World trade has been savagely affected by the Covid crisis, with estimates of the precipitate fall ranging up to 20%. Behind that statistic is a colossal human cost of jobs lost and opportunities destroyed. Every ship that doesn’t sail, every order book unfilled, every cargo plane grounded, represents yet more people added to the millions becoming unemployed worldwide.
Yet even before the events of this year, world trade was already in trouble. Between 2018 and 2019, the value and the volume of world merchandise exports actually fell. Tariffs and other barriers to trade have been increasing. A major recent factor has been the sharp fall in US-China trade as tensions rise between the two largest economies. But even without that, trade restrictions have become more common. The latest figures show nearly 9% of imports around the globe being subject to restrictions of various kinds. That’s a massive $1.7 trillion dollars of trade being held back.
If such trends continue as the recovery from Covid-19 develops, we will be living in a world of many missed opportunities. The great growth of world trade in recent decades has brought high employment, strong development, low inflation and the global availability of new products to billions of people. If trade goes into reverse, so do many of those positive trends.
So it is a cause for alarm that, at the same time, the World Trade Organisation has been struggling. It is meant to help settle disputes and keep the world moving towards freeing up more trade in ways that are safe, transparent, binding, reciprocal and non-discriminatory. Yet in recent years its Appellate Body, which is key to settling disputes, has become ineffective as the USA has blocked new appointments to it. Efforts to agree further liberalisation of trade globally, known as the Doha round, have ended in failure.
In the face of these extraordinary risks, the selection of a new Director-General of the WTO takes on great importance. This week in Geneva, the 164 member countries of the WTO are beginning a long process of selecting that person. Boris Johnson has been quite right to put forward a British candidate for the role – the former International Trade Secretary, Liam Fox. I know from working with him in government over many years that he would be the right person to take on this challenge. He’s experienced, energetic, persistent, persuasive and eloquent. He would bring the weight of someone who has been a senior elected politician to this job.
Liam Fox is well placed to steer the WTO through these challenging and unprecedented times. The organisation needs someone who can make the case for free trade all over the world and get a hearing, and who has the political experience to have some hope of getting leading governments, including in Washington, working together again. He has set out a strong agenda of what he would do, including bringing more women into senior roles, encouraging investment into smaller developing economies and working more closely with other global institutions like the World Bank.
As the delegations of all the member states state their preferences among the candidates, one major voice in world trade has gone missing. That is the European Union, for whom the issues at stake are of vast importance. Yet the nations of the EU have so far been divided in who they want to see at the helm of this vital organisation. Unable to agree on any candidate of their own – even though the job would normally go this time round to a nominee of a developed nation – they have to make a choice among the eight individuals put forward from the rest of the world.
With Brexit in their minds, some EU countries have been reluctant to admit that Dr Fox is their natural choice and exactly represents the type of figure they would like to see lead the WTO. They all ought to be able to see that the issues at stake are nothing to do with Brexit and, globally, much more important. If they acted together they would have huge influence over the outcome. The latest reports are that Germany, holding the EU presidency, is working on trying to find a European consensus. If they swung behind Liam Fox they would show they are able to act cohesively in their own interests and give some hope to all of us who believe in the massive benefits of free trade.
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