These are the worst times the world economy has seen since the establishment of the multilateral trading system more than seventy-five years ago. A quadruple shock, that of Covid-19, climate change, armed conflict and the cost of living, has reversed years of hard-won development gains.
Coordinated multilateral action is needed to address the crises we face. Both aid and trade have a key role to play in reversing the effects of this quadruple shock and putting the world back on track towards achieving the Sustainable Development Goals.
As leaders of the three international agencies that make up Geneva’s trade platform, we work together, with determination, to ensure that trade contributes to development and prosperity, and that it really benefits people. In a world in crisis, we can no longer afford to act as if nothing had happened. Politicians must act taking into account three fundamental aspects.
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Less carbon, more TPE and e-commerce
First, global trade must become greener. He can indeed to play an important role in the transition that leads us to a low-carbon economy. In the context of preliminary studies, the World Trade Organization (WTO) has shown that the removal of customs duties and other regulatory obstacles applying to a range of energy-related environmental goods (wind turbines, solar panels, etc.) would reduce global CO2 emissions by 0.6% in 2030, and this only through improved energy efficiency. The impact on innovation and prices (which would fall) could also be positive, by accelerating the transition to products that use less carbon-intensive renewable energy.
Second, trade must become more inclusive. Fostering small business business development and greater participation of women and youth makes businesses and countries more competitive, drives economic transformation and reduces poverty. Yet, surveys of companies by the International Trade Center (ITC) found that only one in five exporting companies was headed by a woman. According to the WTO, micro, small and medium-sized enterprises, which make up about 95% of global businesses, account for only a third of total exports.
Third, commerce needs to be more “connected”. In a networked world, the future of trade is indeed through digital channels and platforms, especially for small businesses. During the Covid-19 pandemic, we saw how online commerce, which had been useful until then, had become essential for survival. According to UNCTAD, digitally delivered services now account for nearly two-thirds of global services exports.
The Aid for Trade Global Review, taking place from 27 to 29 July in Geneva, addresses precisely these themes. This event comes a month after the success of the twelfth WTO Ministerial Conference, which put trade multilateralism back on track and resulted in a historic agreement on fisheries subsidies. It also comes two months before COP27, which will be organized in Egypt and which could determine what are the chances of the planet succeeding in limiting global warming to 1.5° C, in accordance with its objective.
Several promising signs suggest that Aid for Trade is moving towards greater sustainability, inclusiveness and connectivity. According to the OECD and the WTO, a record amount of nearly $50 billion was disbursed in Aid for Trade in 2020. Half was related to climate or gender equality, and a third was dedicated to the digital economy. Despite growing pressures on national budgets, it is essential to maintain and increase these aid flows.
Optimizing Aid for Trade to achieve the Sustainable Development Goals requires careful attention to how development results can be achieved, and which states to target.
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Let us focus on countries with the greatest trade and development needs – in particular least developed countries and fragile/conflict-affected countries – and on regional initiatives such as AfCFTA, in order to enable them to establish broader and more inclusive regional value chains, as well as trade-based growth.
To do this, international organizations must work in partnership. The WTO, UNCTAD and ITC are already collaborating on initiatives such as the Global Trade Helpdesk, which simplifies market research by bringing together key trade and business information in a single portal, and provide joint support to cotton exporting countries in Africa.
And tomorrow ?
Finally, funding, public and private, must be mobilised. The International Finance Corporation estimates the funding gap for women’s entrepreneurship globally at $300 billion. The global trade finance gap nearly doubled from an already staggering $1.5 trillion. Without access to finance, businesses cannot grow, diversify or strengthen.
We end this forum with a call to action. Creating a more sustainable, more inclusive and more connected future is the great challenge of our time. Development aid, trade and multilateralism are all part of the solution. It is normal and understandable, in times of crisis, for governments to act to support their own economies. We must act now to ensure that the poorest and most vulnerable can find the path to prosperity through trade global.