Here at the World Trade Organisation (WTO) in Geneva, Switzerland, one of the largest trade events – WTO Public Forum – is happening, bringing together thousands of people to discuss the future of trade. What is at stake is that more than ever, the multilateral trading system is increasingly facing threats, which risk reversing decades of gains the world has enjoyed. The WTO in its latest report puts emphasis on these threats, saying that there are early signs of trade fragmentation. First, a war in Ukraine has exposed gaps in supply chains. Countries especially those in Africa were the most vulnerable when wheat, fertilizer, and grain imports were restricted, sending millions of Africans especially those in the Horn of Africa into hunger, and raising commodity prices to all-time highs. It is becoming clear that beyond the war in Ukraine, the Covid-19 pandemic, and climate change, trade is becoming increasingly reoriented along geopolitical lines. Economists at the WTO calculated that goods trade flows between two hypothetical geopolitical blocs – based on countries’ foreign policies according to voting patterns at the UN General Assembly – have grown 4-6 percent more slowly than trade within these blocs since Russia’s full-scale invasion of Ukraine in February 2022. They also warned that if the world is split into two blocs, real income would decline by 5% in the longer term and it will further fall by 12% for the poorest countries, most of which have greatly benefited from the international trade system. This would practically mean that vulnerable workers in export-dependent sectors would suffer the most from labour market disruptions, while low-income households which allocate a large portion of their income to tradable goods and services, would face the burden of higher prices resulting from trade barriers. Apart from increased divergence, countries have continued to implement trade-restrictive measures. As many as 96 export-related restrictions on food, feed, and fertiliser post-Ukraine war were placed by WTO members alone and 68 are still in place covering $85 billion worth of trade. These trade export restrictions have hurt Africa more than anyone else. At the height of the pandemic, rich countries restricted the export and sale of life-saving medical equipment such as face and surgical masks, ventilators, and later vaccines. Until recently, Africa could hardly access enough quantities of vaccines needed to vaccinate its population. These trade restrictions can equally be seen between the world’s largest trading partners – China and the United States of America. The US has recently imposed restrictions on electronic technologies, in particular, silicon chip-making technology. Between 2017-22 there were 38 complaints about such measures raised with the WTO, twice as many as between 2011-16. There has also been a rise in complaints about barriers to goods trade, with the number of cases in which duties were levied on subsidized imports doubling from 2011-16 to 164 in 2017-22. Re-globalization The WTO has called for re-globalisation, or what former British Prime Minister Gordon Brown calls a “new multilateralism” that is more needed today than ever. Brown was right in his presidential lecture at the opening of the WTO Public Forum this week, more than ever, the global community has to forge international cooperation even if it is against the odds. Brown said the family of international multilateral institutions such as the WTO itself, the World Bank, or the IMF that were built for the first time in the 1940s were conceived, born, grew in maturity, and succeeded for decades against the odds. “I want to suggest now is the time for reconstruction, for a new era, even if it may seem at first sight we are striving against the odds,” Brown said, highlighting the need to forge a “new multilateralism”, particularly at a time when international cooperation is facing considerable resistance from various quarters. The idea that the world should ‘re-globalise’ is something that many agree with, and there is a reason to argue that. As the Director General of the WTO Ngozi Okonjo-Iweala puts it, “the post-1945 international economic order was built on the idea that interdependence among nations through increased trade and economic ties would foster peace and shared prosperity.” “For most of the past 75 years, this idea guided policymakers, and helped lay the foundation for an unprecedented era of growth, higher living standards, and poverty reduction.” Re-globalization in an absolute sense would mean, among other things, reducing the cost of trade such as transport and logistics costs, trade policy-related costs, and customs costs, to mention but a few. The reduction in cost would benefit developing countries more. For instance, African women would gain disproportionately from trade cost reductions in digitally delivered services, given that three out of four African firms trading exclusively through e-commerce are owned by women. Globalization serves as a template for cost reduction. Economists estimate that 40% of the dramatic cost decline for solar panels over the past three decades was due to scale economies made possible in part by international trade and value chains. Africa’s place The US and China disagree on everything but a stronger Africa. Both of them see Africa as a potential partner, although it remains to be seen whether these Great Powers really have African interests at heart. It is, therefore, up to Africa to chart a path that is aligned well with the economic development priorities and aspirations of its 1.3 billion people. These priorities are clear, and so too are the aspirations of its people. Africa wants to transform itself by 2063 and enable its people to live a dignified life. To achieve this, a few things have been put in place – policies, strategies, and plans of action. All too often, these remain in words and papers and implementation gets lost in the way. Trade could play an important role and a liberalized trade arrangement on the continent serves as a premise upon which Africa could transform itself and its people. When countries agreed to create a liberalized market under the African Continental Free Trade Area (AfCFTA), they knew clearly the difference this would make. African Development Bank and World Bank studies estimate that the implementation of AfCFTA could lift 30 million Africans out of poverty and boost continental GDP by $450 billion, or 7% from 2023 to 2035. The UN Conference on Trade and Development estimates that the AfCFTA could boost intra-African trade by about 33% and cut the continent’s trade deficit by 51%. According to a May 2023 International Monetary Fund research paper, sharp reductions in tariffs and non-tariff barriers across Africa “could increase the median merchandise trade flow between African countries by 53% and with the rest of the world by 15%, and as a result, raise the real per capita GDP of the median African country by more than 10%.” Although negotiations have been concluded on many key issues, the process of implementation and ratification has been uneven. Africa must take AfCFTA seriously. The author is Senior Producer and Presenter at CNBC Africa
