London, 17 July, 2013
“Globalisation saw little reversal during the recent crisis mainly because of WTO, the role of social safety nets and the success of emerging economies in global trade, among others” said Martin Wolf, Chief Economic Commentator, Financial Times at the 5th CUTS 30th Anniversary Lecture at London on 15th July on the topic “The Future of Global Trade Policy”.
The well attended lecture was hosted by the Commonwealth Secretariat and chaired by Kamalesh Sharma, Secretary General, Commonwealth Secretariat, and Financial Times as the media partner. Justine Greening, UK’s Secretary of State for International Development spoke at the event, while Professors Jim Rollo and Alan Winters commented on Wolf’s lecture.
Wolf, while appreciating the role of CUTS’s admirable work in the trade area, felt that the trading system is facing many challenges both from the inside and outside. The main challenges from outside are the imbalances between trade and exchange rates, climate change and inequality that is corroding the political base in favour of trade in developed countries. He stated that while these are important issues, WTO is not the right place to address them.
Speaking at the event, Justine Greening congratulated CUTS on completing its first 30 years, during which it has consistently made the case for free trade, combined with competition and consumer welfare, leading to economic democracy. She also highlighted the long standing productive relationship between DFID and CUTS.
Greening stated that the UK government and DFID firmly believe that trade will play a key role in poverty reduction and the developing countries should be helped to reap the benefits of free and fair trade.
According to Greening, the main reasons for many developing countries not trading enough include: lack of access to markets; lack of enabling environment, particularly poor infrastructure and weak regulatory system; and not being able to be part of global value chains, that can create more and better jobs. She reiterated UK’s commitment to delivering an agreement on trade facilitation at the 9th WTO ministerial conference to be held in Bali, Indonesia in December-2013.
Wolf appreciated the focus of CUTS in trade, competition, consumer welfare and building LDCs supply capacities. He believed that the poor will become even further marginalised without a robust and fair multilateral trading system.
According to Wolf, the trading system as represented by WTO is faced with several internal challenges, namely successful conclusion of Doha round that will restore legitimacy and relevance of the multilateral trading system and secondly the mega regional trade and investment agreements, i.e. trans-atlantic and trans-pacific, partnerships.
Wolf expressed doubts if the negotiations of these mega-regional trade and investment agreements would succeed. But it would be unfortunate if these negotiations are done without China and other emerging economies. Therefore, Wolf strongly advocated that these should be open to any WTO member who wishes to join later.
Alan Winters in his comments reinforced and expanded on several points made by Wolf. He believed that the 2008 economic crisis did not lead to high levels of protectionism as the world had a lot more macro-economic flexibility unlike in the 1930s. Winters added, that it was too early to declare victory as we have not seen the end of the crisis and governments may yet succumb to pressures for protectionist measures.
He considered smooth integration of China as the biggest internal challenge facing the multilateral trading system. This should not be based on the terms set by the west. Rather the trading system has to change to accommodate the interests of emerging economies including China and India that are different from those of the west.
Jim Rollo recalling the enthusiasm and appreciation of Pradeep Mehta founder and Secretary General of CUTS said that it never wanes and the result in terms of the expansion and success of CUTS is in front of us.
While commenting on the lecture by Wolf, Rollo stated that the WTO is in more trouble than we were willing to admit. He was also worried that the state capitalism was back in business witnessed by bail outs to auto companies and the fact that most of China’s big exporters are stated owned. He also lamented the fact that the private sector has exhibited a lack of interest in the WTO and Doha round.
In the ensuing discussions several questions and comments were made relating to the success of WTO in many of its functions including the dispute settlement, role and responsibilities and performance of China in WTO, issues of interests to developing countries other than China and other emerging economies, i.e. Sub-Saharan Africa, LDCs and small states.
Another interesting debate was around the importance of trade finance for the trade performance of small developing countries, relationship of the financial sector with the real sector and the role of trade in the use and exploitation of natural resources. One participant raised the issue of consumers being ignored in the debate, while panelists did respond that higher trade-led growth does lead to higher consumer welfare.
Pradeep Mehta stated that consumers are the raison de’etre of all economic activity and spoke about a recent CUTS study about the cost of economic non-cooperation in South Asia which costs the regional economies US$3bn. Since the study was published, governments have woken up which is evident in rising intra-regional trade.
Mehta admitted that most of the discourse in the past had assumed that consumer interest would be advanced when trade volumes rise, but were not explicit in approaching trade liberalization through the lens of consumer welfare and thus positioning the debate domestically for consumers to support.
He also stressed the need for strong flanking policies, such as health, education, skills, regulatory regimes etc., to ensure that the benefits of trade openness reach all segments of the society. According to him, coherence in policies at the domestic level and among institutions at the international level etc were needed to face the challenges. This was also a main conclusion of the DG WTO’s High Level Panel on the Future of Trade of which he was a member.
In his vote of thanks, Cyrus Rustomjee, Director, Economic Affairs Division of the Commonwealth Secretariat remarked that the event was very successful and useful for their own work on trade policy. He spoke about a recent ComSec paper: “Right to Trade” by Joseph Stiglitz which has laid out how small and vulnerable economies can benefit from the multilateral trading system.
Rustomjee stated that they will continue to devote their assistance to help its member developing countries, particularly small states, for their participation in the trading system through high-quality research and capacity building workshops.