 27 per cent to over 43 per cent – and their share of global GDP has risen from 41 per cent to over 53 per cent. Emerging economies have become indispensable drivers of the global economy, as well as leading voices in the international economic system. There are many reasons why developing countries have achieved economic lift-off, but surely none is more important than their integration into the global economy – a process that has depended, in turn, on today’s extraordinarily open, reliable and secure world trading system.
However, the WTO’s short history is obviously not one of unbroken success. Disappointing progress in the long-running Doha Round is a lingering and high profile reminder. But it important to recognise that the WTO’s contribution to the world economy in general, and to development in particular, is much broader than the Doha negotiations, even as they remain a key element of our work.
Non-multilateral initiatives will naturally continue to blossom, but we must maintain the WTO as a strong and comprehensive foundation of global trade. The WTO was not the first attempt to create a global trading system, nor the first time that policy makers aimed to realize the vision of global peace through shared prosperity. After the Second World War, the international community also saw the building of an open global trading system as essential precursor to building a new post-war international order. But the bold plan to create an International Trade Organization soon fell victim to Cold War rivalries and waning support for internationalism. It was not until the WTO’s creation five decades later that the dream of a permanent and global trade organization was realized – making the WTO the first truly international institution of the post-Cold War era playing a key role in global economic governance.
The WTO is ultimately the result, not the cause, of members’ willingness to cooperate on trade. Its creation and subsequent success reflects the growing realization among more and more countries that trade opening can lead to growth and development, that agreed rules strengthen, not weaken, sovereignty, and that advancing our national interests increasingly depends on advancing our collective interests. As today’s global economy grows increasingly open, interdependent and multipolar, it is clear that enhancing cooperation in international trade is becoming more, not less, important. But just because the WTO is important does not make it invulnerable. The WTO’s first twenty years have been successful because of members’ firm commitment to the system and constructive decisions.
This attitude will be fundamental in ensuring that the next twenty years are as successful.