International trade and the fight against protectionism
By the International Chamber of Commerce
WTO Director General Roberto Azavêdo led an intimate round table meeting in London in May. The ICC United Kingdom facilitated, convening a number of senior delegates to participate in an open discussion with the Director General to discuss how we can foster the spread of international trade, as well as defend against the growing threat of protectionism.
Azavêdo opened his speech by highlighting the wide-reaching significance of trade – highlighting its importance not only for business but for the entirety of modern society. Yet, at a time where trade is growing at at the fastest rate since the global economic crisis, tensions are growing across the globe. Indeed, we need look no further than the US and China to see the all too obvious signs of a looming trade war. A trade war in which everyone stands to lose – not least global businesses.
For Azavêdo, who has been encouraging intergovernmental co-operation, this is a major concern. While the channels of communication have opened up and key players are becoming more visible, conversation is still centred around putting out old fires or dealing with short-term problems – for instance, elections – rather than addressing the underlying issues that pose considerable long-term threats. If progress is to be made, it is essential that governments and decision makers look at the bigger picture and focus on creating a strategy for long-term economic development.
With regards to the WTO itself, Azavêdo explains that, as an organisation, it has become a lot more flexible and responsive in recent years – with two big multilateral agreements since 2014 (the Trade Facilitation Agreement and the Elimination of Export Subsidies for Agricultural Products), and at least eight e-commerce proposals in the pipeline. What’s more, delegation attendance at WTO meetings has increased exponentially – with between 80 and 90 attending each time, increasing the productivity of conversations.
Now, for Azavêdo, a key area to focus on for future development lies in establishing closer ties with the business community – particularly the private sector, where interest in trade has been traditionally very low.
Following his speech, Azavêdo opened up the floor to questions from attendees, shedding light on the agenda for key areas that stand to influence future global trade initiatives. On the UK’s position, he stresses the fundamental importance of bringing businesses to the cause and ensuring their awareness of the vast opportunities multilateralism can bring – as well as the dangers posed by trade restriction.
Indeed, explains Azavêdo, multilateralism has been successful for over 70 years because it is built upon principles. And it is vital that these are preserved. If this is to happen – and if we are to successfully reverse the direction in which trade restriction is currently moving – it is crucial that businesses are on board. United, business has the size and the force to attract attention from the government, and to incite change.
Strong links with business will also provoke governments to set up a solid agenda, adds Azavêdo. For instance, e-commerce – which currently features heavily on the agenda for global trade – is a controversial topic among governments and decision makers. Taking on board the opinions of businesses – i.e. those most affected by new measures dealing with e-commerce – will help move conversation in the right direction.
Yet, Azavêdo stresses the significance of the WTO’s role in ensuring that people understand the value of a rules-based system, as well as the repercussions of not following the rules (particularly with respect to the threat posed by protectionism.) In fact, there is public confusion when it comes to identifying the factors driving protectionism, as well as its potential impact.
For Azavêdo, it all comes down to the local economy. In the past decade, people have seen jobs disappearing and equate this to trade and immigration. In fact, eight in 10 of those disappearing jobs are the result of technological advances. Essentially, protectionism is a combination of economic slowdown, labour market tensions and political rhetoric – and these are the fears that are promoting increasingly isolationist trade policies in both the developed and undeveloped world.
On this subject, Azavêdo was questioned on the way in which we can maximise the potential of both highly and lesser developed countries. Yet, for Azavêdo, this is not the question we should be asking. People often discuss “developing countries” as a common group, he states, when in fact there is a vast economical spectrum within this category: with some countries exhibiting liberty, openness and growth, while others still work to a model better-fitted to the global economy of 50 years ago.
It is in these countries where the protectionist threat is perhaps most significant – with economies believing that, by giving local businesses exclusivity in the market, they will develop a strong local economy before opening it up to international competitors. Perhaps the biggest problem here, explains Azavêdo, is that this does yield short-term successes. Long-term, however, it does little more than solidify inefficiencies in the market.
Azavêdo closed the discussion with a sobering reference to the geopolitical issues that are currently posing a sizeable barrier to better trade relations – be it Russia, the Middle East or North Korea – and the importance of the West’s role in creating a closer economic relationship moving forward.