Ten Quick Wins for: Re-globalization and Resilience in Trade

Foreword

The year 2024 marks a global election cycle with over 80 countries, representing more than half of the world’s population casting their votes. In these uncertain times, the world finds itself confronted by a state of “polycrisis”—a complex web of interconnected global challenges that transcends borders. Geopolitics and international trade have a critical role to play in driving solutions to these crises. 

As many countries continue to navigate the aftermath of the COVID-19 pandemic, the world contends with other pressing issues such as the increasing urgency of tackling climate change and addressing the fragmentation of traditional geopolitical alliances. As nations confront various stressors, including ongoing conflicts in several regions around the world, these interconnected issues have heightened uncertainties and undermined the previously robust support for open trade.

In the past three decades, the world has enjoyed numerous benefits of trade liberalization. For example, in the first 25 years since the establishment of the WTO average tariffs dropped from 10.5% to 6.4%, and the value of global trade nearly quadrupled. The emergence of a global supply chain seamlessly weaved goods and services from various corners of the world into products ready for consumers’ hands. However, disruptions in recent years, such as the COVID-19 pandemic, climate-change-related natural disasters, and geopolitical events, have exposed significant risks in the global supply chain model. These disruptions have propelled businesses to diversify their supply chains in order to mitigate disruption risks. This means increasing sourcing opportunities from a diverse geographical footprint.

Trade policy can significantly leverage re-globalization to achieve a net-zero world, but it is crucial to ensure these measures include developing countries, particularly the most vulnerable and marginalized. Climate science advocates for enhanced efforts to reduce greenhouse gas (GHG) emissions and move towards a sustainable energy future, as underscored by the 2023 Intergovernmental Panel on Climate Change (IPCC) Synthesis Report. Agreements like the 2015 Paris Agreement and the 2021 Glasgow Climate Pact have set ambitious targets for net-zero carbon dioxide emissions by mid-century. However, developing countries often lack the financial resources, technological advancements, and institutional capacity to meet these targets. This risks their exclusion from the benefits of global climate initiatives such as carbon markets and clean energy transitions.

Workers are the backbone of international trade. They provide global services, the labor for tradable goods, and the means to ship exports and imports. Despite their unique importance to trade, not all workers are treated equally, and many groups are excluded from the design, implementation, and enforcement of trade policies. Countries should offer a seat at the trade policy table not only to advantaged trade union representatives but also to vulnerable workers who lack union representation.

The world is on the cusp of a transformative shift as the growth of clean energy and digital technologies propel humanity toward a minerals-based economy. This transformation holds the promise of a more sustainable and interconnected future, but it will also be highly material intensive. Meeting the burgeoning demand for these materials will necessitate an unprecedented expansion of mining activities. Experts estimate that the demand for lithium-ion batteries alone could require more than 300 new mines by 2035. Emerging green technologies will further accelerate demand for critical minerals needed for the generation and transmission of more renewable energy.

Cross-border data flows are crucial for trade and digital economy innovation. The rapid advancement and adoption of artificial intelligence (AI) further highlights the need to ensure that data flows freely, safely, and securely across borders. However, diverse and sometimes irreconcilable policy interests of WTO members have fueled the lack of agreement on vital issues, such as data governance, and slimmed down the negotiation agenda within the WTO’s Joint Statement Initiative on Electronic Commerce (E-Commerce JSI). These developments reflect ongoing concerns about shrinking policy space, privacy, national security, and data sovereignty, which can lead to regulatory fragmentation and restrictions on data flows. While AI is not currently included in the E-Commerce JSI, rapid developments in AI governance outside the WTO indicate the potential for further fragmentation. We propose a pragmatic approach focused on inclusivity through regulatory interoperability and technical harmonization, where certification frameworks and technical standards play a key role.

The WTO dispute settlement system is vital for enforcing WTO rules and providing security and predictability to the multilateral trading system. While the system has been by and large effective over the past 30 years, its practical application over time has made clear that some aspects need improvement or clarification. Accumulated dissatisfaction of some WTO members over certain features of the system, especially related to appellate review, led to a deadlock in the appointment of Appellate Body members to replace those whose terms of office had expired. This situation came to a head in December 2019, when the Appellate Body became non-functional due to a lack of quorum.

Responding to the perception that aspects of international trade create economic security risks, some WTO members have implemented unilateral, trade-inhibiting measures that lack clear endpoints. Members may justify violations of trade rules by invoking the WTO security exceptions, provided all requirements are met. However, security exceptions are not a long-term solution for persistent, unpredictable challenges and may even preclude multilateral approaches to anticipate and mitigate economic security risks. It is time to view security as more than an exception to WTO rules and principles. Members should build a new mechanism for economic security issues using the WTO’s safeguards procedures as a model.

Redirecting investment flows to developing and least-developed economies is one of the key challenges to overcome when thinking about a new paradigm for globalization and building resilience in trade. The Joint Initiative on Investment Facilitation for Development, launched by some WTO members in December 2017, aimed to address trade barriers that impede and restrict investment processes between countries. Although the conclusion of the negotiations on the Investment Facilitation for Development (IFD) Agreement was announced in February 2024, the Agreement was not incorporated into Annex 4 of the Marrakesh Agreement during the 13th WTO Ministerial Conference (MC13). Establishing these rules at the multilateral level is crucial to creating a cohesive and inclusive global investment environment, which will enhance the participation of developing and least-developed WTO members in global investment.

Across the globe, governments are increasingly confronting the urgent challenge of combating climate change. The green transition is essential to tackle this challenge and necessitates wide scale innovation and dissemination of advanced clean technologies. While the clean tech boom is underway, many developing countries are struggling to keep pace. The WTO is uniquely positioned to facilitate technology transfer by leveraging its existing frameworks and enhancing international cooperation with existing initiatives, such as those of the UNFCCC.

For decades, development finance has played a critical role in supporting financial resilience in developing countries. However, even countries that are striving to increase their economic strength remain vulnerable to external macroeconomic shocks and geopolitical uncertainties. One way development finance can help shield developing economies from shocks and drive inclusive growth is by championing the adoption of digital payments—including open and competitive payments markets and public-private partnerships.