Global Trade chief: The overdependence on the US and China for trade must be corrected | DW News

Key Concepts

• WTO (World Trade Organization): An international organization that regulates international trade.
• Tariffs: Taxes imposed on imported goods.
• Global Trade System: The network of rules, agreements, and practices that govern international trade.
• Interdependence vs. Overdependence: The concept of mutual reliance in trade versus an excessive reliance on a single partner or source.
• Decentralization of Supply Chains: Shifting production and sourcing away from a single location to multiple locations to increase resilience.
• Value Addition: Processing raw materials into finished goods to increase their economic value.
• Critical Minerals: Minerals essential for modern technologies, often found in specific regions.
• Artificial Intelligence (AI): Technology that enables machines to perform tasks that typically require human intelligence.
• Digital Trade: Trade in goods and services facilitated by digital technologies.
• Green Trade: Trade in environmentally friendly goods and services.

Disruption of Global Trade and WTO Relevance

The United States' imposition of tariffs has significantly disrupted the global trade system, a disruption not seen in decades. While the majority of world trade (72%) still operates under World Trade Organization (WTO) rules, this figure is down from 80% prior to the tariffs. This continued adherence to WTO rules is largely due to other countries not engaging in retaliatory measures against the US, which is beneficial for global trade and growth. The US accounts for 13% of world imports, indicating that the impact of its tariffs is not universally crippling due to the non-retaliatory stance of other nations.

Bilateral Agreements and Complex Negotiations

The speaker acknowledges that bilateral trade deals struck with the US, such as the one with the European Union, often fall outside WTO rules. However, the core of global trade among WTO members continues to adhere to these rules. The complexity of these negotiations extends beyond trade, encompassing security issues, immigration, drug control, and critical minerals. These multifaceted concerns are factored into bilateral agreements in ways that the WTO cannot accommodate, making it difficult to pass judgment solely on trade rule adherence.

Building Resilience in the Global Trade System

The COVID-19 pandemic highlighted an overdependence on China for critical supplies, and the current US tariff era reveals a dependency of many countries, including those in Africa, on the US as an export market. To counter this, there is a strong push for the diversification of trade and the decentralization of supply chains, with a particular focus on developing regions like Africa. The goal is to move from overdependence to interdependence, fostering more resilient global trade.

Africa's Role in Global Trade and Value Chains

Africa's trade integration with the US is relatively low, with only 6% of its exports going to the US and 4% of its imports coming from the US. This limited integration means the continent as a whole is not as severely impacted by US tariffs, although specific countries like South Africa are more affected. The G20 meeting is discussing the creation of regional and sub-regional value chains on the African continent to add value to products, create jobs for the youth, and increase Africa's share of global trade.

Artificial Intelligence and its Impact on Global Trade

AI is a significant driver of global trade, with projections suggesting it could boost trade by nearly 40% by 2040. However, equitable adoption is crucial. If AI adoption is not equitable, parts of the world risk falling behind, exacerbating existing inequalities. AI has the potential to reduce trade costs, which are particularly high in Africa (20% more expensive to trade internally than with the outside world). The G20 is exploring partnerships to ensure AI benefits African countries and promotes equitable adoption.

Critical Minerals and Value Addition in Africa

The increasing demand for AI and new technologies necessitates critical minerals, many of which are found in Africa. There is a concern about repeating past patterns where raw materials are extracted from the continent without significant value addition, thus not benefiting the local population. African leaders are advocating for a shift towards adding value to these critical minerals, moving from raw materials to finished products through sub-regional and regional value chains. This is seen as crucial for job creation for Africa's growing youth population. Reducing barriers to investment and trade costs is essential to attract the necessary investment for this transformation.

The Importance of the WTO and Reform

The speaker emphasizes that if the WTO did not exist, it would need to be invented. Developing countries stand to lose the most if world trade rules are abandoned, as they have used the existing system to improve living standards. While 1.5 billion people have been lifted out of extreme poverty globally, not all developing countries have benefited equally, and Africa, in particular, has not benefited as much as it could have. Therefore, it is crucial to fight to maintain the WTO system and improve its rules.

Key Reforms for a More Equitable Global Trade System

The speaker identifies several key areas for WTO reform to benefit all:

• Integrating Developing Countries: Enhancing the system's ability to help developing countries integrate better into world trade and reap greater benefits.
• Facilitating Investment: Creating an environment that attracts investment into developing economies.
• Flexible Decision-Making: Developing a more flexible system that allows for the quicker adoption of new rules, particularly beneficial for developing countries in rapidly evolving sectors like AI, digital trade, and green trade.
• Openness and Transparency: Ensuring greater transparency in trade policies of member countries so businesses can adapt and capitalize on opportunities.

Message to WTO Members and the US

The speaker's message to all WTO members is to focus on the positive aspects of the world trading system, identify areas for improvement, and work towards greater integration of Africa and enhanced support for developing countries. The recent G20 meeting has shown strong support for the centrality of the world trading system and the WTO from most world leaders, with the exception of the US. The speaker advocates for continued collaboration to implement necessary reforms.