trade & finance 13
Simulations show that in a dynamic economic and open trade environment , developing countries are likely to outpace developed countries in terms of both export and GDP growth by a factor of two to three in future decades . By contrast , their GDP would grow by less than half this rate in a pessimistic economic and protectionist scenario , and export growth would be lower than in developed countries .
Fundamental economic factors affecting international trade
Demographic change affects trade through its impact on countries ’ comparative advantage and on import demand . An ageing population , migration , educational improvements and women ’ s participation in the labour force will all play a role in years to come , as will the continuing emergence of a global middle class .
Investment in physical infrastructure can facilitate the integration of new players into international supply chains . The accumulation of capital and the build-up of knowledge and technology associated with investment , particularly foreign direct investment , can also enable countries to move up the value chain by altering their comparative advantage .
New players have emerged among the countries driving technological progress . Countries representing 20 % of the world ’ s total population accounted for about 70 % of research and development ( R & D ) expenditure in 1999 , but only about 40 % in 2010 . Technology spill-overs are largely regional and stronger among countries connected by production networks . In addition to the traditionally R & D intensive manufacturing sectors , knowledge-intensive business services are emerging as key drivers of knowledge accumulation .
The shale gas revolution portends dramatic shifts in the future pattern of energy production and trade as North America becomes energy sufficient . Increasing water scarcity in the future in large swathes of the developing world may mean that the long-term decline in the share of food and agricultural products in international trade might be arrested or even reversed .
Ample opportunities exist for policy actions , at the national and multilateral level , to reduce transportation costs and offset the effect of higher fuel costs in the future - improving the quantity and quality of transportation infrastructure , successfully concluding the Doha Round negotiations on trade facilitation , introducing more competition on transport routes , and supporting innovation .
Improvements in institutional quality , notably in relation to contract enforcement , can reduce the costs of trade . Institutions are also a source of comparative advantage , and trade and institutions strongly influence each other .
Higher incomes and larger populations will put new strains on both renewable and non-renewable resources …
Trade openness and the broader socio-economic context
Successful integration into global markets requires the constant need for individuals and societies to cope with changes in the competitive environment . These adjustments can put labour markets under strain and can shape attitudes towards trade openness . Job losses in the short-run can exert pressure on governments to use barriers to trade . In the end , it is open economies with a well-trained workforce and a business-friendly environment as well as an effective social protection system that tend to be better placed to adjust successfully .
Societies ’ transition to a sustainable development path requires careful management of the multi-faceted relationship between trade and the environment in order to maximise the environmental benefits that open trade can bring . Competitiveness concerns may result in governments incorporating trade-restrictive nontariff measures into environmental policies as a means of compensating affected firms and sectors . Such green incentive packages may undermine their environmental effectiveness and exacerbate their potentially adverse trade effects .
The expansion of trade needs to be supported by a stable financial and monetary system - delivering a sufficient volume of trade finance at an affordable cost , particularly for developing countries , and macroeconomic policies that promote exchange rate stability .
Prospects for multilateral trade co-operation
Some of the main trends which will affect world trade in the coming decades are the emergence of international value chains , the rise of new forms of regionalism , the growth of trade in services , the greater incidence of non-tariff measures , higher and more volatile commodity prices , the rise of emerging economies , and evolving perceptions about the link between trade , jobs and the environment .
These trends will raise a number of challenges for the WTO . Trade opening , especially in the context of non-tariff measures beyond WTO disciplines , is taking place outside of the WTO . A greater focus on regulatory convergence will therefore be required . Interdependence between trade in goods and trade in services is increasing . Frictions in natural resource markets expose some regulatory gaps . The emergence of new players affects global trade governance in ways that need to be better understood . Coherence between WTO rules and nontrade regulations in other multilateral fora needs to be maintained .
Addressing these challenges will involve reviewing and possibly expanding the WTO agenda . Traditional market access issues will not disappear but new issues , particularly with regard to non-tariff measures , are emerging . Internal governance matters as well as the role of the WTO in global governance may need to be addressed . An important issue will be how to ‘ multilateralise ’ the gains made in preferential trade agreements and to secure regulatory convergence .
This article was taken from the press release by the WTO on 18 July 2013 .