Since the inception of the World Trade Organisation (WTO) in 1995, global trade has seen massive expansion, with global markets becoming more and more connected as a result of processes of globalisation.

The WTO’s commitment to a free and multilateral trading system has “helped to lift 1.5 billion people out of extreme poverty, transformed countless lives, and unlocked a range of opportunities, creating jobs and giving consumers access to a vast array of products and services,” according to its website.

However, the benefits of the growth in trade have not always been equally distributed, with many underserved communities, including women, continuing to be unfairly marginalised. The share of the Least Developed Countries (LDCs) in global trade has also hardly increased over the past three decades.

Speaking to Al-Ahram Weekly in Geneva, WTO Director-General Ngozi Okona-Iweala took time out to express her thoughts on developments in global trade on the sidelines of the organisation’s public forum, an annual event.

She shed light on the role played by the organisation on its 30th anniversary as well as on plans to widen the beneficiaries of the multilateral trading system among the developing countries.

 

Thirty years after the creation of the World Trade Organisation, what is the importance of the multilateral trading system, especially in this period of multiplying challenges?  

One of the things I want to highlight about trade and the WTO is the role it has played over time. Today, there are a lot of geopolitical conflicts, trade-related disagreements, and criticism. People seem to forget why the multilateral trading system was created in the first place.

This system, of which the WTO is the successor, was designed 80 years ago at the Bretton Woods Conference to support peace. The idea was that when countries are interdependent and trade with each other, they are less likely to engage in conflict. This is how the multilateral trading system was born.

I call it a global public good, something we are in danger of forgetting and underestimating. This system has brought prosperity. It has helped to lift over one and a half billion people out of poverty. The developing countries have also benefited from the WTO’s rules. This is a reality we cannot forget, especially in the current challenging times.  

 

What are the key findings of the WTO’s 2024 World Trade Report, launched on the first day of the public forum?  

The latest WTO World Trade Report provides multiple insights. A central question was whether the [multilateral trading] system is truly beneficial for development and the developing countries. Does it contribute to poverty reduction or not?

The report answers yes to both questions. We find that countries that are less integrated into international trade are often behind in development. So, when participation in trade is insufficient, inequalities increase. Furthermore, we observe a correlation between a country’s trade intensity and its ability to catch up with the development levels of the advanced economies.

Some believe that competition sometimes leads to income inequality. So far, we have not found strong evidence for this claim. In fact, we observe that the more a country expands trade, the more likely it is to prosper.

 

What are the new trends in global trade, and how can we take advantage of these developments to optimise the benefits?  The services sector, particularly digital services, is a fast-growing new trend. While the volume of global trade stands at $32 trillion, digital services are growing at an annual rate of eight per cent, now reaching $4.25 trillion. We are therefore examining these new trends to help WTO member countries engage more in digital trade.

However, many developing countries suffer from a digital divide and do not have the basic infrastructure. To address this, the WTO is working with financial institutions like the World Bank to establish a pilot programme in some African countries to support them and help them to increase their digital capacities.  

To diversify supply chains, which are concentrated in certain countries, the organisation is exploring the opportunities offered by developing countries that have a favourable business environment. These countries, characterised by good macroeconomic management, strong infrastructure, and an effective regulatory framework, can become key partners for private-sector companies.

 

What are the challenges of green trade in the developing countries?  

Green trade is also a rapidly expanding sector that offers enormous growth potential. The WTO is looking to diversify supply chains for green products and renewable energy resources, which are concentrated in certain developing countries. These countries are characterised by good macroeconomic management and solid infrastructure, providing an environment conducive to investment. In Africa, trade costs are equivalent to tariffs of 300 per cent. To enhance our competitiveness and foster regional integration, it is essential to significantly reduce these costs.

 

How can international trade be more inclusive of the developing countries?  

We believe that trade can be more inclusive. The Covid-19 pandemic highlighted the fragility of global supply chains, which are hyper-centralised. Therefore, we are proposing to decentralise these supply chains to the poorer regions of wealthy countries and the poorer countries that did not benefit from the first wave of globalisation.

This is what we call “re-globalisation”, a term that means extending trade integration to more economies, people, and issues. Costa Rica is a good example of this potential, and it is becoming a link in the semiconductor supply chain. Thanks to a favourable environment and a skilled workforce, the country is attracting foreign direct investment.

 

Africa’s share of global trade is very weak. How is the WTO helping to support the continent’s trade capacity?

Africa represents three per cent of global trade or even less. Moreover, the North Africa region accounts for about a third of all African goods and services trade, despite comprising only five of the continent’s 55 countries. Here comes the concept of re-globalisation, which means including those who have been left behind. The question is how we can reimagine trade and globalisation to benefit the African countries more.

The WTO has made a lot of efforts to support trade development in Africa. WTO bodies have implemented a broad range of agreements, decisions, and technical assistance programmes, ranging from trade facilitation to government procurement regulations.

The WTO has supported trade development in Africa through its leadership of Aid for Trade. Since the launch of this initiative in 2006, donors have disbursed $451 billion in official development assistance to help developing countries build trade capacity and infrastructure. Some $163 billion of this amount has gone to the African countries.

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* A version of this article appears in print in the 19 September, 2024 edition of Al-Ahram Weekly