In an era of disorder, open trade is at risk

• Published date: 29 June 2022
• Author: Martin Wolf
• Publication title: Irish Times: Web Edition Articles (Dublin, Ireland)

We are now moving into a new era of world disorder, marked by domestic mistakes and global friction. Domestically, there has been a failure, particularly in the US, to adopt policies that cushion the adjustments to economic change and provide security and opportunity for those adversely affected. The rhetorical ploys of nationalism and xenophobia have instead focused anger on "unfair" competitors, especially China. In the US, the idea of strategic competition with China has also become increasingly bipartisan, while China itself has become more repressive and inward-looking. With the war in Ukraine, these divisions have deepened

How in such a world might a liberal trading order be sustained? "With great difficulty" is the answer. Yet so much is at stake for so many that everybody who has influence must try.

Fortunately, a large number of less powerful countries understand what is at stake. They should be willing to take the initiative, so far as possible, regardless of what the battling superpowers decide to do. In this context, even the limited successes of the WTO ministerial meeting in Geneva are significant. They have at the least kept the machine working.

It is more important, however, to clarify and then tackle the more fundamental challenges to the liberal trading system. Here are five of them.

First, sustainability. Managing the global commons has become humanity's most important collective challenge. Trade rules must be made fully compatible with this objective. The WTO is an obvious forum for tackling destructive subsidies, notably for fishing. More broadly, it must be compatible with enlightened policies, such as carbon pricing. Border price adjustments, needed to prevent shifting of production to locations without appropriate pricing, are both an incentive and a penalty. These must be combined with large-scale assistance to developing countries with the climate transition.

Second, security. Here one must distinguish the economic from the more strategic and the issues business can handle from those that must concern governments. Supply chains have, for example, shown a lack of robustness and resilience. Businesses need to achieve greater diversification. But this is also costly. Governments may help by monitoring supply chains at the industry level. But they cannot do the job of managing such complex systems.

Governments do have a legitimate interest in whether their economies are over-reliant on imports from potential enemies, as Europe is on...