World trade - looking ahead
25 Oct 2017
When the Facts Change, I Change My
John Maynard Keynes who spoke the words 'when the facts change,
I change my mind' was one of the driving forces behind the post-War
creation of the 'Bretton Woods' institutions: the World Bank and
the International Monetary Fund.
What is less well-known is that Keynes also envisaged the
creation of an 'International Trade Organisation' (ITO), which
would be the source of the rules governing trade between
nations. Taken together, these three institutions would
promote and safeguard global economic interaction, which he and the
Bretton Woods 'founding fathers' believed was necessary to maintain
international peace and security.
Although the ITO never came into being, many of its functions
were undertaken through the General Agreement on Tariffs and Trade
(GATT). The GATT system continued on a 'provisional' basis
from 1948 to 1996, when Keynes' vision was finally realised in the
form of the new World Trade Organisation (WTO).
It is interesting to reflect on the issues that were foreseen
for the ITO. As well as trade in goods, it was also to
address issues such as trade in services, investment and
employment. While those ideas were overly ambitious at the
time, the WTO does now cover services. There is also renewed
interest in a multilateral agreement on investment, which would sit
within the WTO system. Although the 'Singapore Issues',
discussed in the WTO Ministerial in Singapore in 1996², were at that
time seen as too sensitive to bring into the WTO, both trade
facilitation and government procurement (on a 'plurilateral' basis)
are covered now.
If one takes a long-term view, sometimes ideas about global
economic governance emerge that are ahead of their time. The
ability of the system and of politicians to see the light can lag
the need for action.
A good current example is digital trade. As disruptive
technology advances, the trade policy community recognises that
global rules are needed to govern this new form of trade. But
the well-known difficulties of the WTO's negotiating function,
where nothing is agreed until everything is agreed, has meant that
progress in creating the rule book has been slow.
Brexit comes at a time when the WTO system is evolving.
Most accept that the all-encompassing Doha Round will never be
concluded. We are now starting to see the WTO becoming what
it was originally designed to be - an institution within which
separate negotiations on discrete topics take place on a rolling
basis. Some cover all WTO Members, such as the Trade
Facilitation Agreement; others involve coalitions of the willing,
such as the Government Procurement Agreement, which is subject to
WTO dispute settlement, but applies only to those Members that have
agreed to be bound. This trend will continue.
Equally, in the 1990s, the QUAD countries (Canada, EU, Japan and
the United States) were the principal drivers of
negotiations. The massive global economic shifts since then
have multiplied the number of key players, whether they be major
economies, such as Brazil, China and India, or groupings of
countries with similar interests, such as the Cairns Group of
agricultural exporters and the G33, one of a number of coalitions
of developing countries.
Many WTO Members expect the UK to become an influential,
principled supporter of trade liberalisation and the WTO
system. There is an opportunity for the UK, working with
like-minded members, such as the EU, to drive the further
liberalisation through the WTO that will create increased
prosperity, growth and jobs.
That is important because, behind the headlines, the low profile
mechanisms of the WTO are doing exactly what Keynes envisaged the
ITO would do. WTO rules govern international trade, ensuring
that governments have space to regulate while providing industry
with the stability and certainty necessary to trade and grow.
So the SWA was pleased earlier this month to host a delegation
from the WTO Secretariat in Edinburgh for a day long seminar with
trade associations, businesses and others in the Scottish food and
drink sector. The objective was to explain how the system
works, the benefits it brings and how they can engage with it when
they encounter trade barriers in export markets.
The WTO has worked for the Scotch Whisky industry; we believe
that it can work equally well for other Scottish exporters.
Martin Bell is SWA deputy director of global affairs
¹ Attributed to John Maynard Keynes, but also to Paul
² Transparency in government procurement, trade facilitation
(customs issues), trade and investment, and trade and