As the 13th WTO Ministerial Conference (MC) is scheduled to take place during February 26-29, 2024 at Abu Dhabi amidst a highly fractured world, trade minsters of member countries are concerned about the prospects of world trade. The growth of global trade is on a decline and a prospect for improvement is not in immediate sight. In fact, it was projected to decline by 5.1% in 2022 to 0.9% by December 2023.
The establishment of the multilateral trading system over seven decades ago was based on the understanding that free and fair trade benefits everyone, and the interdependence and cooperation it fosters contribute to peace and shared prosperity. However, the recent “polycrisis” emanating from geopolitics, healthcare, extreme protectionist measures, climate change, rising cost of living, Red Sea disturbance, and Gaza conflict have led to fears that globalisation exposes countries to excessive risks.
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Such fears have increased pressures to unwind trading relationships among traditional partners and instead compelling countries to turn to unilateral policies. The pursuit of such unilateral policies in last five years has resulted in the fragmentation of global trade. For example, Chinese imports after tariff imposition by the US have been primarily replaced by exports from Vietnam and Mexico. So, this inward and alliance-oriented arrangements due to current geopolitics are proving to be meaningless as they are based on short-term interests and weak foundations. However, such developments dramatically alter the course of multilateral trade pursued during globalisation in the 1980s, 1990s, up till 2008.
Also Read New scheme for solar rooftops Across the aisle by P Chidambaram: Bullhorn economics South Asian trade infrastructure and India A strategic pause: Govt is right in avoiding hurried disinvestment, but privatisation as a policy must continue Against such fragmentation in the global economy today and the unilateral actions followed by many important members of WTO, the 13th MC may find it difficult to forge any unity among 164 member countries. Outstanding issues such as agricultural negotiations including food security, reforms in dispute settlement mechanism (DSM), a moratorium on custom duties relating to e-commerce, and fisheries subsidies will be at the forefront of discussions in Abu Dhabi.
Agricultural negotiation, by far, has remained the most contentious and thorny issue. As two-thirds of WTO members are dependent on agriculture for their livelihood, these countries are extra cautious about its trade liberalisation. They find the proposal put forth by developed economies highly discriminatory in nature. To counter such tendencies, India, on behalf of developing economies, has taken the lead in pitching for provisions like special safeguard mechanisms (SSMs) and identification of ‘special products’ (SPs), which aim to help developing countries defend their triple concerns of food security, farmers’ livelihoods, and rural development in the event of agricultural trade liberalisation. The issue of public stock holding (PSH) of grain will find prominence in the 13th MC. India is firm that such a mandate only aims at food security, and hence can’t be compromised. On the DSM front, it looks very unlikely that there will be a consensus on the selection of the appellate body members or the further reforms required to make the DSM a transparent, secured, predictable, impartially actionable, and fast-moving process. Developed and developing countries hold different viewpoints on this matter.
The moratorium on custom duties relating to e-commerce transmission holds significance as potential of e-commerce is globally recognised. India and many other countries expect the moratorium to end so that the policy space is preserved for their digital advancement, import regulation, and revenue generation through customs duties.
All these issues are an extension of the 12th MC held in Geneva in June 2022 and will be no doubt deliberated at length in the 13th MC. But will there be a positive outcome or consensus on these issues? It seems doubtful, as the current fragmented world is pursuing objectives unilaterally. For instance, the unilateral industrial policy followed by the US, China, and others with heavy governmental intervention is causing a hindrance to the free flow of goods and services. Restrictive industrial policy measures such as tariffs and subsidies have distorted and reduced the prospects of world trade. Industrial policy can even distort FDI patterns and be a disincentive for investment. Around 3,000 trade restricting measures were imposed last year—nearly three times the number imposed in 2019. National security consideration is also becoming an influential factor in the fragmentation of global economy post the “polycrisis.”
With such fragmentation in sight, the larger goal of a global green transition is being jeopardised. Critical rare earth minerals essential for global production are highly concentrated in some parts of the world. This further will make the green transition more difficult. With unprecedented challenges like global warming and climate change threatening the very existence of human life, global cooperation has never been as daunting as it is today.
So, what is the alternative? The biggest danger one can see is that of climate change. That requires collective action, not an individual country’s chivalry. International cooperation in framing all inclusive trade policies with openness and predictability while addressing security concerns would be the best bet. The 13th MC at Abu Dhabi should aim at restoring the faith and confidence of all members to bring back the spirit of multilateralism and simultaneously exposing the risks and impact of unilateral industrial policies.
Anil K Kanungo, former professor, IIFT, New Delhi
As the 13th WTO Ministerial Conference (MC) is scheduled to take place during February 26-29, 2024 at Abu Dhabi amidst a highly fractured world, trade minsters of member countries are concerned about the prospects of world trade. The growth of global trade is on a decline and a prospect for improvement is not in immediate sight. In fact, it was projected to decline by 5.1% in 2022 to 0.9% by December 2023.
The establishment of the multilateral trading system over seven decades ago was based on the understanding that free and fair trade benefits everyone, and the interdependence and cooperation it fosters contribute to peace and shared prosperity. However, the recent “polycrisis” emanating from geopolitics, healthcare, extreme protectionist measures, climate change, rising cost of living, Red Sea disturbance, and Gaza conflict have led to fears that globalisation exposes countries to excessive risks.
Such fears have increased pressures to unwind trading relationships among traditional partners and instead compelling countries to turn to unilateral policies. The pursuit of such unilateral policies in last five years has resulted in the fragmentation of global trade. For example, Chinese imports after tariff imposition by the US have been primarily replaced by exports from Vietnam and Mexico. So, this inward and alliance-oriented arrangements due to current geopolitics are proving to be meaningless as they are based on short-term interests and weak foundations. However, such developments dramatically alter the course of multilateral trade pursued during globalisation in the 1980s, 1990s, up till 2008.
Against such fragmentation in the global economy today and the unilateral actions followed by many important members of WTO, the 13th MC may find it difficult to forge any unity among 164 member countries. Outstanding issues such as agricultural negotiations including food security, reforms in dispute settlement mechanism (DSM), a moratorium on custom duties relating to e-commerce, and fisheries subsidies will be at the forefront of discussions in Abu Dhabi.
Agricultural negotiation, by far, has remained the most contentious and thorny issue. As two-thirds of WTO members are dependent on agriculture for their livelihood, these countries are extra cautious about its trade liberalisation. They find the proposal put forth by developed economies highly discriminatory in nature. To counter such tendencies, India, on behalf of developing economies, has taken the lead in pitching for provisions like special safeguard mechanisms (SSMs) and identification of ‘special products’ (SPs), which aim to help developing countries defend their triple concerns of food security, farmers’ livelihoods, and rural development in the event of agricultural trade liberalisation. The issue of public stock holding (PSH) of grain will find prominence in the 13th MC. India is firm that such a mandate only aims at food security, and hence can’t be compromised. On the DSM front, it looks very unlikely that there will be a consensus on the selection of the appellate body members or the further reforms required to make the DSM a transparent, secured, predictable, impartially actionable, and fast-moving process. Developed and developing countries hold different viewpoints on this matter.
The moratorium on custom duties relating to e-commerce transmission holds significance as potential of e-commerce is globally recognised. India and many other countries expect the moratorium to end so that the policy space is preserved for their digital advancement, import regulation, and revenue generation through customs duties.
All these issues are an extension of the 12th MC held in Geneva in June 2022 and will be no doubt deliberated at length in the 13th MC. But will there be a positive outcome or consensus on these issues? It seems doubtful, as the current fragmented world is pursuing objectives unilaterally. For instance, the unilateral industrial policy followed by the US, China, and others with heavy governmental intervention is causing a hindrance to the free flow of goods and services. Restrictive industrial policy measures such as tariffs and subsidies have distorted and reduced the prospects of world trade. Industrial policy can even distort FDI patterns and be a disincentive for investment. Around 3,000 trade restricting measures were imposed last year—nearly three times the number imposed in 2019. National security consideration is also becoming an influential factor in the fragmentation of global economy post the “polycrisis.”
With such fragmentation in sight, the larger goal of a global green transition is being jeopardised. Critical rare earth minerals essential for global production are highly concentrated in some parts of the world. This further will make the green transition more difficult. With unprecedented challenges like global warming and climate change threatening the very existence of human life, global cooperation has never been as daunting as it is today.
So, what is the alternative? The biggest danger one can see is that of climate change. That requires collective action, not an individual country’s chivalry. International cooperation in framing all inclusive trade policies with openness and predictability while addressing security concerns would be the best bet. The 13th MC at Abu Dhabi should aim at restoring the faith and confidence of all members to bring back the spirit of multilateralism and simultaneously exposing the risks and impact of unilateral industrial policies.
Anil K Kanungo, former professor, IIFT, New Delhi
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