Trade part of solution but not enough for inclusive global economy: WTO Report

Trade is part of the solution for a more resilient and inclusive global economy, but trade alone may not be enough, per ‘World Trade Report 2024’ released by the WTO.

“...complementary policies are essential to enable individuals and firms to move to where the gains from trade are, and to share the gains from trade more evenly.  Such complementary policies may cover various aspects of the economy, including financial, labour, energy and housing markets,” the report shared by the WTO on Monday noted. The report focusses on ‘Trade and inclusiveness: How to make trade work for all’.

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Trade challenges

The report pushed for efforts by member countries to address evolving trade challenges in digital trade, green trade and in the services sector, to “seize opportunities” for convergence and inclusiveness through digital and environmental transformation.

Highlighting the trade convergence that took place since the WTO was established, the report pointed out that between 1995 and 2022, the share of low and middle-income economies in global trade grew from 21 per cent to 38 per cent, while the share of trade between developing economies in world trade almost quadrupled, increasing from 5 per cent in 1995 to 19 per cent in 2021. 

However, this convergence process slowed since the global financial crisis, as the average share of trade in GDP of low- and middle-income economies has remained relatively constant. “Economic convergence even went into reverse during the Covid-19 pandemic, which hit growth in poorer economies hardest,” the report highlighted.

The report produced data suggesting a strong link between trade participation and the narrowing of income disparities among economies. From 1996 to 2021, a high trade share in GDP is significantly correlated to faster growth in low- and middle-income economies, converging to the level of GDP per capita in high-income economies, it stated.

“Perhaps the biggest takeaway from the report is its reaffirmation of trade’s transformative role in reducing poverty and creating shared prosperity — contrary to the currently fashionable notion that trade, and institutions like the WTO, have not been good for poverty or for poor countries, and are creating a more unequal world,” WTO Director-General Ngozi Okonjo-Iweala said in her foreword to the report.

But much more needed to be done to make trade and the WTO work better for economies and people left behind during the past 30 years of globalisation, she added.

Proactive role

The report suggested that the WTO could play a more proactive role in facilitating the implementation of existing WTO agreements, such as the Trade Facilitation Agreement, which would unlock significant potential gains for developing economies. 

It advocated restoration of an effective and fully functioning dispute settlement mechanism as binding commitments significantly reduce trade policy uncertainty, which in turn increases investments and fosters growth.

It also made a case for efforts to address evolving trade challenges in digital trade, green trade and in the services sector. 

(The writer is in Geneva at the invitation of WTO)