We must ensure that trade is an integral part of the solution to the myriad of problems that leaders are wrestling with today, said Director-General Roberto Azevêdo in an address to the B20 Summit in Berlin on May 3, 2017, and that it can do even more to create jobs and support growth and development around the world. “This is how we will make trade work for all,” he said, and for this “we also need the contribution of the private sector”. This is what he said:
People long regarded this as almost self-evident. Making the case for trade seemed almost like making the case for breathing.
Trade wasn’t a choice – it was an economic norm. It was an obvious and fundamental ingredient for any strategy of sustainable economic growth and social development.
Berlin wall
However, I believe, since the fall of the Berlin wall in 1989, economists, academics, opinion makers and politicians concluded that the argument had been won. They no longer thought it necessary to raise their voices for trade and for an open and better integrated global economy.
But, it proved to be problematic for two reasons.
First, we found that people began to forget the value of trade. They simply took the benefits for granted.
Second, over time, the trading system did not receive the close scrutiny and engagement it needs – and this may have made it more difficult for the system to evolve in tandem with the demands of the people it is there to serve.
I believe, trade and the global trading system are essential for jobs, growth, development, prosperity and, for peace. I also believe, the system can be improved. Its benefits can be spread more widely. This requires more work, not less.
This is the case I have sought to make since I became the Director-General of the WTO in 2013. And we have made real progress in improving the system. But, I have no doubt, there is more we can do.
On a number of occasions over the last four years, we have had reason to say that the trading system is at a critical juncture. I think we have good reason to say it again today.
Onthe one hand, the WTO has never been more important for managing an increasingly interconnected global economy that is experiencing extremely low growth rates.
On the other, the system faces real structural challenges. The economy of today is vastly different from when the WTO came into being in 1995 – and the pace of change is accelerating. New technologies are changing the way businesses work, the way we trade, the way we live. And, they are having a significant impact on patterns of employment.
Technologies
Trade is often pointed to as the culprit here. But, in developed economies around 80% of jobs are lost to new technologies, not imports.
Technology and innovation are driving a revolution in the labour market. It is estimated that 65% of children entering primary school today will end up working in types of jobs that don’t yet exist.
Therefore, a response that focuses on restricting trade would miss the real issue. It would risk worsening the problems that workers face. Raising barriers would not bring the jobs back. Moreover, it would hit consumers in the wallet by reducing their purchasing power.
These technological changes are not new. We have been adapting to them basically since the industrial revolution in the late 19th century. However, what we experience today is different, in one particular and fundamental way: speed! The speed of change in the digital world is like nothing we ever witnessed before. It shows no sign of slowing down.
In responding to these quick shifts we are seeing in employment, we must focus on the real causes of the structural changes we see in labour markets. The best response will vary from country to country, depending on their special circumstances, such as: composition of the work force in terms of skills, competitiveness, development, and many other factors.
While there is no “one size fits all” set of policies, we can find examples of policies that have been adopted by some countries that seem to be working for them.
Most actions taken to address these structural labour market tensions seem to focus on three pillars: education; training in new skills; and support to those that lost their jobs.
So, it’s clear that we have to consider how to adapt to this new world. While governments formulate policies in the way they see fit, we need to remember the value of trade as an ally in these efforts. I’d like to highlight three specific elements now, though there are many others.
First, trade is economically vital and a major job creator. In Germany, 30% of jobs are export-related, 21% in France, 10% in the US. 13% in Japan, and 16% in China.
Trade helps to lower prices, contributing to better living standards. For low-income households it has cut prices by two thirds. For high-income households, by one quarter.
But of course, a positive net gain to the economy and to other individuals is no comfort to someone who has lost their job. And of course trade is a factor here.
However, most jobs are not being lost to imports. They are disappearing because of new technologies , automation and innovation. So any effective response must deal with this reality.
This is why many governments are looking at how they can help their workforce to adjust and adapt. Trade can be part of the solution here, it plays a central role in fuelling economic growth.
Between 1990 and 2000, world trade expanded by over 7% annually – double the rate of global output. This expansion helped to lift incomes and improve living standards across advanced, emerging, and developing countries.
Since the financial crisis trade growth has been disappointing. Year 2017 will likely be the sixth consecutive year with trade growth below 3% – a situation seen only once before in the 70 year history of the multilateral trading system – since the creation of the General Agreement on Tariffs and Trade in 1947.
Global trade
Given today’s increasingly interconnected world economy, it’s hard to imagine a robust economic recovery without a parallel recovery of global trade. Indeed, with the right mix of policies, trade can help to energize that recovery.
So that’s the first point. Trade has fuelled growth in the past – and it will do so in future.
The second point is the system’s key role in the rise of developing countries. It has helped to lift a billion people out of poverty between 1990 and 2010.
There are many reasons why developing countries have achieved economic lift-off, but none is more important than their integration into the global trading system, and the access it brings to new markets, new technologies and new investment, under a set of shared rules.
The developing country share of global trade has grown from less than a third in 1980 to nearly a half today. While the focus is on emerging economies such as China and India, the story of dynamic trade-driven development includes countries of all sizes and regions – from Viet Nam, to Cambodia, to Madagascar.
The growth of developing countries is a fundamental force for the creation of jobs worldwide, as well as for global peace, stability and security.
The third and final point is the predictability, security and fairness that the WTO provides, which is essential for business.
The rules-based trading system was the world’s response to the chaos of the 1930s – when rising protectionism, rival trade blocs, and beggar-thy-neighbour policies did so much to harm economic prospects and lay the ground for the Second World War.
When countries clash over anti-dumping duties, subsidies, technical barriers or IP rights today, instead of fighting it out in a destructive zero-sum trade war, they now do it through the WTO’s dispute settlement system under rules that both sides have agreed and helped to design.
This dispute settlement system, while not perfect, has dealt with over 500 cases in a little over two decades. That is a pretty impressive work rate, more than any other adjudicating body on the global stage.
Hence, the multilateral trading system helps provide vital stability in global economic relations, and for businesses. Perhaps, the clearest example of this came after the financial crisis of 2008. We did not see a significant rise in protectionism, nor a repeat of the 1930s.
The share of world imports covered by import-restrictive measures implemented since October 2008 is just 5%, which shows that the WTO did its job, and that while the trading system is not perfect, it is essential.
The WTO’s 164 members have every reason to want, and expect, improvements in the system. Recent negotiating successes prove the system can deliver such reforms.
For the first time in many years, the WTO is seen as a place to get things done. For example, the WTO’s Trade Facilitation Agreement, which came into force earlier this year, is the biggest global trade deal this century.
Its economic impact promises to be more significant than removing every remaining duty around the world. And, WTO members have struck a number of other deals in the past two years, including the expansion of the Information Technology Agreement, and the elimination of agricultural export subsidies.
The different approaches represented by these agreements show that members are willing to be adaptable and dynamic. A number of areas are now being discussed. Many are focused on the longstanding issues that are part of the Doha Round. Conversations are ongoing, for example, in agriculture, and on issues related to food security.
Overfishing
Members are also looking into an agreement to limit fisheries subsidies which lead to overfishing, and issues at the WTO – such as e-commerce, and facilitation in services and investments. The B20 has made an important contribution here.
I would like to pay tribute to the work done by Jurgen Heraeus as B20 Chairman, and his team – including Stormy Mildner.
We have set up a series of ’Trade Dialogues’ sessions in Geneva, to bring in voices from business, labour, consumers and a range of other stakeholders.
The WTO will keep providing a platform for our members to pursue their aims, and an opportunity for stakeholders to have their say.
Challenges
Our 11th Ministerial Conference will be an important moment in taking all of this forward. It will be held in Buenos Aires in December .Almost none of the global trade challenges we face today would be easier to solve outside of the multilateral system.
How would we manage an increasing borderless digital economy – or respond to the globalization of the internet?
How can we get countries to limit their agricultural or fisheries subsidies?
The fact is, if the WTO didn’t exist, we would have to invent it. Nevertheless, I believe the system can be better. We are the custodians of the system today.
In an increasingly interdependent world economy, it is our responsibility to ensure that we bolster global economic cooperation – and that we leave a strong and well-functioning trading system for future generations.
We must ensure that trade is a solution to the myriad of problems that leaders are wrestling with today – that it can do even more to create jobs and support growth and development around the world.
For this, we need the contribution of the private sector. We need your contribution.