Diverse views on trade & investment at Davos

At the recent World Economic Forum (WEF) meet at Davos, Switzerland, five sessions were devoted to matters relating to the current state of global trade and investment. In the end, it was clear that the views are too divergent on critical issues.  

In a panel discussion, Katherine Tai, the US Trade Representative called for a new version of globalisation that does not lose sight of the consumers, workers, family members and community members who want to benefit from the economic opportunities. She made it clear that labour standards will be a key element of trade policy of the Biden administration. Poorer countries do not want to go along with that view on the grounds that it is intended to deny them the natural advantage of cheap labour.

The European Union (EU) is committed to imposing a carbon tax i.e. a tax on goods entering the EU that according to its authorities are produced using less environment friendly processes. India and many other developing countries have always opposed restrictions on trade in goods based on the processes that are used to produce the goods. That rigid position may be softening a bit but not sufficiently to give up on the basic principle.

The panelists talked of significant growth in cross border delivery of services through digital medium. However, they expressed concerns also over imposition of restrictions such as data localisation by some governments on the grounds of national security, privacy etc. Besides, many governments are pushing for imposition of tax on e-commerce. Unilateral actions on such matters are likely to decelerate the growth in digital trade, said the panelists.

The session titled ‘Tradetech meets Fintech’ discussed how digitisation of all aspects of international supply chains and transactions is enabling more accessible and reliable trade, financing and payments. Trust-building, data sharing, nurturing risk-taking and innovation and capacity building to ensure everyone has access to the necessary technology emerged as key priorities.

A full session devoted to ‘Indigenous Peoples and Trade’ discussed the need to mainstream the topic of trade and investment helping indigenous people. Over 50 WTO members supported the ‘Draft Investment Facilitation for Development (IFD) Agreement’ at the WTO that aims to create a transparent, efficient and investor-friendly business climate. A coalition of over 50 trade ministers aimed to provide high-level political direction and guidance to bolster inclusive international cooperation on climate, trade and sustainable development.

Last year, global trade reached a record $32 trillion despite widespread inflation, lingering supply chain issues, geopolitical shocks (including Russia’s invasion of Ukraine) and some degree of de-globalisation and geo-economic fragmentation. Now, there are concerns that various headwinds will lead to a significant global economic downturn this year. The problems cannot be solved without multilateralism, cooperation and trade, said Ngozi Okonjo-Iweala, the Director General of the WTO. If the world decouples into even two blocks, that would cost us 5% of real global GDP. Global economic fragmentation, including friend-shoring, is bound to be expensive because it will lead to inefficiencies and duplication and thus to inflation, she cautioned.

The theme of WEF 2023 was ‘Cooperation in a Fragmented World’. Beneath the high sounding words during the discussions, willingness to co-operate on trade and investment issues was missing. So, a consensus on the way forward is more likely to elude the negotiators at the WTO. 

Email : tncrajagopalan@gmail.com