Trading System Needs to Improve and
Link Better with Other Parts of Global Economic Governance
London, 17 July, 2013
"Globalisation saw little reversal during
the recent crisis mainly because of WTO, the role of
social safety nets and the success of emerging economies
in global trade, among others" said Martin Wolf, Chief
Economic Commentator, Financial Times at the 5th CUTS
30th Anniversary Lecture at London on 15th July on the
topic "The Future of Global Trade Policy".
The well attended lecture was hosted by the Commonwealth
Secretariat and chaired by Kamalesh Sharma, Secretary
General, Commonwealth Secretariat, and Financial Times
as the media partner. Justine Greening, UK's Secretary
of State for International Development spoke at the
event, while Professors Jim Rollo and Alan Winters
commented on Wolf's lecture.
Wolf, while appreciating the role of CUTS's admirable
work in the trade area, felt that the trading system is
facing many challenges both from the inside and outside.
The main challenges from outside are the imbalances
between trade and exchange rates, climate change and
inequality that is corroding the political base in
favour of trade in developed countries. He stated that
while these are important issues, WTO is not the right
place to address them.
Speaking at the event, Justine Greening congratulated
CUTS on completing its first 30 years, during which it
has consistently made the case for free trade, combined
with competition and consumer welfare, leading to
economic democracy. She also highlighted the long
standing productive relationship between DFID and CUTS.
Greening stated that the UK government and DFID firmly
believe that trade will play a key role in poverty
reduction and the developing countries should be helped
to reap the benefits of free and fair trade.
According to Greening, the main reasons for many
developing countries not trading enough include: lack of
access to markets; lack of enabling environment,
particularly poor infrastructure and weak regulatory
system; and not being able to be part of global value
chains, that can create more and better jobs. She
reiterated UK's commitment to delivering an agreement on
trade facilitation at the 9th WTO ministerial conference
to be held in Bali, Indonesia in December-2013.
Wolf appreciated the focus of CUTS in trade,
competition, consumer welfare and building LDCs supply
capacities. He believed that the poor will become even
further marginalised without a robust and fair
multilateral trading system.
According to Wolf, the trading system as represented by
WTO is faced with several internal challenges, namely
successful conclusion of Doha round that will restore
legitimacy and relevance of the multilateral trading
system and secondly the mega regional trade and
investment agreements, i.e. trans-atlantic and
trans-pacific, partnerships.
Wolf expressed doubts if the negotiations of these
mega-regional trade and investment agreements would
succeed. But it would be unfortunate if these
negotiations are done without China and other emerging
economies. Therefore, Wolf strongly advocated that these
should be open to any WTO member who wishes to join
later.
Alan Winters in his comments reinforced and expanded on
several points made by Wolf. He believed that the 2008
economic crisis did not lead to high levels of
protectionism as the world had a lot more macro-economic
flexibility unlike in the 1930s. Winters added, that it
was too early to declare victory as we have not seen the
end of the crisis and governments may yet succumb to
pressures for protectionist measures.
He considered smooth integration of China as the biggest
internal challenge facing the multilateral trading
system. This should not be based on the terms set by the
west. Rather the trading system has to change to
accommodate the interests of emerging economies
including China and India that are different from those
of the west.
Jim Rollo recalling the enthusiasm and appreciation of
Pradeep Mehta founder and Secretary General of CUTS said
that it never wanes and the result in terms of the
expansion and success of CUTS is in front of us.
While commenting on the lecture by Wolf, Rollo stated
that the WTO is in more trouble than we were willing to
admit. He was also worried that the state capitalism was
back in business witnessed by bail outs to auto
companies and the fact that most of China's big
exporters are stated owned. He also lamented the fact
that the private sector has exhibited a lack of interest
in the WTO and Doha round.
In the ensuing discussions several questions and
comments were made relating to the success of WTO in
many of its functions including the dispute settlement,
role and responsibilities and performance of China in
WTO, issues of interests to developing countries other
than China and other emerging economies, i.e.
Sub-Saharan Africa, LDCs and small states.
Another interesting debate was around the importance of
trade finance for the trade performance of small
developing countries, relationship of the financial
sector with the real sector and the role of trade in the
use and exploitation of natural resources. One
participant raised the issue of consumers being ignored
in the debate, while panelists did respond that higher
trade-led growth does lead to higher consumer welfare.
Pradeep Mehta stated that consumers are the raison
de'etre of all economic activity and spoke about a
recent CUTS study about the cost of economic
non-cooperation in South Asia which costs the regional
economies US$3bn. Since the study was published,
governments have woken up which is evident in rising
intra-regional trade.
Mehta admitted that most of the discourse in the past
had assumed that consumer interest would be advanced
when trade volumes rise, but were not explicit in
approaching trade liberalization through the lens of
consumer welfare and thus positioning the debate
domestically for consumers to support.
He also stressed the need for strong flanking policies,
such as health, education, skills, regulatory regimes
etc., to ensure that the benefits of trade openness
reach all segments of the society. According to him,
coherence in policies at the domestic level and among
institutions at the international level etc were needed
to face the challenges. This was also a main conclusion
of the DG WTO's High Level Panel on the Future of Trade
of which he was a member.
In his vote of thanks, Cyrus Rustomjee, Director,
Economic Affairs Division of the Commonwealth
Secretariat remarked that the event was very successful
and useful for their own work on trade policy. He spoke
about a recent ComSec paper: "Right to Trade" by Joseph
Stiglitz which has laid out how small and vulnerable
economies can benefit from the multilateral trading
system.
Rustomjee stated that they will continue to devote their
assistance to help its member developing countries,
particularly small states, for their participation in
the trading system through high-quality research and
capacity building workshops.
For further information please contact:
Pradeep S Mehta, CUTS International, London at
psm@cuts.org or +919829013131 or
Rashid Kaukab, CUTS International, Geneva at
rsk@cuts.org or +41792024112