ďTransformationĒ of Global Trade to Pose Fresh Challenges, WTO SaysThursday, July 25, 2013 > 11:16:04
Global trade is set to undergo a series of rapid changes in the coming years, moulded by economic, political, and social factors as well as the rise of emerging powers, according to a new report published by the WTO last week.
Such changes are likely to pose fresh challenges and opportunities for the multilateral trading system, this year’s World Trade Report finds, though the “transformation” of trade has already been underway for several years. The increase in global supply chains, for instance, and the wider geographical participation in trade are evidence of these changes.
“The forecasts and reflections contained in this report do not foresee a reversal of globalization,” WTO Director-General Pascal Lamy said in his foreword. “But we should remember that the gains it brings could be nullified or at least mitigated if short-term pressures are allowed to override long-term interests, and if its social consequences in terms of the unevenness of its benefits are neglected.”
“We do not espouse trade for its own sake, but for its potential contribution to our future,” Lamy added.
Technology and demographic changes are expected to serve as crucial drivers in the future evolution of trade, according to the WTO report, with the sources of new technology expected to shift increasingly to emerging economies.
These countries have already demonstrated a growing presence in the international trade arena; between 1980 and 2011, for example, developing economies raised their share in world exports and imports from just over one third to almost half.
In this context, WTO Chief Economist Patrick Low emphasised during last week’s report launch in Geneva that policy cannot be formulated in isolation, and must take into account the rapidly changing global trade landscape.
Danny Quah, Professor of Economics and Kuwait Professor at the London School of Economics, also noted at the launch that these emerging economies were responsible for “pulling the world’s economic centre” towards the East, despite concerns from some critics that this phenomenon could pose a potential threat.
Trade for development
Referring to the recent Aid for Trade Global Review, which was held from 8-10 July, the Director-General particularly highlighted the importance of trade in development. He underlined the changing context of trade in terms of increased interdependency among countries in supply chains, and also called for “renewed efforts… to revive the vibrancy of the global trading system.”
Highlighting other key trends discussed in the report, Low said that trade is unexpectedly moving towards being dominated by a small number of large firms. He also stated that countries are increasingly diversifying exports, and that regional trade is on the rise, particularly in Asia. Global supply chains are set to change trade patterns, and services trade is expected to continue growing rapidly.
NTMs, regulatory convergence
In the years to come, trade opening in the area of non-tariff measures (NTMs) is expected to grow in prominence, and ensuring regulatory convergence will likely constitute one of the main challenges to the trading system. NTMs were the subject of last year’s World Trade Report, with the WTO similarly stressing at the time the need for “new approaches” in this area. (See Bridges Weekly, 18 July 2012)
The future of trade will also be affected by how politics and policies address issues such as the availability of jobs, growing income inequality, and environmental concerns, the World Trade Report said.
For Quah, all these underline the trend that comparative advantages are weakening nationally, but growing geographically and regionally.
“World trade isn’t about countries; it is about regions and geography, where those firms are located. We have to think, perhaps, about a world which is devoid of national boundaries,” Quah said.