Global trade reform in 2023: a "race of the big pockets"?

The American government presented its idea of "worker-centric" trade. China made the "all-round opening up" vow. Europe has spoken of its desire for strategic independence. And industrial policy is no longer a terrible phrase since it is supported by a lot of governmental money.

At the World Economic Forum this year, the Big Three trading nations presented their perspectives on the direction of world trade. Where the rest of the world fits in is unclear.

Ngozi Okonjo-Iweala, the head of the World Trade Organization (WTO), told Reuters on the margins of the gathering in Davos, Switzerland, "I am very concerned." "In this reimagining of globalisation, we must use it as a tool to include those nations and regions who were left behind."

The International Monetary Fund believes that three decades of unfettered global commerce have helped more than a billion people escape extreme poverty. It gave customers in wealthy nations access to what seemed like an unlimited supply of affordable items.

However, it also neglected to help the less fortunate citizens of wealthier economies, causing inequality to worsen and feeding global populist aspirations for protectionism.

There is now general agreement that globalisation must be approached differently after the COVID-19 epidemic and the Ukraine war more recently upended the world's supply networks.

The Biden administration is advocating a trade policy that strives to defend worker rights because it is aware of how Donald Trump profited from voter concerns that globalisation was destroying American jobs.

As Beijing uses Davos to declare that it is prepared to re-engage with the world after abandoning its "zero-COVID" policy, it is also supporting a "" drive to encourage businesses to diversify their activities away from China and toward market-led economies.

While this is going on, Russia's invasion of Ukraine has convinced Europe that it needs to stop importing fossil fuels and aggressively pursue its own economic interests, whether they be in renewable energy or other crucial industries like semiconductors.

Game Rich Country

All of this contributed to the focus at Davos on the $369 billion American plan to combat climate change and Europe's worries that this could syphon clean technology business away from other countries and to the United States at its expense.

Belgian Prime Minister Alexander De Croo expressed worries that this should not turn into a "race of the large wallets" in which those countries lacking the capacity to compete lost out as Europe raced to launch its own strategy.

IMF Deputy Managing Director Gita Gopinath told Reuters, "Our only request would be to do that for all your partners, not just a sub-set of them."

More simply stated was Raghuram Rajan, a former governor of the Reserve Bank of India.

He said at the Reuters Global Markets Forum, "This becomes a rich-country game, right?" "We can all provide subsidies for one another, but what about the poorer nations with less fiscal space? They are left outside in the weather."

Similar issues are raised by "Friendshoring." The term is used by U.S. Treasury Secretary Janet Yellen and others to emphasise how businesses should prioritise trading with nations that share their values, but this begs the question of which nations they are.

The WTO's Okonjo-Iweala stated, "Friends shouldn't just be in Asia; there is Latin America, and there is Africa." "You include them by integrating them into the supply chain."

Concerns are raised by additional aspects of the shifting global economic system, as stated by U.S. Trade Representative Katherine Tai on Wednesday.

For instance, several middle-income nations are miffed by what they perceive to be the failure of a 2021 global overhaul of tax regulations designed to ensure that multinational corporations like Apple AAPL and Amazon AMZN pay a fair proportion of tax on local operations.

Regarding efforts to strengthen that agreement with a new tax treaty with other Latin American nations, Colombian Finance Minister Jose Antonio Ocampo claimed that "there is still a bias in favour of (countries that host) the headquarters of multinationals."

To ensure that the advantages of trade are distributed more evenly and widely, certain initiatives have been made. Notably, the United States included a system for detecting and resolving the violation of worker rights in its trade agreement with Mexico.

To its credit, the European Union has increased its efforts to ensure that businesses conduct enough due diligence on their supply chains and has long incorporated labour rights provisions into its trade agreements, though with various degrees of success.

On Wednesday, U.S. Trade Representative Tai stated before a panel that the country wants to "lead a conversation" on a revised form of globalisation. Many nations will want to make sure their opinions are heard in that discussion.