Chapter D: Inclusive trade and international cooperation; Chapter E: Conclusions

The WTO has contributed to income convergence by reducing trade barriers, increasing the predictability of trade policy, boosting trade flows and reducing their volatility, and fostering reforms and good governance, but participation has been uneven; WTO commitments have contributed to trade and economic growth and helped to diversify both exports and imports; making strong WTO commitments helps avoid mutually-damaging beggar-thy-neighbor policies, and enhances the credibility of trade policy reform programs; non-discrimination provisions foster the development of all members, leveraging their comparative advantages; GATT/WTO membership has boosted trade between members by 140 percent; lower trade policy uncertainty has also played an important role in facilitating imports; low-income economies have higher tariff flexibilities but also greater tariff uncertainty and use their flexibilities to raise their applied MFN tariffs more extensively; the economic growth effect of WTO accession depends on the extent of WTO commitments. (pp. 98-102, Figures D.1-D.5)

The Trade Facilitation Agreement (TFA) has boosted trade and contributed to economic convergence; least-developed countries (LDCs) have benefited disproportionately from the TFA, with export increases at 2.4 percent; low-income economies may not derive much benefit from the TRIPS Agreement because of challenges with its implementation as these economies lack the absorptive capacity and complementary infrastructure needed to benefit from enhanced IP regimes. (pp. 101-102)
LDCs and developing economies are allowed flexibilities under the WTO commitments - special and differential treatment (S&DT) – but evidence on their use and effects is limited; there are six different types of S&DT provisions, designed to increase trade opportunities, safeguard trade interests, offer flexibility in commitments, provide longer transition periods, and ensure that technical assistance is provided; economic arguments including low levels of economic and technological sophistication, high costs of compliance, and the extent of market failures support offering flexibilities to developing economies; some flexibilities, depending on design, could undermine the predictability and value of commitments; S&DT provisions have drawbacks, including imbalances in market access commitments compared to high-income economies; some factors hinder the use of S&DT provisions, though evidence is limited likely because of capacity issues; views of WTO members differ on S&DT provisions. (pp. 101-107, Boxes D.1-D.2)
The participation of low-income economies in the WTO has increased over time but remains limited, as developing members face financial and human resource constraints that hinder their ability to participate actively, including in WTO committees, propose measures, and monitor potentially harmful policies of other trading partners; LDCs and smaller economies tend to participate in WTO negotiations as a group; low- and middle-income members have initiated fewer dispute proceedings than other WTO members, and have participated primarily as third parties; there are WTO rules and resources to facilitate the participation of lower-income WTO members. (pp. 107-109, D.6-D.9)
The WTO can help economies that have not fully benefitted from trade; this requires greater international cooperation and WTO support in the face of current tensions; maintaining an open and predictable multilateral trading system is essential to support trade-led economic convergence; reducing trade costs, re-establishing a fully functional dispute resolution system, and enhancing transparency and information sharing help to maintain an open and predictable trading system; a fully functional and accessible dispute settlement system is crucial for enabling low-income economies with limited bargaining power to participate as complainants and respondents; enhancing transparency and information-sharing can further improve policy decision-making, business operations, and investor confidence in low-income economies; economies joining the WTO can use the accession process to reform their economies in order to improve access to imports, increase FDI, and enhance good governance. (pp. 110-111)
Economies must address both their own trade barriers and those imposed by others to fully capitalize on future trade opportunities and support economic convergence; while services-led growth is increasingly seen as a new path to development, services sectors face significant trade restrictions, especially in lower-income economies, necessitating the combination of market-opening negotiations with international cooperation on regulatory issues to reduce barriers; greater cooperation on digital trade could benefit less integrated or diversified low-income economies, whose participation in digital trade remains limited, providing new trade opportunities and supporting greater economic convergence; preparing developing economies for digital trade requires a comprehensive and multifaceted strategy including both domestic and international mobilization, such as international initiatives leveraging specific expertise of different international organizations to catalyze more inclusive digital trade. (pp. 111-113)
Coordinated investment policies can contribute to economic convergence by reducing trade costs, supporting infrastructure development, and fostering innovation; although low-income economies only receive a small share of FDI, they can benefit significantly from improvements in investment facilitation; agricultural trade patterns are heavily distorted by both tariffs and domestic support, though reducing domestic support could help LDCs more than reducing tariffs; international cooperation is needed to discipline or discourage the use of export restrictions and tariff escalation affecting trade in raw materials and to find alternative approaches as export restrictions are not regulated by the WTO. (pp. 113-115)
International cooperation can help low-income economies overcome the challenges that hinder them from implementing their trade agreements, especially through S&DT implementation in the TBT and SPS agreements including training and technical assistance; full implementation of the TFA could boost the participation of LDCs in trade but LDCs must overcome capacity constraints, resource limitations, and technology gaps; greater collaboration among assistance partners is needed to accelerate TFA implementation in low-income economies, especially to strengthen trade-related infrastructure and improve digital connectivity. (pp. 115-116)
The TFA’s S&DT provisions mark a significant shift from the WTO’s past approach and can serve as a blueprint for future agreements, offering a flexibilities package without exemptions and allowing developing economies and LDCs to establish their own implementation timetables based on capacity; greater support can help low-income economies implement an IP regime that responds to their needs; low-income economies can take steps to maximize the benefits of IP protection by investing in education, developing infrastructure to support innovation, and engaging in international cooperation; technical assistance is available through the WTO, WIPO, and other international organizations; modern Aid for Trade financing through new models and approaches is necessary as traditional development finance is under stress; developing countries are working through the G-90 to advance S&DT negotiations to support industrialization efforts while minimizing the risk of legal retaliation; a comprehensive analysis of potential changes would help in improving the effectiveness of S&DT. (pp. 116-118)
Trade inclusiveness within economies seeks to make the WTO’s benefits and opportunities accessible to all individuals and businesses; poverty reduction, inequality and inclusiveness are issues repeatedly raised and taken into consideration at the WTO, driven partly by concerns that rising inequality and the perception that trade is leaving certain groups behind could lead to a backlash against trade; trade and trade policies can have notable distributional effects and the WTO can contribute to these effects; WTO accession can contribute to poverty reduction in acceding economies; further research on the impact of WTO membership would be valuable to identify and quantify specific mechanisms. (pp. 118-119, Figure D.10)

WTO disciplines do not restrict the use of most domestic inclusion policies, like training and job search assistance and unemployment insurance, to address the distributional impact of trade; other tools are subject to WTO disciplines, though tariffs, subsidies, and safeguards may sometimes be used to protect jobs at risk from import competition; some WTO agreements explicitly address inclusiveness through provisions targeting MSMEs, though in the absence of specific provisions, aspects of WTO agreements can still support inclusiveness; the WTO Agreement on Agriculture has provisions contributing to food security, which is important to low-income groups, while the Agreement on Fisheries Subsidies recognizes the needs of fisherfolk in developing economies and LDCs; the TFA can benefit MSMEs by simplifying and streamlining international trade procedures and improving information availability; discussions on inclusive trade and trade-related technical and capacity-building initiatives specifically focused on women and MSMEs are gaining traction in the WTO, including in committees and working groups; poverty reduction, women’s economic empowerment and MSMEs’ participation are increasingly integrated into Aid for Trade programming; trade finance and development facilitation programs, including the Standards and Trade Development Facility, can benefit and enhance inclusive trade. (pp. 119-122)
The WTO can do more to foster inclusive trade and growth for people and firms, including through strengthening the WTO and updating its rulebook; re-globalization through strengthened international cooperation can reduce poverty in less integrated and diversified economies and ensure that disadvantaged groups can participate in and benefit from trade; the WTO can strengthen information sharing, discussion of best practices, improve data collection and analysis, and increase participation from vulnerable groups to better reflect their perspectives and interests; the WTO can increase efforts to support food security. (pp. 122-124)
Enhanced international cooperation can promote inclusive development; beyond trade policies, complimentary policies including on infrastructure, institutions, redistribution and competition are essential to foster inclusive development; international cooperation can strengthen economic resilience through coordinated trade policies, reducing trade barriers, facilitating smoother cross-border transactions, reducing negative shocks, and providing assistance to countries that experience negative trade shocks. (pp. 124-125)
International cooperation is needed to harness the opportunities of the digital revolution, to build better infrastructure and digital connectivity, which will enhance trade capacity and lower trade costs; FDI and international trade in IT-related goods and services play a pivotal role in the development of digital infrastructure; a robust regulatory framework is essential to safeguard consumer interests and facilitate the adoption of emerging technologies, and international cooperation is important for advancing the regulatory framework, with the WTO and other multilateral and regional institutions playing a significant role in promoting common regulations and standards; effective competition policy, enforcement, and cross-border collaboration among competition authorities can play a pivotal role in promoting inclusiveness by addressing dominant market positions in the digital economy; international coordination in taxation policies is essential to prevent tax evasion and ensure that trade contributes to inclusive development. (pp. 125-129)
International cooperation is indispensable in addressing climate change and other environmental challenges on a global scale; international cooperation, finance, and trade are essential to building climate-resilient, low-carbon infrastructure, reduce greenhouse gas emissions and transition to low-carbon economies; coherence between trade and environmental policies is necessary for sustainability; actions to address climate change can be bolstered through finance and trade; finance is especially important for vulnerable developing countries to help in the transition to net zero, with several international initiatives like the Green Climate Fund already supporting developing economies; trade in critical goods and services enhances climate action by reducing costs and amplifying impact; international cooperation to combat corruption plays a crucial role in ensuring the benefits of trade, including revenues from exports of natural resources, are widely shared. (pp. 129-130)
There is an ongoing debate about international cooperation on the introduction of labor and other inclusiveness considerations in trade policies to address within-economy inclusiveness, though existing ILO Declarations on trade and labor recognize that violating labor rights should not be used as a trade advantage and labor standards should not be misused for protectionist purposes; provisions addressing inclusiveness within economies are included in an increasing number of RTAs, while labor provisions are found in an increasing number of unilateral, preferential, bilateral, regional trade, and international investment agreements; some provisions of RTAs specifically target disadvantaged groups, promote social corporate responsibility, and target firms including MSMEs and artisans; there is limited empirical evidence of the effectiveness of labor and inclusiveness provisions in RTAs, and labor provisions are more likely to improve working conditions or have positive effects on trade when combined with appropriate accompanying measures; recent WTO ministerial declarations indicate more focused discussion on labor-related trade measures at the WTO in the future. (pp. 130-135, Figure D.11, Boxes D.4-D.5)
Two misleading assumptions still underlie the debate about the effect of globalization on inclusiveness between and within economies: that trade is detrimental to development and inclusiveness, and that WTO rules prevent governments from adopting ambitious development and inclusiveness policies; in reality, trade has played a crucial role in reducing poverty and in enabling income convergence, though trade has benefitted some individuals, regions, and economies more than others; nothing in the WTO agreements restricts the use of non-discriminatory policies for development or inclusiveness, but trade alone is not enough to create a more resilient and inclusive global economy. (pp. 138-140)