WTO urges G20 nations to boost trade cooperation

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The director-general of the WTO has warned of the dangers to the global economy if nations fragment into competing trade blocs.


The director-general of the World Trade Organization (WTO) has urged leaders of the largest economies to strengthen their cooperation in international trade and avoid implementing further barriers to imports and exports.

Ngozi Okonjo-Iweala was speaking at the G20 summit in Bali, Indonesia, earlier this month. Her warning came in the wake of a new report from the WTO that noted export restrictions are increasingly being imposed due to continued economic uncertainties.

The director-general stated this could lead to a fragmentation of the global trade system, which would result in heightened geopolitical tensions and significant hits to GDP, especially in developing countries.

New trade restrictions increase pressure

The WTO latest Trade Monitoring Report, which covers the period from mid-May to mid-October 2022, found that although G20 nations have lifted some trade restrictions, overall the trend is going in the "wrong direction", with barriers to exports contributing to good shortages, price volatility, and market uncertainty.

Overall, the pace of implementation of such restrictions has increased since 2020, with factors including the COVID-19 pandemic, high inflation, the war in Ukraine and the subsequent food crisis all contributing to more protectionist measures. This was especially the case in areas such as food, feed and fertilizers, which accounted for 52 export restrictions in place as of mid-October. Of these, 44 percent were imposed by G20 economies.

Despite this, G20 economies introduced 66 new trade-facilitating measures across the six months of the review period, covering trade worth a total of $451.8 billion, along with 47 trade-restrictive measures on goods, with a trade coverage of $160.1 billion. 

As of mid-October, 11.6 percent of G20 imports were affected by trade-restricting measures that have been implemented since 2009 and remain in force.

The risks of a fragmentation global trade system

Ms Okonjo-Iweala told G20 leaders in Bali that free and open trade is essential if the global economy is to meet the current challenges and continue growing. Yet if various blocs continue to look inward and impose new restrictions, this will make it much harder for leading economies to meet their goals in areas such as improving development, overcoming food and energy shortages and tackling climate change.

Such an approach would also seriously disadvantage less advanced economies. The director-general stated: "Fragmenting this foundation would put these goals in jeopardy, worsening domestic prospects and geopolitical tension. It would result in substantial global GDP losses, which could be double digit losses for developing countries."

A previous report by the WTO Secretariat last year noted that if the world economy does split into rival trading blocs, this could reduce global GDP in the long run by about five percent, mainly by restricting competition and stifling innovation.

Therefore, Ms Okonjo-Iwaela urged leaders to set an example to other nations by lifting trade restrictions, particularly on essential goods such as fertilizers that will be key to tackling the food crisis. She noted that such measures have especially damaging effects on Africa, which only consumes three to four percent of the world's fertilizer supplies, but is finding it increasingly difficult to secure these items.

She added that while "strategic competition" is a major factor in today's global challenges, it is only by working together that these can be overcome. "We also know that strategic cooperation is key to tackling many of the same challenges. Therefore, we need to strengthen trade cooperation, not weaken it," the director-general said.

G20 commits to fair trade

The WTO did, however, welcome a communiqué from G20 leaders at the end of this month's summit. The Bali Declaration affirmed the groups commitment to a rules-based approach to trade that focuses on a "non-discriminatory, free, fair, open, inclusive and equitable" system that places the WTO at its core.

Leaders also acknowledged the importance of reforming the WTO in order to better solve disputes and build trust in the global multilateral trading system.

Ms Okonjo-Iwaela said she is "pleased that the G20 communiqué was prominent in terms of highlighting trade issues and issues of concern to the WTO, such as agriculture, export restrictions on food, and WTO reform".