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Opinion: Inclusive and sustainable trade needed for development

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Recent global events underscore the urgency of inclusive and sustainable global trade. The combination of climate change, Covid-19, and now military conflict, have disrupted supply chains, left supply short of demand, created an ominous food crisis, and demonstrated anew the importance of open trade.

The World Trade Organization (WTO) made some progress in June by concluding new agreements at its twelfth Ministerial Conference in Geneva. But much more needs to be done, making more apparent the necessity for the global trading system to emphasize the links between trade and sustainability by making trade rules affirmative agents for global sustainable development. In the new world we find ourselves in, new trade rules are urgently needed.

Trade is central to addressing climate change

Trade is central to the twenty-first century global economy. The links between trade and climate change, biodiversity, and other aspects of our natural ecology are evident to all.

The economy and environment are indivisible, one and the same. Indeed, the global economy is contained within the biosphere of the planet, which means that the threats to the biosphere from the reckless actions of humanity are not only environmental threats; they are also economic threats.

There is compelling need, therefore, for trade to be conducted in ways that protect the environment, and for trade rules to be upheld and updated in ways that achieve environmental protection without resorting to the false solution of trade protectionism.

Trade and the SDGs

Trade is central to the accomplishment of the Sustainable Development Goals of the United Nations as part of the UN’s agenda for 2030.

Looking at some simple links between trade and SDGs: lowering trade barriers can contribute to achieving Goal 1: ending poverty; reserving rising food export restrictions can help achieve Goal 2: ending hunger; lowering barriers to trade in pharmaceuticals and other medical goods can help achieve Goal 3: health and wellbeing; building on existing efforts to engage more women in trade can help achieve Goal 5: gender equity, especially in the wake of Covid-19.

Trade barriers can delay sustainable growth

Trade barriers can have a pernicious effect on sustainable growth everywhere, especially in developing countries. For example, the agricultural subsidies of developed countries distort international food trade and deny many developing countries what should be the benefits of their comparative advantages in agricultural production.

There are also often critical trade-offs to balance between greater inclusion and sustainability – as within trade policy, sustainability standards and regulations can have both positive and negative spillovers, which affect the poor.

For example, increases in carbon dioxide emissions from transporting goods are projected to triple in the next 30 years. Tariffs – taxes imposed on imports – add to the prices of consumer goods and of inputs into domestic production, making that production less competitive and thus shrinking the economic future of the countries that apply them.

Trade is also critical to social inclusion, which is one of the three pillars of sustainable development, along with the economy and the environment. For instance, trade can become an avenue of inclusion for the 550 million indigenous peoples worldwide that often lack real representation and are bereft of formal connections to trade.

Indigenous peoples have much to teach the rest of us about sustainability and need our support in navigating trade inclusion while preserving their traditional sustainable practices and cultures. From our work on marine resources, we see significant challenges in sustainably managing resources that affect these groups, such as pressures from overfishing, coastal development, pollution and intrinsic complexities in resource management.

The SDGs and the WTO

The WTO has a clear mandate that is set out in the first paragraph on the first page of the WTO treaty: to pursue trade and economic endeavour in accordance with the principle of sustainable development. All 164 members of the WTO are also members of the United Nations and have agreed to these goals.

Achieving these goals must be central to the mission of the WTO, just as it must be central to the mission of the UN and all other international institutions. Without the SDGs as central to the task of the WTO, it is hard to see how those goals can be realised.

The WTO is taking insufficient action

Among the outcomes of the Ministerial Conference, a limited waiver of intellectual property rights on Covid-19 vaccines is intended to spur vaccinations in the developing countries that lag far behind the developed world in their vaccination rates; tariffs on digital trade have once more been delayed; food export restrictions will not be obstacles to humanitarian food relief; and some new disciplines on fisheries subsidies will help preserve rapidly declining fish stocks worldwide.

None of these agreements go nearly far enough; yet the mere fact that the members of the WTO have proven to themselves that they can still conclude multilateral trade agreements is a success that could foreshadow more successes.

It is significant that the agreement on fisheries subsidies, though it does not disciple the overcapacity in fishing fleets or the vast majority of overfishing, is the first WTO trade agreement concluded solely with the aim of improving environmental sustainability.

Equally significant is the welcome fact that 73 members of the WTO, which together account for 84% of all world trade, are now engaged in “structure discussions” on trade in environmental goods, environmental and other subsidies, the nexus between trade and climate change, and circular trade (including plastics pollution) in what could become a prelude to formal negotiations on the links between trade and environmental sustainability.

The future is inclusive and sustainable trade

In all that is done by the WTO to address the links between trade and climate change and between trade and other sustainability concerns, much in mind must be the potential effects on developing countries that are still climbing the economic ladder and have been pushed back down that ladder by Covid-19, climate change, and conflict.

Any new expectations from these developing countries for making their products and their overall trade more sustainable must be accompanied by much more generous assistance from developed countries, individually and through international institutions, through climate and trade finance, technical assistance, technology transfer, infrastructure, training, and other forms of capacity building.

These could be through targeted aid for trade, as well as other routes of South-South and trilateral cooperation programs. Imposing climate-related production obligations on developing countries as a condition of trade without also providing them with the assistance they must have to be able to comply with these obligations would be unjust.

Ideas are not lacking. What appears lacking is political will. The will must be found politically throughout the world to revitalize the multilateral trading system by making it true to its original commitment of pursuing trade in accordance with the principles of sustainable development. Collective and concerted action, both domestically, and at the WTO, will take us closer to inclusive and sustainable trade

This piece was originally published by the Institute of Development Studies. If you’re interested in learning more about inclusive and sustainable trade take a look at their online short course ‘Making trade policy inclusive’

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