WTO Identifies Escalating Tensions in Global Trade, Highlighting Growing Rifts

Unilateral Environmental Measures and Trade Concerns

• Member nations have raised concerns about unilateral environmental measures.
• Examples include Indonesia’s export restrictions on raw materials, China’s export restrictions on gallium and germanium, the European Union’s Carbon Border Adjustment Mechanism (CBAM), and other EU Green Deal measures, as well as the US Inflation Reduction Act (IRA).

WTO warns that the use of unilateral trade policies could lead to a downward spiral of retaliatory actions and a more fragmented world dominated by regional trade blocs. Such a development would be difficult to reverse.

The WTO report highlights a ninefold increase in the number of trade concerns raised at the Council for Trade in Goods between 2015 and 2022. While there has been rapid expansion in trade of digital services and environmental goods, further increase in unilateral measures could fragment the world economy. The report argues that a renewed drive towards integration, or “re-globalization,” is the way to tackle current problems of security, poverty, and climate change.

Growing Skepticism about Globalization

WTO also acknowledges the growing skepticism about the progress of globalization. Discussions about the stagnation or decline of international trade’s role in the global economy point towards the rise in new industrial strategies, limits to global supply chain expansion, and rising geopolitical tensions.

Trade strategies aimed at re-shoring manufacturing production would lead to an overall decline in the importance of trade in the global economy. Other strategies, such as bringing production closer to large markets (near-shoring) or strengthening production networks with like-minded countries (friend-shoring), would result in the fragmentation of the global economy along regional and geopolitical lines.