Tariffs, subsidies and export bans: global trade is under pressure. According to WTO calculations, this could cost trillions of dollars - the organization is calling for new rules.
Geneva. The World Trade Organization (WTO) warns of losses in the range of thousands of billions of dollars if the world breaks up into geopolitical power blocs that trade largely among themselves or only in separate free trade zones.
With such a development, economic output (real gross domestic product) will be consistently around ten percent lower from 2050 onwards than in a scenario in which trade cooperation is expanded, writes the WTO in a study. The title: “A crucial moment for the world trading system”.
According to the WTO simulation, exports in the “increased cooperation” scenario are likely to be almost 45 percent higher per year from 2050 onwards than in the scenario in which tariffs are only kept low within certain free trade zones. “Increased cooperation” means an expansion of rules like those in the WTO, in which all countries reduce tariffs and costs of international trade among themselves.
“Global trade policy and the WTO are currently experiencing the most severe and sustained turmoil since the founding of the multilateral trading system 80 years ago,” the report said. The fact that the global economy is more integrated has created new sources of conflict and sometimes made free trade negotiations more difficult. The WTO has existed since 1995; its predecessor was the General Agreement on Tariffs and Trade (GATT) of 1947.
72 percent of global trade in goods still takes place according to the WTO free trade rules, i.e. the most-favored nation (MFN) principle. This means that a member country grants trade advantages that it grants to another WTO member to all others, with few exceptions. However, two years ago it was still 80 percent, as WTO chief economist Robert Staiger says.
Staiger believes new rules are necessary
The rules negotiated when the WTO was founded in 1995 need to be updated because the world has changed a lot. Many countries were added, including China in 2001.
“It's about how to formulate rules that create a successful interface between economies that differ greatly in many ways,” Staiger told dpa. "Some are more state-led, others are more market-oriented; some have more interventionist policies, others less interventionist; some have a higher level of development, some have a lower level."
The 166 member countries, which together represent 98 percent of world trade, would have to negotiate what new rules should look like. Staiger makes no suggestions.
The WTO has been in crisis for years. The last major multilateral round of negotiations, the Doha Round, was started in 2001. But she failed. It should integrate developing and emerging countries more closely into world trade.
Among other things, many countries that compete with China on the world market criticize the fact that the country still has “developing country” status in the WTO and the associated advantages.
It is also controversial how state control of many companies should be dealt with in some countries. Neither the reform efforts of the ambassadors in Geneva nor the recent ministerial meetings have brought any progress.
