1 February 2021
WEF Event Explores Ways to “Fix” International Trade System
Photo credit Lynn Wagner
story highlights

Among priorities for WTO reform, ministers from the Netherlands and the UK highlighted the need to address subsidies that undermine free trade.

The Dutch minister called for tackling current societal challenges, restoring a level playing field, and reviving multilateralism.

The UK minister wished to work with like-minded allies to diversify supply chains and prevent those who are artificially subsidizing products from undermining free market.

A virtual “leadership panel,” convened as part of the World Economic Forum’s (WEF) Davos Agenda, examined how governments and industries can work together to adapt the international trade system to disruptions caused by the COVID-19 pandemic and make it more resilient in the future.

Greg Ip, Chief Economics Commentator, The Wall Street Journal, moderated the discussion. He said over the past years, the international trade system experienced “shock after shock,” brought about by a pull from globalization, dissatisfaction with inequality, and COVID-19 challenges such as “vaccine nationalism.”

On World Trade Organization (WTO) reform, Elizabeth Truss, Secretary of State for International Trade, Department for International Trade, UK, highlighted 2021 as an opportunity to “sort out” the appointment of the new Director-General, and make progress on the dispute settlement mechanism and subsidies that undermine free trade. As the Group of 7 (G7) Presidency and COP 26 Presidency, Truss said the UK will work with countries to support a rules-based international trade system and resist protectionism as we respond to COVID-19.

Sigrid Kaag, Minister for Foreign Trade and Development Cooperation, Ministry of Foreign Affairs, the Netherlands, stressed the need to: tackle current societal challenges by working together to design ambitious green trade policies and sustainable trade agreements; restore a level playing field by ensuring that China and others “ramp up the game” on transparency of state subsidies; and revive multilateralism. She looked forward to reengaging with the US on climate change and transatlantic trade partnership, among other issues.

On risks posed by COVID-19 vaccine export restrictions, Kaag explained that the EU’s transparency and authorization mechanism is not an export ban as it contains exemptions for vaccine supply under humanitarian aid and vaccines destined to countries under the COVAX facility.

Stefan Oschmann, Chairman of the Executive Board and Chief Executive Officer, Merck KGaA, said the pandemic revealed weaknesses in global value chains. He noted that tariffs on inputs necessary to make vaccines and diagnostics add unnecessary costs, drive up prices, and prevent new companies from entering the market.

The panel then discussed ways to deal with China-specific issues such as state subsidies, forced technology transfer, and intellectual property rights (IPR) violations.

Truss said while it is important to make sure we have full engagement of those who believe in restoring the multilateral trading system (MTS), there are other ways to promote free and fair trade through bilateral and multilateral arrangements.

Kaag said the new Comprehensive Agreement on Investment (CAI) between the EU and China contains elements to create a level playing field and address human rights in relation to Uyghurs and slave labor. She said the European Parliament is yet to consider the final text.

Oschmann noted “gradual progress in the right direction” in the field of life sciences exemplified by China’s accession to global bodies on regulatory alignment and strengthened IP protection in recent years.

In response to a question about the “decoupling dynamic” in the UK and its exclusion of Huawei from its 5G network, Truss said the UK wants to work with like-minded allies to diversify supply chains and prevent those who are artificially subsidizing products from undermining free market through tougher action on subsidies at the WTO.

On monitoring transparency in the vaccine value chain, Oschmann said the efficacy, safety, and quality are managed by competent state and regional authorities. He highlighted “tremendous progress” on global cooperation in vaccine manufacturing and distribution, and cautioned against “cutting corners.”

Kaag looked forward to strengthening trade agreements where sustainability is key, climate change is addressed, standards are met, and compliance is ensured.

Among priorities for engagement with the Biden administration, Truss highlighted the need to resolve the Airbus/Boeing dispute and restore the MTS and the WTO. Kaag stressed the need to take trade distorting measures off the table.

The event took place on 29 January 2021. In focusing on the theme, ‘Fixing the International Trade System,’ it contributed to the WEF’s Great Reset Initiative in the area of advancing global and regional cooperation. [Event Webpage] [The Davos Agenda] [SDG Knowledge Hub Sources]

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