What is the relationship between global geopolitical tensions and the need for a solid multipolar world order? How can Egypt benefit from this for its economy?
Let’s address the subject from the general to the specific. Generally speaking, the global geopolitical situation is full of shocks and tensions at all levels, which impact trade relations in many ways. First, the effect will be felt in the relationships between states, especially since the existing tensions in these relationships cause disruptions in trade relations. In such cases, the weaker party suffers the most damage.
Then, the impact is seen in the multipolar world order, which is experiencing disturbances, raising many questions about its credibility, from the United Nations to humanitarian organizations, and even the maintenance of security.
What is the benefit of a multipolar order, and what rules govern it?
The technical rules in trade and investment are closely linked. Trade in services accounts for two-thirds of global foreign direct investment flows, according to the Trade in Services Agreement. For this trade to thrive, stable growth in trade relations and investment flows is needed, along with a stable legal environment with clear prospects. This is effectively ensured by a multipolar order based on clear foundations. Stability allows companies, particularly in the private sector, to assess risks in the best possible way. Thus, stability and predictability provided by this order are key. Market openness comes second.
In a state like Egypt, we are fortunate that the constitution stipulates that the economy is based on a free market, an open economy that should encourage competition. Of course, the government plays a vital role as a regulator and policymaker. It guarantees the law and contributes to the stability of transactions as the driving force for sustainable development.
What are the main challenges the WTO faces?
The current world order is disrupted. What is happening within the WTO is merely a reflection of several developments. The WTO is not in good shape, and the situation is worsening. This is because the latest negotiations at the 13th Ministerial Conference are worse than those at the 12th. Compared to the previous sessions, progress has been minimal. The general discourse and propaganda claim that the situation is much better, but the reality is different, and this contradiction is unhealthy.
The main issue lies in the institutional challenges that hinder progress, and the absence of strong global leadership, such as that provided by the United States after the 2008 financial crisis. No other country has been able to fill the void left by the absence of the United States. The alternative to the United States doesn't have to be a single state. Instead, we need a group of countries that believe in the system and its importance. When I talk about leadership, I'm not referring to political weight but to intellectual leadership, which was the driving force that transitioned us from the General Agreement on Tariffs and Trade (GATT) to the World Trade Organization (WTO).
Another problem is the complexity of trade negotiations due to the nature of e-commerce, which is inherently complicated. These negotiations need to balance trade liberalization with laws that protect society, such as public health laws, public order, and consumer rights. For instance, there is no effective dialogue between those responsible for the economy, trade, and investment and the lawmakers regulating the process.
The third challenge requires a radical change in the organizational structure of the WTO. Thirty years later, the structure of member states has significantly changed, and we have witnessed unprecedented variations and diversity. Today’s reality clearly shows this. China, the world’s largest trading power, is still considered a developing country. This shift has created communication difficulties and challenges in managing the organization effectively.
Fourth, there is uncertainty in the minds of some countries. It has become evident that a group of nations, particularly India, believes this system does not meet their objectives. India doesn’t want an effective WTO because it doesn’t want a legal system that liberalizes trade in which China is a member. India believes China will always outcompete it. For this reason, India withdrew from negotiations during their final phase, playing an opposing role against China.
Over the years, this situation has created a problem that has hindered the progress of all negotiations within the WTO, leading to the current state of insufficiency and ineffectiveness of existing rules. This is why we must revisit some important rules concerning industrialization support and state-owned enterprises' practices, which result in accusations that contradict the WTO’s spirit. We need to modernize the rules. There will be no real reform without reconsidering membership principles. Real reform must happen.
How can this reform begin? What are the proposals to ensure its success?
The WTO is based on three essential functions. The first is the negotiation function, referred to as legislation, which involves negotiating the rules that govern global trade. Next is the dispute resolution function, which handles trade disputes between member states. Lastly, there is the consultation function, which can be considered the executive function responsible for decision-making.
These three functions are interconnected. For example, when a state faces a complex trade issue, the consultation function is used by holding meetings and discussions to identify and solve the problem. Today, this consultation function is no longer effective. We must begin with the negotiation function to start reform. India, however, staunchly opposes this.
This means we cannot propose new functions based on the negotiation process's results. This system is like a legal system in that it is based on legislation and judgment. There must be a balance between legislation, rooted in negotiation, and the reality states face.
This approach aims to modernize the legal rules on which the system is based. Over the past 30 years, these rules have not been updated, causing a gap between the rules and reality. Despite what is being said, none of the three functions are effective.
How can developing countries, especially African, benefit from the current reforms? Should these states play a more significant role in shaping the reforms?
Reform means we must come together and think about the future. We want to know exactly where we are heading. Reform will not come from a single state but through cooperation between different states.
Unfortunately, our leadership role is unclear. Leadership means we must gather to determine precisely our goals and expand cooperation to include non-African states. Real reform is achieved through the collaboration of different groups. We must start a dialogue with the European Union, Canada, and all countries interested in this system.
How can activating regional agreements in Africa and the Arab world help address the growing challenges facing global trade?
On a regional level, there must first be a clear vision, as African states have great potential to benefit from each other through the African Continental Free Trade Area (AfCFTA). However, there are structural problems in African trade that must be addressed. There must be a sufficient level of communication to overcome the obstacles to trade. Communication is vital, whether digital or physical, and it is impossible to transport goods from East to West Africa by passing through Europe.
As for telecommunications and the trade in services, there is great potential for complementarity. On the Arab level, we have the GAFTA agreement but the challenge lies in transferring some elements of international experience to the regional space to make this agreement effective.
* This story was published in Al-Ahram Hebdo (in French) on Wednesday 18 September.
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