Yesterday, Baroness Falkner of Margravine represented TOP at the Chatham House conference on “Global Trade: A Trade System for the 21st Century”. As the World Trade Organisation achieves its first breakthrough on trade facilitation and bilateral negotiations unfold between trading partners across the Atlantic and Pacific regions, a new era for global trade appears to be emerging. The conference addressed questions about the future of global trade governance and prospects for bilateral and multilateral trade liberalization, and considered what lies ahead for trade in a competitive global economy.
The rise of digital was a key topic of discussion. Both in terms of value-add (the new jaguar is 50% car, 50% digital), its prevalence as an SME provision, and its ability to create ‘micro-multinationals’ – one man bands with global reach. Trade agreements are normally a closed network, but digital is a very open, global sector – the question was raised as to how negotiators can create closed agreements that support such a global network.
The role of services was also emphasised and the lack of attention they receive in trade agreements. Services are vital to SMEs (90% of Malaysian SMEs are service providers) and now make up a sizeable portion of many goods (two thirds of the costs of a loaf of bread is now services). More work is needed to integrate services into international trade regulations and agreements to reflect the reality of the trading landscape. This issue of this disconnect between policy (local) and reality (global) was highlighted by various speakers, but also the fact that it is not always the intention of policies to hinder trade, but the day to day implementation of those policies.
Trade finance was also a hot topic. Large corporations have a big role to play by supporting their supply chains through supply chain finance systems, but there must be better linkage between banks to provide access to trade finance, especially for SMEs in emerging markets.
In terms of development, it was said that in many ways the aid community led the trade community to see the benefits of using trade as a development tool. Capacity building and technical assistance remain essential elements in the development framework. Looking at the recent European elections, we can see a rise of protectionist attitudes – voters are not seeing the results of aid expenditure, but trade as part of a win-win economic approach should still appeal. We must keep making the case for open trade.
Regional free trade agreements such as TTIP and TPP exclude developing countries, but there are ways that this could be balanced out. For instance EU and US could use the opportunity of the TTIP negotiations to harmonise their preferential access schemes and rules of origin for LDCs to ease the admin burden on those trying to access their markets.
Speaking on the record, Sir Simon Fraser (FCO) said that the international trade system must demonstrate value for developing countries. Mega RTAs risk excluding many who need greater market access. Implementing the Bali trade facilitation deal is extremely important to integrating emerging economies into the global system. The UK advocated the ‘golden thread’ approach to global economics throughout its G8 presidency and hopes that the need for a partnership between developed and developing countries covered by tax, trade and transparency will be reflected in the post-2015 development framework.