This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.
Author: Jan Yves Remy, Director, Shridath Ramphal Centre (SRC), Shridath Ramphal Centre for International Trade Law, Policy and Services
- The World Trade Organization’s legitimacy is being threatened by geopolitical tensions and a perceived failure of it contributing to sustainable development.
- Recent efforts to regear global trade systems centre around non-economic values to advance a people-centric, inclusive and fair trade system for all.
- The Villars Framework for a Sustainable Global Trade System outlines ideas on how the sustainability agenda can be central to remaking global trade.
Since its creation in 1995, the World Trade Organization (WTO) has occupied an unassailable position as foremost among international economic institutions. Today, however, some argue that the organization – and the rules-based multilateral trade system it has spawned – faces a serious legitimacy crisis alongside the neo-liberal model on which it was built.
Geopolitical tensions associated with its seeming demise include the US-China rivalry, a growing rift between developed and developing countries, profound supply chain disruptions lingering from the COVID-19 pandemic, and the Russian invasion of Ukraine.
Compounding this is the perceived lack of concern of the trade community to the existential challenges of our times, including the fight against climate change, loss of biodiversity, food insecurity, social and health inequality, uneven access to finance, and the digital divide, among others.
Reforming the global trade system
Recent attempts have been made to regear the WTO and trade institutions towards more sustainable outcomes – whether environmental, social or economic – where wealth creation for a few becomes secondary to promoting new non-economic “values” shared by the global community that advance a people-centred, inclusive, fair and transparent trade system that benefits all.
One set of reform proposals – the Villars Framework for a Sustainable Global Trade System – has been developed through 10 workshops held over the last year with more than 400 trade and sustainability experts and led by trade academics.
Since its launch in September 2023, key elements of that framework have been debated and refined by trade and sustainability experts, including members of the Global Future Council on Trade and Investment.
The key points and recommendations of the framework are as follows:
Climate action and a just transition
- A commitment to net-zero greenhouse gas (GHG) emissions in international trade by 2050 must be made, in alignment with national commitments under the Glasgow Climate Pact.
- Ensuring that border adjustment mechanisms and other climate-related policies are non-discriminatory, fair, interoperable, and do not place undue burdens on trade partners, especially developing economies.
- A more deliberate pivot towards a “just transition” for developing countries to adjust, as well as take advantage of new opportunities, including consideration of how trade rules and processes (including Aid for Trade at the WTO, and trade finance) can promote investment and finance in green technologies, and encourage innovation and transfers of technologies for the low-carbon transition.
- More harmonization, guidance and training are necessary for businesses, and in particular micro, small and medium-sized enterprises to comply with supply chain sustainability due diligence tracing/emissions requirements, and other regulatory developments. Technological advancements, including blockchain and artificial intelligence (AI), can help to make processes more transparent, trustworthy, cost-effective and scalable.
Development and inclusion
- More transparency and deliberate inclusion of perspectives of marginalized communities and groups like Indigenous Peoples, women, MSMEs, and small-island developing states in WTO decision-making processes, and ongoing negotiations.
- A sustainable goods/services/technology initiative focused on eliminating tariffs and other non-tariff barriers that promote sustainable development; and more open and inclusive standard-setting processes, especially in sectors where developing countries have a comparative advantage.
- A repurposing of institutions and processes in the service of the sustainability agenda, including a rechartered International Trade Centre – the Geneva-based organization focused on expanding export opportunities for small and medium-sized firms in developing countries – to become the Sustainable Trade Centre with an expanded capacity-building and innovation focus; and the creation of a Global Sustainability Trade Fund, resourced from repurposed subsidies and revenues collected from developing countries and reallocated financial resources from the World Bank and other development institutions.
Subsidies and industrial policy
- A new approach to disciplining harmful subsidies and promoting helpful ones through a new analytical/legal framework that combines the traditional WTO focus on the degree of trade distortion (on a spectrum from de minimis to significant) with a new focus on sustainability.
Monitoring and impact evaluation
- Concerted action to measure and adapt the impact of trade policies on people, marginalized and underrepresented groups through ex-ante and ex-post sustainable development impact assessments (SDIAs) in the context of ongoing and future trade negotiations.
- Inclusion of dedicated sections in WTO Trade Policy Reviews that examine the effect of trade policies on sustainability metrics such as gender, environment, etc, as a way of highlighting best practices and learning from each other’s experiences, without imposing more “hard” obligations on countries.
Institutional and governance reform
- Reform of WTO institutional and decision-making processes to be more agile and facilitative of the sustainability agenda, through, for instance, a move away from “consensus” to majority voting for procedural matters (e.g. agenda-setting and creating plurilateral initiatives) and by encouraging member-led discussions such as those currently taking place on trade and the environment, plastics pollution and fossil fuel subsidies.
- Improving technical and political engagement between the WTO and other organizations pursuing trade-impacting sustainability mandates – e.g. United Nations (UN) agencies, the International Maritime Organization, the Organisation for Economic Co-operation and Development, the International Organization for Standardization, the World Bank – to ensure more coherence and mutually-supportive approaches, in line with UN Sustainable Development Goal 17.
Some of these proposals could reasonably be put forward for consideration at the upcoming 13th Ministerial Conference of the WTO (MC13) in Abu Dhabi, including the net-zero commitment, commencing work on disciplining subsidies and assessing the impacts of border carbon adjustment mechanisms.
Others need further socialization and buy-in among trade diplomats at the WTO headquarters in Geneva as well as in capitals, and the broader sustainability community.
What is the World Economic Forum doing on trade facilitation?
Holistic and inclusive reform of the trade system is more essential than ever. Prevailing geopolitical tensions and the increasing resort to unilateralism can only be addressed by recommitting to a rules-based system and rebuilding trust in multilateral systems and processes.
Overall, the sustainability agenda should serve as a unifying basis for this trade system and not as a guise for protectionism.
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