Preserving Open Trade: Subsidies, Geopolitics, and International Cooperation
JOINT EVENT
DATE: April 22, 2022
DAY: Friday
2:30 PM - 4:00 PM
LOCATION: Virtual
WATCH THE WEBCAST HERE - April 22, 2022
Overview
Open trade policies are critical to growth and development and are especially important in today’s global context. However, the growing use of market-distorting subsidies can undermine the multi-lateral, rules-based trading system that has promoted trade liberalization and global growth in the past. This event will explore the issue of subsidies—from when they may be appropriate for addressing challenges to the unintended consequences—as well as how international cooperation can promote better subsidies policies and a more effective trading system for countries at all income levels.
Preserving Open Trade: Subsidies, Geopolitics, and International Cooperation
Event Summary
The growing use of market-distorting and fiscally costly subsidies are contributing to global trade tensions that are harming growth and living standards and undermining the multilateral, rules-based trading system. Against this backdrop, it is essential to enhance international cooperation and multilateral efforts in promoting better subsidies policies and ensuring a more effective trading system for countries at all income levels.
Key Points:
- The rise of subsidies & the need for reform. The challenging and complex global economic environment, including the economic impact of the war in Ukraine and the pandemic, rising inflationary pressures, and surging food prices are forcing governments to provide more subsidies. Panelists concurred that many subsidies are poorly designed and hardly fulfill their stated objectives. They are highly distortive and costly, both fiscally and environmentally, undermine international competition, and bring significant discord to the trading system. Thus, subsidy reforms demand global attention and cooperation. Against this backdrop, panelists underscored that the four international organizations that have authored the report on “Subsidies, Trade, and International Cooperation” are committed to strengthen their individual and joint work to support governments in collecting, organizing, and sharing data, coordinating analytical work agendas to develop methodologies to assess the cross-border effects of different forms of subsidies, and supporting inter-governmental dialogues on reforming subsidies.
- Globalization and trade. Panelists underscored the benefits of global trade but noted the challenging geopolitical environment and risks to the rules-based trading system. Georgieva warned about the risk of fragmentation of the global economy and trading blocs, which could make all countries poorer. She called for building on the strengths of international trading system while paying due attention to the inequality and distributional aspects of globalization. Okonjo-Iweala underscored that the rules-based trading system is a global public good and noted the importance of reforming it, including through updating the WTO rule book. She outlined the significant costs of “pulling back.” Malpass highlighted that trade is a positive force and called for preserving the idea of efficiency that comes from trade. Cormann emphasized that there is no alternative to trade but stressed the importance of “making it work for all.”
- High and rising food prices & food security: Panelists called for coordinated actions to address food insecurity and noted the urgency on developing a new action plan on food security by international financial institutions. Georgieva underscored the criticality of identifying regions where food production could be increased and ensuring access to information on the food availability. Malpass emphasized that the spike in food prices underscored the urgency of reducing trade barriers, enhancing international cooperation, and ensuring greater transparency about countries' food stockpiles to help markets function better.
