Geopolitical competition, globalization and WTO reform

Abstract

Global trade and investment is increasingly characterized by systemic conflicts, giving rise to unilateral policies to attain competitiveness, national security and other noneconomic objectives. Disparate national measures motivated by all these objectives targeting the global value chains that have helped drive globalization create policy uncertainty, increase political risk and potentially distort trade and investment decisions. Sustaining an open, rules-based trade system calls for deliberation to help clarify underlying policy objectives, assess effectiveness and spillover effects of domestic measures. Policy dialogue centered on the use of specific trade concerns, already used in some WTO agreements, offers a path forward for such dialogue, one that may be more effective than formal dispute settlement, assuming a functioning dispute resolution system can be re-established, in coping with the return of geopolitical rivalry. Plurilateral cooperation among like-minded nations on the use of trade policies to pursue noneconomic objectives, and between the large trade powers on economic policies that generate competitiveness concerns, are both a pragmatic and efficient path forward in addressing spillovers associated with the rise of unilateral trade action motivated by security considerations and domestic nontrade objectives.