Info Service on WTO and Trade Issues (Jun18/03)
4 June 2018
Third World Network
United Nations: Multilateralism and international trade under pressure
Published in SUNS #8692 dated 1 June 2018
Geneva, 31 May (Kanaga Raja) - Multilateralism and international trade
are facing intensifying pressure, in particular with regard to their
development impact, the UN Conference on Trade and Development (UNCTAD)
This is compounded by the rise of nationalist sentiment, increased
use of trade-restrictive policies, increasing difficulties in adopting
hard rules in multilateral trade negotiations and a growing tendency
to craft trade deals in bilateral, plurilateral and regional settings.
This assessment was highlighted by UNCTAD in a Secretariat Note prepared
for the sixty-fifth session of the Trade and Development Board, which
begins next week.
The Secretariat Note has made some policy recommendations and has
posed questions for the UNCTAD membership to consider.
Among the policy recommendations, UNCTAD has underscored the need
for the international community to work together, in all available
forums, to uphold multilateralism.
Such an approach should remain at the core of the global partnership,
UNCTAD said the challenge for the international community is to ensure
that the headwinds that multilateralism and international trade are
currently facing do not hold back the contribution of international
trade to the achievement of the 2030 Agenda for Sustainable Development
and the Sustainable Development Goals.
According to the UNCTAD paper, international trade accounts for important
shares of the outputs of national economies, yet its rise in importance
has slowed. The most commonly used index of globalization trends,
namely the ratio of t he value of international trade over global
output, stalled at about 30 per cent in 2011-2014, a level first reached
in 2007, then fell by about 5 percentage points in 2015 and 2016.
The most recent statistics and forecasts point to a positive trend
in relation to both international trade and global output. Overall,
it is likely that in 2017 and 2018, trade will outpace output growth,
albeit marginally. Global output growth is expected to be around 3.6
percentage points and trade growth, around 4 percentage points.
A recovery in trade growth is a positive factor for developing countries
in particular, provided it reflects growth in developing country exports.
UNCTAD however pointed out that the recovery in trade remains fragile,
as it is too early to gauge whether this positive trend will continue
in the coming years.
"There is significant uncertainty and vulnerability affecting
the global economy, and there are growing trade frictions between
countries that may negatively affect international trade in the near
future," it said.
Public support for globalization and for multilateral cooperation
has waned. Concerns with regard to the benefits of globalization are
also reflected in a surge in protectionist rhetoric.
Debates on the persistence of trade imbalances and on the fairness
of export promotion practices between the major economies are of concern.
In addition, these developments have been accompanied by an increase
in trade defence measures, such as anti- dumping and safeguard measures,
and related investigations and disputes.
"All of these developments have resulted in policymaking processes
that are more cautious with regard to multilateral cooperation initiatives,"
said the paper.
"Recently enacted protectionist measures risk provoking trade
disputes, retaliations or trade wars. If many countries, in particular
major trading economies, engage in trade-related disputes, such friction
can impede the recovery of international trade and undermine multilateral
cooperation," it cautioned.
The weakening globalization trend observed over the past decade has
been accompanied by growing recognition that the economic gains and
opportunities brought about by globalization have not been inclusive
and have not always translated into sustainable economic, social and
Trade has contributed to lifting millions of people out of poverty,
yet there remain a large number of people for whom the globalization
process and trade openness has been harmful.
In some countries, international trade and the rules governing such
trade, developed through years of multilateral cooperation and administered
through international arrangements, are increasingly perceived as
detrimental to ordinary workers and as eliminating jobs, in particular
in manufacturing sectors.
Such concerns emphasize the issue of the equitable distribution of
gains from trade and, in this regard, the need for policymaking at
all levels that sufficiently protects the interests of the less privileged,
In addition, rapid technological progress, such as the automation
of production processes, has displaced some workers, yet has also
created opportunities f or new jobs based on technological advancements,
and strategies to effectively harness technological change are therefore
Geopolitical challenges, technological innovations and socially or
environmentally driven changes have created complex and urgent problems
at both national and global levels. These challenges, and the need
to address them collectively, added impetus to the adoption of the
"However, despite the momentum launched by the adoption of the
Sustainable Development Goals, there are mounting concerns over the
ability, and practicability, of multilateralism to address global
problems and promote sustainable development through a strengthened
According to UNCTAD, the weakening globalization trend is also mirrored
in the status of some multilateral cooperation processes, in particular
the stalemate in multilateral trade rule-making under the World Trade
Organization and in the appointment of members (to fill vacancies)
of its Appellate Body.
The continued hiatus in reaching comprehensive results, including
at recent ministerial conferences, illustrates the difficulties in
advancing a multilateral agenda at this time.
Some difficulties originate from a lack of consensus in negotiations
on the multilateral policies and rules that would best support the
development process in developing countries.
Other difficulties originate from the emergence of new issues owing
to the rapid changes that the global economy is experiencing, such
as in electronic commerce (e-commerce) and investment and trade facilitation,
which some countries wish to address.
The need for and scope of increased participation in international
trade remains strong in many developing countries, in particular the
least developed countries and small and vulnerable economies.
It is therefore important to establish robust multilateral hard trade
rules, to provide predictability, transparency and stability in market
However, efforts to improve multilateral hard trade rule-making continue
to stall, yet the policymaking process has continued to progress at
bilateral and regional levels.
The number of preferential trade agreements, investment treaties and
technical assistance programmes targeting behind-the-border and at-the-border
policy reforms has continued to increase.
There are two issues of concern to be considered in this regard, said
First, a more polarized international rule-making approach may not
be in the interest of parties with more limited negotiating power
and economic weight.
Second, such polarization is likely to create a set of mutually inconsistent
rules, which it may thereafter be difficult to establish at the multilateral
level, as the rules may have been cemented by the interests of societal
groups and economic lobbies.
There is therefore a high level of uncertainty as to how multilateral
cooperation and the multilateral trading system will evolve in the
For international cooperation to resume and to succeed, in particular
with regard to the 2030 Agenda and the Sustainable Development Goals,
Governments need to advance an economic agenda that is not only outward
looking but also fair and equitable and that brings benefits to a
much larger share of constituents.
"In the absence of a coherent multilateral agenda that responds
to the head winds faced by globalization, the world may continue to
drift toward nationalism and multi-polarity."
UNCTAD noted that recognizing the contribution of trade, SDG Goal
17 sets specific trade-related targets.
Moreover, the fact that these targets are an integral part of achieving
all of the Goals serves as a reminder that trade is not an end in
itself. Trade and trade policy should serve as a catalyst for socioeconomic
and environmentally sustainable development, advancing the 2030 Agenda
commitment to build people-centred economies.
UNCTAD emphasised that trade policy and rules should be development-friendly,
by being sensitive to and accompanied by complementary national and
regional policies, to reduce poverty, create jobs and/or provide social
safety nets for affected populations, as well as to promote sustainable
Improving market access at the border in developing countries (SDG
targets 17.11 and 17.12) and behind the border in the sectors of greatest
importance for poor populations remains a challenging task, it said.
For example, agricultural markets in developed countries remain restrictive
, both because of border protection through tariffs and domestic support
through subsidies. Average agricultural tariffs have been above 6
per cent since 2005 and have not shown much reduction in the past
Such restrictions remain important, yet non-tariff measures and private
standards often represent an even higher barrier to exports. The number
of non-tariff measures rose from over 1,500 in the mid-2000s to over
2,500 in 2015.
Such measures tend to raise the unit values of traded products by
15-30 per cent in food and agricultural sectors and by 5-20 per cent
in manufacturing sectors.
Non-tariff measures and private standards often represent an important
hurdle for market access, yet they are also supportive in the achievement
of sustainable development. Many non-tariff measures arise from domestic
legislation designed to protect the health and safety of the population
or the environment and private standards are used to meet increasing
consumer demands for environmental an d social sustainability.
Significantly, although it serves similar objectives, domestic legislation
generally differs between countries, resulting in unnecessary obstacles
The coordination and/or harmonization of such policies, for instance,
through the adoption of international standards and increased regulatory
convergence, may be helpful in this regard, UNCTAD suggested.
"Ways forward on this matter could build on the coordination
by UNCTAD of work on non-tariff measures among several United Nations
and international and regional organizations, as well as on its comprehensive
database on non-tariff measures."
The paper also said that fast, reliable and transparent trade procedures
are important for developing countries to be able to reach markets
abroad and to participate in global value chains.
It noted that as developing countries face increasingly greater challenges
in accessing large and complex markets, development assistance and
global partnerships for development are more important than ever.
Improving development assistance, such as by increasing resources
through aid for trade, providing trade-related information and increasing
investment, is necessary to improve developing country access to markets.
SOME INTER-RELATED POLICY DIMENSIONS
According to UNCTAD, at the macroeconomic level, international trade,
that is, exports of goods and services, accounts for more than half
of the gross domestic product of many low-income countries.
Moreover, under certain conditions, international trade provides support
for a large number of jobs in many developing countries (Goal 8),
thereby contributing to the achievement of other Goals with regard
to access to food, health care, education, energy and water and sanitation.
Beyond income generation, trade also influences the achievement of
most of the Goals through other channels, both directly and indirectly.
"Countries need to ensure that the aggregate gains from trade
are maximized , shared fairly and equitably, in particular among the
most vulnerable groups , and that those who are affected by trade-related
disruptions and adjustments are quickly brought back to productive
employment," said UNCTAD.
Trade policies alone are not enough to achieve this and complementary
policies such as fiscal and financial policies, as well as policies
related to investment, industry, education, skills and innovation
and competition and consumer protection, along with quality infrastructure
and trade facilitation measures in favour of micro-enterprises and
small and medium-sized enterprises, are essential for inclusive development.
Providing jobs and incomes to vulnerable populations, including the
poor, w omen and youth, is an overarching theme of the Goals.
Trade and trade policies may be used to address related concerns,
such as decreasing the lack of gender-related equality. For example,
pro-poor trade policies can increase the relative income of poor households
by altering the availability, accessibility, affordability and quality
of essential goods, for example, lowering tariffs on mosquito nets
in countries where malaria is prevalent, to help reduce child mortality.
According to UNCTAD, as trade increasingly takes place online, achieving
target 17.11 increasingly requires enterprises in developing countries
to be visible online and engage in e-commerce.
New digital solutions can help overcome challenges to exporting, such
as those related to small domestic markets and remoteness from global
markets and other geographical disadvantages.
Traditionally, only large and productive firms were able to bear the
costs associated with export entry, such as identifying and marketing
to distant customers.
Such costs can be significant with each successive export market entry.
By reducing information asymmetries and costs related to communications
and information, transactions, searches and matching, new solutions
can help lower overall trade costs.
Digital technologies also create opportunities for new types of trade
in digitally traded products, services and tasks, as well as for increased
traditional trade using e-commerce and online platforms to match buyers
and sellers. Such platforms can help enhance the visibility of products.
"However, although digitalization can help make trade more inclusive,
gains are not automatic," the UNCTAD paper pointed out.
Companies still need to ensure that their goods and services meet
the quality standards and prices expected by potential clients.
Challenges include ensuring that entrepreneurs have the required capabilities
to engage in e-commerce, as well as cross-border trade, such as capabilities
i n digital marketing and the ability to comply with various trade
UNCTAD also noted that the services sector plays an increasingly important
role in the world economy in creating employment, building linkages,
coordinating production processes and facilitating international trade.
In 2016, it accounted for about 67 per cent of output and 49 per cent
of employment in the world economy.
Developing countries with weak domestic productive capacities in manufacturing
sectors, in particular commodity-dependent and small economies, may
diversify their export baskets into services products such as tourism.
Given the high transportation costs of merchandise goods due to weak
connectivity and long distances to major markets, as well as advances
in information and communications technology and e-commerce technology,
services trade can be a good alternative approach to promoting trade
and domestic employment.
UNCTAD noted that trade liberalization and reforms can bring frictions
and adjustment costs in the short term.
For example, trade reforms can strongly affect the structure of employment,
creating employment in some sectors while disrupting employment in
other sectors. This can result in temporary unemployment as workers
change jobs or industries.
Accordingly, countries should put accompanying measures in place to
ease the transition for workers and firms, for example, by providing
additional training for displaced workers to qualify for work in booming
sectors, such that they can once more benefit from trade at a later
Adequate social policies are also required to protect those negatively
affected by trade-related disruptions who cannot change sectors, an
effect more likely to occur among elderly populations.
The paper also pointed out that trade and investment reforms and liberalization
in support of economic growth and development can be circumvented
by the national and/or cross-border anti-competitive behaviour of
"To counter and halt such behaviour, comprehensive competition
provisions a re necessary at all levels," it said.
"Strengthened competition laws and policies may facilitate the
national and international competitiveness of key sectors and the
growth of the private sector in countries and regional groupings."
In addition, robust cross-border cooperation by competition authorities
can address the harmful effects of international cartels that restrain
access by small and medium-sized enterprises to regional and global
Such efforts are in line with the United Nations Set of Multilaterally
Agreed Equitable Principles and Rules for the Control of Restrictive
THE ROLE OF UNCTAD
The crisis in multilateralism and trade-related hard rule-making brings
to the fore the need for more specific assessments of the governance
of trade for sustainable development, said UNCTAD.
This crisis does not justify a rejection of the hard rule-making process,
a s this provides stability, predictability and transparency in the
rights and obligations undertaken under the international trading
At the same time, the rules-based multilateral trading system can
potentially reduce the policy options of States in achieving the Goals,
which underline s the importance of ensuring a robust development
UNCTAD said elaborating trade frameworks that foster inclusive and
sustainable development may therefore be better undertaken by way
of developing best practices and soft laws, such as voluntary codes
of conduct and guidelines.
Such a process would enable countries to safeguard policy space while
building up a non-binding system of commitments and best practices
that could eventually be taken over by relevant multilateral institutions
when countries wish to move from soft to hard rule-making and governance.
The current proliferation of plurilateral and issue-based negotiations
has made forging trade alliances and reaching multilateral consensus
increasingly complex. Countries may often be reluctant to give up
policy space when exploring commitments multilaterally.
Against this background, UNCTAD offers United Nations Member States
informal and formal space for open and creative dialogues to explore
policy issues and interests and, ultimately, reach consensus without
immediately requiring hard commitments.
The paper said in contrast to the legally binding nature of commitments
under the World Trade Organization and their enforcement through the
Dispute Settlement Body, the consensus-building role of UNCTAD in
multilateral trade and development policymaking stimulates exchanges
and the sharing of best practices and experiences, with a view to
making trade work for development.
UNCTAD can thereby prepare the ground and support member States in
openly and holistically discussing collective actions to problems
inherent in multi-party and multi-issue trade negotiations, the paper
"The consensus-building role of UNCTAD may be useful in the near
future as members of the World Trade Organization begin to explore
the role and contribution of new issues discussed at the Eleventh
Ministerial Conference, namely e-commerce, investment facilitation
and micro-enterprises and small and medium-sized enterprises."
There is an opportunity for member States to reach consensus on these
emerging issues in a non-binding setting.
This would follow the example demonstrated in other areas that have
previously been a focus of non-binding consensus-building and soft-law
approaches at UNCTAD, such as the Generalized System of Preferences,
the United Nations Guidelines for Consumer Protection and the United
Nations Set of Multilaterally Agreed Equitable Principles and Rules
for the Control of Restrictive Business Practices, said the UNCTAD
UNCTAD leadership in data collection and in the research and analysis
of developing country trade and development issues contributes to
incubating knowledge that underpins intergovernmental consensus-building
and soft-law approaches, it pointed out.
UNCTAD technical assistance can also provide fruitful field-level
experiences on which intergovernmental consensus-building and soft-law
approaches can draw for evidence of how policies may be put into practice.
SOME POLICY RECOMMENDATIONS
The UNCTAD paper has proposed the following policy recommendations:
(a) In the current interconnected, liberalized and fast-changing environment,
for trade not to be lost as an enabler of inclusive development, the
international community needs to urgently work together, in all available
forums, to uphold multilateralism as the cornerstone of the Global
Partnership for Sustainable Development (Goal 17).
(b) The multilateral approach should remain at the core of the global
partnership, to achieve sustainable development through trade.
(c) The framework for a development-friendly international trading
system may be based on both hard law and soft law, with the latter
taking greater prominence when the former presents difficulties with
regard to policy space and options.
(d) UNCTAD, as the focal point in the United Nations for the integrated
treatment of trade and development and inter-related issues in the
areas of finance, technology, investment and sustainable development,
has an important contribution to make in strengthening multilateralism
in trade and development relations to advance the Sustainable Development
The paper also posed the following questions for the Trade and Development
Board to consider:
(a) Amid the current retreat from multilateralism and the crisis in
rule-ma king in the multilateral trading system, what actions should
the international community take to strengthen a revival in international
trade and revitalize the multilateral trading system? How should the
international community ensure that multilateralism brings about transformative
impacts under the Sustainable Development Goals and enables trade
to bring shared prosperity?
(b) The symptoms of discontent with multilateralism and trade should
not be left unaddressed, yet what should policymakers do to enable
international trade to deliver on the Sustainable Development Goals?
Can trade policy be, at the same time, poverty sensitive, gender sensitive,
labour sensitive, environmentally sensitive and climate friendly?
(c) Given that crises can trigger change, what does the future portend
for the United Nations and its development machinery in enhancing
the contribution of trade to sustainable development? What should
be the contribution of UNCTAD?