Deputy Director-General Angela Ellard delivered on 14 February a spotlight talk at the German-American Trade and Tech Conference organized by Aspen Institute Germany. In her speech, DDG Ellard addressed recent trends in international trade, the role of technology and the WTO’s current work in this area. Her full speech is below.
Thank you for such a generous introduction, Stormy. And thanks to Aspen Institute Germany for inviting me to speak at this important conference. It is a pleasure to be with all of you today, albeit virtually.
Trade and technology are closely interlinked. From the invention of the earliest sailing ships, to steam engines, railways, and steamboats, to the advent of containerization, ever more sophisticated logistics, and the demand for climate friendly transportation, technology has always played a vital role in shaping the way we live and trade. This trend is accelerating like never before. We are living in an era of unprecedented technological change, experiencing and shaping innovations that could have a major impact on how we trade, who trades, and what is traded.
Technological developments can unlock new opportunities for businesses and individuals around the world. To realize this potential, we need to understand how to harness new technologies to make sure that they translate into job creation, economic growth, and helping to deliver Sustainable Development Goals in line with the WTO’s stated mission to improve living standards.
There is no doubt that the future of trade is inextricably linked to digital technologies. According to WTO estimates, global exports of digitally delivered services have more than tripled since 2005. Between 2005 and 2019, the average annual growth rate of digitally delivered services reached 7.3%. By contrast, other services exports grew only by 5.6%, and goods by 4.7%. During the pandemic, exports of digitally delivered services further increased by 14% year-on-year, and e-commerce sales soared.
The current framework regulating trade in services and technology at the WTO was put in place in 1995, generations ago in technology terms. WTO Members are working to improve the existing tools and developing new ones to reflect the changing nature of trade. Let me elaborate on some of that work.
First, at our 12th Ministerial Conference last June, WTO Members agreed by consensus to extend the longstanding moratorium on customs duties on electronic transmissions until our next Ministerial Conference, in one year. This outcome was fundamental to preserving a trade policy environment that is supportive of e-commerce and is of tremendous importance for many businesses.
But because this moratorium is set to expire in a year, discussions will continue in the coming months to address the gap between developed and many developing countries on the one hand, and some developing countries on the other, who see the moratorium as detrimental to raising revenue and addressing the digital divide in ecommerce.
At MC12, Ministers also agreed to reinvigorate work under the work programme on electronic commerce, a longstanding effort aiming to address all trade-related issues relating to global e-commerce. This work includes development-related issues, such as digital divide in terms of digital infrastructure, connectivity, and capacity building.
Second, there is a lot of attention these days on the plurilateral joint initiative on e-commerce. Eighty-seven WTO Members, including many developing countries, participate in this initiative to develop baseline rules to govern the global digital economy. In particular, Members seek common disciplines to facilitate remote transactions and strengthen trust in digital markets while helping to tackle digital trade barriers. Members are aiming to conclude them by the end of the year.
It is significant that developed country Members participating in the initiative recognize the importance of inclusion and the barriers faced by developing and least developed countries seeking to benefit from the digital economy. In this regard, the ‘E-commerce Capacity Building Framework’ launched by Australia, Japan, Singapore, and Switzerland is a key step to strengthen digital inclusion and to help harness the opportunities of digital trade. The Framework will offer a wide range of technical assistance, training, and capacity building to support countries’ participation in the e-commerce negotiations.
In addition to these initiatives, discussions of technology-related issues take place in various specialized committees. For example, Members have been increasingly notifying the WTO’s Committee on Technical Barriers to Trade about their measures affecting digital trade, e-commerce, and cybersecurity. The level of interest to these topics is so high that the Committee will hold thematic sessions on current challenges and best practices in these areas.
Finally, there has been a push on behalf of some industry associations to further expand the coverage of the WTO Information Technology Agreement, which has 82 participants, representing about 97 per cent of world trade in IT products. During the pandemic, dozens of products covered under the ITA2, such as pulse oximeters, played a key role in saving lives. Furthermore, access to IT products and information and telecommunications infrastructure is paramount for small businesses’ engagement in e-commerce. Last year, we held an Information and Dialogue Session with IT industry representatives during our annual Public Forum, and our Members appreciated the first-hand information from industry representatives. I encourage those of you for whom this subject is important to participate in similar events in the future.
My next point is that access to technology is crucial to reducing the cost of climate change mitigation, speeding up the low-carbon transition, and creating green jobs, and the WTO has an important role to play in this regard.
Trade is often seen as a contributor to climate change through emissions caused by the production and transportation of goods. But this view is incomplete because international trade — and the WTO as the guardian of multilateral trade rules — can help achieve climate goals by enhancing adaptation and mitigation efforts.
To transition to a low-carbon economy, countries need affordable access to advanced technologies. And open trade plays a critical role in providing such access. Lowering barriers to trade in environmental goods and services would help facilitate transfer and deployment of climate change mitigation and adaptation technologies. Wind turbines, solar panels, heat pumps, and biogas stoves need to move across borders as freely as possible if we want to limit the global warming to 1.5 degrees.
The average tariff on environmental goods is already relatively low, particularly in developed economies. But some environmental goods are still subject to high tariffs in some countries, and non-tariff barriers are prevalent as well. Our analysis suggests that eliminating tariffs and reducing non-tariff measures on some energy-related environmental goods and environmentally preferable products could increase global exports in these products by US$ 109 billion (5%) and US$ 10.3 billion (14%), respectively, by 2030. This boost in the use of climate-friendly technologies could lead to a reduction of net carbon emissions by 0.6 %.
By the same token, installation and operation of clean technology is often complex and requires specific user skills that can be difficult to source domestically. So, removing barriers on environmental services, such as environmental consulting and engineering, can also help reduce costs of projects that lower emissions.
And such access is particularly important for developing countries. Think about it: 13% of the world’s population doesn’t have access to a stable electricity supply. Households that are off-grid now can benefit from access to electricity through solar power. And the environment benefits because this energy is renewable.
Free movement of environmental goods and services will also result in economic diversification and job creation, particularly in services. For example, the rooftop installation cost of photovoltaic modules accounts for approximately 60% of the total cost. A growing number of jobs, especially in Africa, are being created in off-grid decentralized renewables, which also boosts employment in other sectors such as agro‑processing, health care, communications, and local commerce.
With its broad membership, which includes countries with different political systems and levels of development, the WTO offers a unique forum for discussions on reduction of barriers to environmental goods and services.
The WTO can also help countries mobilize support and build trade-related capacities for adaptation. For example, the WTO surveys the evolving technology needs and priorities of least-developed countries and supports them by monitoring developed countries’ programmes for transferring relevant technologies to least-developed countries in line with their obligations under the WTO TRIPS Agreement. Climate change adaptation, including disaster prevention and water management, was an important element in 25% of the 152 environmental technology transfer programmes reported by developed members to the WTO between 2018 and 2020.
Furthermore, our Aid for Trade initiative – which is increasingly about investment for trade – can and should help developing and least-developed countries build climate-friendly critical trade infrastructure. In 2020, disbursements with a climate objective represented 31% of total Aid for Trade.
My last point is that technology is also at the heart of many trade tensions today. In 1989, the former U.S. Secretary of Defence Harold Brown wrote a paper on U.S. – Japan technological competition, which was aptly titled “High Tech is Foreign Policy”. This is again the case today. For many countries, technology is at the heart of foreign policy, national security, and geopolitical tensions.
Let me give just one example. In the last couple of years, we have witnessed attempts to “onshore”, “nearshore”, or “friend-shore” supply chains for sensitive technology. As governments and business seek resiliency in supply chains, we can all certainly understand, to a degree, the trend to do business only with friends and neighbours given global uncertainties, even if it increases costs a little – or even a lot. But the consequences of taking this too far will be counterproductive – less resilience, more vulnerabilities, and greater exposure to shocks. This is especially true given increasingly frequent and more intense natural and man-made disasters – such as extreme weather events and climate change, armed conflicts, and pandemics.
Not one single country or even a few countries can produce everything – or event most things – domestically. The key to supply chain resilience is therefore more international cooperation and more diverse supply chains.
Moreover, consider other unintended consequences of isolationism: our preliminary research at the WTO shows that decoupling of the global economy into two blocs would slash long-term global real GDP levels by about 5 percent. And that is a conservative estimate, not taking into account the unquantifiable economic, social, and political consequences of having two systems of rules and standards regarding issues such as sustainability, labor, and the rule of law.
Now, more than ever, the pull toward globalization cannot, and should not, be ignored, despite pressures to become more isolationist and self-sufficient to a fault. The high cost of fragmentation shows that we need more strategic multilateralism and less unilateralism or tactical bilateralism. That’s the thought I would like to leave you with today.
Thank you for your attention.
To read the full speech, please click here.