A world in crisis needs trade and aid

We are going through a period that is the toughest the world economy has known since the creation of the multilateral trading system more than three-quarters of a century ago.

NewsEditor
NewsEditor
05 August 2022 Friday 19:56
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A world in crisis needs trade and aid

We are going through a period that is the toughest the world economy has known since the creation of the multilateral trading system more than three-quarters of a century ago. The quadruple shock of covid, climate change, conflict and the cost of living has undone years of hard-earned development gains. With financial conditions tightening, even countries that seemed to be on the path to prosperity and stability are now mired in the abyss of debt, fragility and uncertainty about the future.

To overcome the crises we face, coordinated multilateral action is needed. Both aid and trade have a critical role to play in reversing the effects of this quadruple shock and putting the world back on track to achieve the Sustainable Development Goals.

We lead the three international organizations that make up the Geneva trade platform: the World Trade Organization (WTO), the United Nations Conference on Trade and Development (Unctad) and the International Trade Center (ITC). The WTO sets and enforces the rules that govern world trade, UNCTAD conducts research and facilitates consensus building to guide governments, and ITC helps small businesses go global, especially businesses run by women and young entrepreneurs. . We work together to make trade work better for development.

The three of us share a deep commitment to trade-led prosperity. All three of us understand that a world in crisis means that we cannot continue to act as if nothing is happening. And the three of us want our organizations to move from words to deeds so that aid and trade bring results to people of flesh and blood.

To make aid and trade work for a better world, policymakers need to consider three key things:

First of all, make trade greener. Global trade can play an important role in the process of transitioning to a low-carbon economy. According to preliminary research carried out at the WTO, the elimination of tariffs and regulatory barriers to trade on a set of energy-related environmental goods would reduce global CO₂ emissions by 0.6% in 2030 thanks only to the improvement in energy efficiency, and there could be additional efficiency gains linked to the impact of innovation and lower prices, which would speed up the shift to renewable energy and less carbon-intensive products.

Second, make trade more inclusive. Promoting small business development and increased participation of women and youth in trade makes businesses and countries more competitive, drives economic transformation and reduces poverty. However, ITC conjuncture surveys found that only one in five exporting companies is run by women. WTO data shows that micro, small and medium-sized enterprises account for around 95% of all businesses globally, but only a third of total exports.

Third, make commerce more connected. In our networked world, the future of commerce lies in digital channels and platforms, especially for small businesses. During the pandemic, we witnessed how doing business online went from being useful to being essential for survival. Unctad data shows that services delivered digitally accounted for nearly two-thirds of the level of global services exports.

These issues have been addressed at the Global Review of Aid for Trade, which took place this week in Geneva. The event took place one month after the successful 12th WTO Ministerial Conference, which put trade multilateralism back on track and produced a historic agreement on fisheries subsidies, and two months before the COP27 meeting in Egypt, which could determine the world's chances of keeping the 1.5ºC target alive.

The data shows encouraging signs that aid for trade is moving towards greater sustainability, inclusiveness and connectivity. OECD and WTO data reveal a record level of nearly $50 billion in aid-for-trade disbursements in 2020, of which half were climate- or gender-related, and a third were in favor of the digital economy. Despite growing domestic budgetary pressures, it is vitally important to continue and increase these Aid-for-Trade flows.

Aside from a stronger thematic focus on sustainability, inclusiveness and connectivity, maximizing the contribution of aid for trade to the achievement of the Sustainable Development Goals requires resolute attention to the question of where and how to deliver developing.

This means focusing on countries with the highest trade and development needs – in particular least developed countries and fragile or conflict-affected countries – and on regional initiatives such as the African Continental Free Trade Area, to ensure that they constitute steps towards broader and more inclusive regional value chains and trade-led growth.

It means association of all international organizations. The WTO, Unctad and ITC are already collaborating on initiatives such as the Global Trade Helpdesk – which simplifies market research by integrating key trade and business information into a single portal – as well as supporting countries exporting cotton in Africa.

Last but certainly not least, it means mobilizing public and private finance. The IFC estimates that the global financing gap amounts to $300 billion for women, and that the global trade financing gap has nearly doubled from the already impressive $1.5 trillion. Without access to financing, companies cannot grow, diversify or formalize.

We want to end with a call to action. Creating a more sustainable, inclusive and connected future is the great challenge of our time. Aid, trade and multilateralism together are part of the solution. It is normal and understandable for governments to act to prop up their economies in difficult times. But we need to act now to ensure that the world's poorest and most vulnerable can find a path to prosperity through global trade.

Ngozi Okonjo-Iweala is Director General of the WTO

Rebeca Grynspan is Secretary General of Unctad

Pamela Coke-Hamilton is director of the International Trade Center

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