Driving Global Trade for Development

[Vicky Chemutai] Good morning, everybody that is in the room with   us today, as well as the virtual audience that is  joining us through the World Bank livestream.   It is an absolute pleasure to see all your faces. I see an eagerness to learn, but also to contribute   to today's conference, so that's super exciting  on our end. My name is Vicky Chemutai and I'm   with Macroeconomics, Trade and Investment Global Practice with the World Bank Group. In case some  of you accidentally wandered into this room,  today's trade conference that has been jointly   organized between the World Bank Group and the  Peterson Institute for International Economics.  This trade conference primarily is going  to focus on discussing issues, well,   as you can see in the name, driving a global  trade for development. Specifically, our goal   today is to discuss the recent geopolitical  and trade tensions that threaten to undermine   the security of the rules-based trading regime and  how trade can contribute to the engine of growth,   especially for developing [inaudible]. Because  it is also Valentine's Day, I cannot help myself   but give a little bit of amateur poetry to  kick us off. So here it goes. Roses are red,   violets are blue, globalization has brought forth  so many tangible and intangible gains. So why   is its perception constantly merged with  so much gloom? Can trade provide some   of the solutions thwart off these  global development blues? The end.  So to dissect these issues, we are absolutely  delighted to have two presidents here with   us that need little to no introduction. The  first president obviously is David Malpass,   who is the president of the World Bank  Group, he has been with us since 2019,   and our second president is Adam Posen, who  has been with the Peterson International   Institute since 2013. It is an absolute pleasure  to have you both. Please do come onto the stage.   And while they do, while they're sitting,  a little bit of housekeeping. We do have   our set of experts that are online ready to  answer all your questions. This is in French,   English, and Spanish. Do make use  of that live chat and because this   is such a big conference discussing  trade issues, don't be shy. Fire away.   This is an opportunity for everybody to get  those hot questions answered. David, please   do take the fire chat away. Can globalization  be reshaped to accommodate national interests   while maintaining trade as an engine for  green resilient and inclusive development?  [David Malpass] Thanks very much and thanks for the Valentine's poem as well, and really good to be here with Adam Posen. We're going to have a super intellectual conversation because the world's at this point where global growth isn't enough. We recognize that trade is part of the solution, but  we don't have the exact modalities to get there.   I'll state a view and then I'm really interested  in Adam modifying it and expanding on it as he   has done in really good writings about trade. We  know from economics that trade is a powerful way   to specialize and that includes across borders.  And so, as people look at the word globalization,   it's a necessary part of being on one planet  and it means that there's specialization across   country boundaries and indeed across  continents. We need to have continents   trading across oceans in order to have the  full benefit from economic efficiencies.  Then that gets us into how far do you want to  go with it in terms of dependency on Russia for   energy or dependency for chip making on individual  countries. There needs to be a rational thought   process of where do you want to go with your trade  supply lines? Maybe that got overdone, certainly   it did get overdone in the 2000s, 2010s, and even  maybe before that in terms of the dependence on   Russian energy. If we take that as the context,  then we need to recognize there's this huge value   to people around the world from trading within  their village, with a neighboring village within   their nation, and then especially to keep in  mind that cross border trade is critical to   specialization. We can't go to the point of saying  self-sufficiency country by country is a workable   economic model. I'll state that as the premise  and then that leaves us with maybe part of today's   discussion is to push back… My worry is that we  see countries around the world putting in export   controls, putting in subsidies that are meant  to provide self-sufficiency for their domestic   production, but they end up being super expensive  for them on their fiscal deficits. We have to,   in some way, draw rational lines in terms of how  far we want to go with those barriers, import   and export barriers, subsidies that are hugely  expensive and distort the trade. With that, let me   go to Adam. Where are we going to go with this? [Adam Posen]  Thank you, David. Let me just say on behalf of the  Peterson Institute for International Economics,   we're very grateful to get to work with the Bank,  not just on today's event where we got to work   with President Malpass, managing director Pangestu  and others, but that we work on a working basis   with numerous departments at the Bank as well.  This is because we don't agree on everything,   but we share the basic values that I think David  implied and some places explicitly said, which   is when you're talking about eliminating poverty,  when you're talking about development and for that   matter when you're talking about sustainable  green growth, economic efficiency matters,   economic freedom matters, and it's very hard to  get those without trade. If I can be conceptual   for a moment, as David I think rightly said,  we overdid it in supply chain extensions and   specialization and putting supply chains in places  that for geopolitical reasons were not wise. But   I think it's important to understand that wasn't  because of some diktat from the Bank or the fund   or the neoliberals like me. It was organic. It  was because you had multinational companies and   investors and businesses in developing countries  who were out there saying, "I see an opportunity."   The CFO of whatever large global economies country  says on a quarterly earnings call, "We're going   to reduce cost 10% over the next year," and that  comes down four levels to somebody who has a plant   who says, "Oh my God, I got to cut cost 13%,"  and then they realize that there was somebody   in Turkey or Thailand or Tobago or I can't think  of a T in Latin America at the moment. Anyway.  [David Malpass] Togo.  [Adam Posen] Togo, which isn't in Latin America,   but it's another T. Anyway. They figure out, "I  can really save money by doing this." Then after   that happens, you start learn meeting other people  in that country. This wasn't some deep decision   to spread supply chains thin. It was an organic  response to the opportunities that were out there   in the world that were very large. And so it's  reasonable that at some point the public aspects   of this, like resilience in the face of pandemics  or worries about, let's call them rogue regimes,   start to come in and we're not completely taken  into account, but there's a real reason why this   happened and it really was a benefit both ways. We  have vast amounts of research showing that where   countries and more importantly individuals and  communities are part of global supply chains, they   get higher wage work, they get more investment,  they get more integrated, they get benefits.   Let me step back a second and I'll trust  David to cut me off if I go too long.  Going to Vicky's excellent poem and  intro, why does it have such a bad rap?   I think to the degree there's a bad rap in good  faith for trade and development. It goes back to,   as always with intellectuals, fighting the  last four. There was this sense of overselling   the benefits of trade and overselling what used  to be called 30, 40 years ago the Washington   Consensus. Of course there was hypocrisy,  of course there was recognition of problems,   but that has now persisted and grown  in ways that are not justified.   When we think about what trade does, David  put it one way, let me put it a different way.   What you need to grow is you need enough  competition, enough technology and enough   investment of long term to let your country  and your companies adapt. If you cut yourself   off from new technology, if you cut yourself off  from the world, you not only miss opportunities,   you engender more corruption, you engender  worse choices, you engender less competition.   This is why econometrically you can't  always come up with a simple relationship,   trade equals growth, because what really  equals growth is competition, anti-corruption,   adoption of technology. Trade is very useful  for that, and conversely, it's very difficult   to achieve those if you're not open. But it is  possible to achieve those without trade, it is   possible to achieve those in other  ways, but I wouldn't bet on it,   particularly for a small economy. Trade is the  access to the best practices, the best technology,   the best competition. It's about what trade does  to your own country and your own economy and not   so much what you export. [David Malpass]  We accept that. You're being a little too nice  on one point. You described well that some part   of globalization was driven by profit or  by actual benefit to people, to workers,   to the competitiveness and so on. But now we're  at the point, or not even now, always throughout,   there is the risk of stakeholders finding ways to  use the system in order to beef their own profit,   but at the expense of the whole. That gets  into import barriers are a classic one where   it benefits my company to have the barrier. Now  we have the export blockages that are being put   on which benefits someone. I mean, you can trace  it back to the dollar and cents benefit to bad   practices. And so it's not enough, I think, to say  there was logic to the expansion of global trade   because it was making money, there's also logic  to the barriers that are being put in now. We   have to have some kind of a system to evaluate  the barriers. We are using right language,   for example, on subsidies to say if a government  is putting in subsidies because of the current   crisis, they need to be time bound and they  need to be targeted. If there are subsidies   around the world that are being put in place  that aren't, meaning they benefit all of the   people at giant expense and they don't have an  end point, they're going to massively distort   what the economic development might be. That's  one area that we can say we're against untargeted,   untimed bound subsidies. The reality is those  are being put in place by governments every   day now and we try to speak up against them. Another area of that is the, I mentioned the   term self-sufficiency, but there is this big  wave to say we ought to make each component   within our own country. That's massively  costly. Then you mentioned, as we think about   the agricultural subsidies that are going  on, we have these giant distortions from,   let's put it on the table, from quotas, from  biofuels, from very expensive practices that   end up distorting markets. What's the system  going to be to try to get us back on track   toward the good side of the profit motive rather  than maybe the one that subtracts from the whole?  [Adam Posen] No, no, you're absolutely right,   David, and I commend the Bank for its work  tracking and pointing out the subsidies.   I think it's very important what you just  said. Not only that there are subsidies that   it may not be corruption per se legally, but is  subverting the public good and public money for   the sake of entrenched incumbents or politically  favorable. I was trying to go to the general issue   of trade, but I think it's also important to  recognize what you just said, that right now,   whether it's the US or developing economies,  the action is much more on subsidies than on   tariffs. It is potentially much more distorting.  Tariffs, we have a framework, we can track them,   they're not good, but there's ways of taking  them down. Right now we don't have a system for   mutually taking down subsidies the way we once  did and still to some degree have on tariffs.  I just want to go one step further.  Let's take the green example.   There is obviously an insufficiency of  public investment throughout the world   but particularly in developing world for climate  change mitigation, climate change adaptation,   new green and new energy technology, and the  Bank is confronting that along with others.   The subsidy's reaction is probably not the right  reaction in a very costly way because subsidies   tend to be tied to discriminatory practices. It's  about production or ownership of companies in my   territory. What we know from the adoption of the  internet and digital and we know needs to be true   for green energy is what matters is widespread  adoption of best practices and it's the households   and the companies throughout the economy gaining  from that. It's not the value of the production.   What matters is that we have economies of  scale and competition for technologies and not   fragmenting standards, which if we get all the  subsidies out there, we're going to be actually   subverting the progress of green technology and  green energy. We're going to have countries bank,   as referred to often, thick borders and  that means a lot of things. But essentially   we're creating a set of thicker borders for  grids, for interoperability of technology,   for adopting the newest technology,  for spreading at a common standard,   for getting it cheap enough that people can  buy it on a large scale. So even if your goal   is well-intentioned to increase public investment  and then private investment in green technology,   doing it through subsidies that involve  trade distortions is the wrong way to go.  [David Malpass] That's huge, and your point that   there's no system to try to fight this or not as  much of a system as there was on tariff barriers,   the original part of GAT was a tariff focused  and unfortunately it excluded agriculture   in most cases. It was a good industrial  exchange. We're even losing that, I fear,   because industrial policies are really aimed at  saying, "Well, we know that there are not supposed   to be terrorists, but we need to have protection  for this industry because it's a key industry."  [Adam Posen] Can I pick up on that   and try and turn it, as you said, about modalities  going forward? A little bit more positive. I see   my colleague from Peterson, Jeff Shot, here who'll  be on the next panel and he has the scars from the   Tokyo round trying to negotiate a subsidies code  that didn't work then. Then we know that the US,   Japan and EU were talking about a subsidies code  in the previous administration and for whatever   reason that hasn't gotten picked up. There's room  for it to do it, but this is about development,   so let's talk about the countries that are not  China and the US, that are not the rich countries.   I think there are a few places of  positive movement we can think about.   The first one is it's important to have the  multilateral spirit, if not literally multilateral   practice. That is you try to involve yourself  in deals and standards that are transparent,   that are equally applied across all members of  deals, that involve as many different countries   at different types as possible, and that… Mari  reminded me thinking of the WTO as a club of   clubs, that your club may not include everybody  on a given thing, but that it's consistent   [inaudible]. There we are. People can join if  they meet the standards. It doesn't have to be   literally a multilateral trade round, let alone a  development trade round. But it has to be African   common free trade area, which the gentleman from  Kenya will be speaking about perhaps a bit at the   next session. It's about EU doing deals with  [inaudible], with Africa, with Latin America,   with India that are inclusive. Again, it goes back  to this idea of discrimination. That's the core,   that you want… Discrimination versus  economies of scale, large scale standards.   There is nothing that helps the developing  world when you go that route. Alternatively,   even if China or US are not playing along  in a constructive way, there is room for the   rest of the world to continue to gain and let them  exclude the US and China, for god's sake, and gain   and force US and China to come along. And that's  true of what we're seeing with CPTPT for example.   Second point, I had the privilege to speak the  other day at the FCI, which is an important part   of the World Bank sort of three year retreat.  I was followed on the program later by the   distinguished economist Richard Baldwin, who I'm  proud to say is now affiliating with Peterson.   Anyway, we both talked about, and Richard in more  detail than I, the opportunities in services.   Again, the panelists in the next session will talk  more about this, but in a world where if China and   the US and Russia are creating fragmentation of  various sorts, the need for business services to   adapt and get you across borders and get adoption  of technology and get around frankly whatever   arbitrary divisions China and the US impose on the  rest of the world becomes all the more critical.   Third countries as it were, which of course  spans a huge range of the world economy,   have the opportunity to move in this area.  Because services trade has not yet been very   well regulated, there's room for plural lateral  agreements that can engage the developing world.   Finally in this sphere, services trade is the  biggest substitute for migration we got. Now,   I know the World Bank's WDR this year is going  to be focused on migration. We've seen some of   that work coming. Our colleague Michael Clemens  is doing some work with the World Bank on this.   There are huge gains we had from migration.  But let us accept, in my view sadly, but let   us accept that there's not going to be large,  peaceful mass migration in the next few years.   The next biggest gains to be had are free  year trade in services involving developing   country populations and it's doable because  China and the US have chosen not to play.   In a perverse way, this creates much more  room for the rest of the world to play.  [David Malpass] That's a challenging mix, and so to clarify, we   have our WDR, the World Development Report, coming  out shortly that is focused on migration and from   the standpoint of labor moving from one place to  where there's maybe more capital or more jobs, but   also the push side of it because of the fragility  going on around the world. Very troubling times.   We're going to wrap, but you gave us a big hook  to go into the positive side of this. I mentioned   things that we're trying to get countries not  to do, which is the subsidies, for example,   that are not targeted or not time-bound. So  reducing that for all the reasons that that's   important. The export controls stop wherever  possible because of the distortive effect. As   trade in climate friendly products emerges, try  not to have them driven by protectionism. Those   are some of that, and you mentioned the importance  of avoiding the fragmentation of standards. It's   important in world development that people  find ways to have their standards be somewhat   common so that trade can go across borders. You  mentioned plural lateral on services, so I want   to add things that we've been working hard on  are trade finance. As trade finance broke down   during COVID or even prior, IFC has stepped in,  the Bank has stepped in and MIGA has stepped in,   and so we've had this giant surge in our own  trade finance and we are hoping that that can   be catalytic and bring private sector trade  finance back into the market as circumstances   stabilize. But we recognize the  importance of trade finance in   allowing imports and exports of all kinds. Then I wanted to mention also trade facilitation,   which is a critical part. I think I saw Mona  here, Mona Adahd. We have a big push within the   Bank. We've got lots of important people. Mari  is here, Jurgen is here, and around the room,   people working hard every day on making the  system work. As we think of trade facilitation,   it's the idea of identifying the barriers between  countries, often neighbors, but it can be across a   continent, and then what are the concrete ways  that we can reduce those barriers? That would   be customs harmonization for example, which is so  important. Across the world we see borders, well,   you mentioned the term thick borders, which  I think was a World Bank invention in maybe   a previous WDR, World Development Report, that  talked about the idea that if it takes a long   time for a truck to go across a border, you've  lost some part of the benefit of trade. That's   especially true if it's a perishable item. If  you're trying to grow vegetables in one country   and get them to another and it takes 12 hours  to get through the border, that's not going to   work because it diminishes the value of the  product. So we are working really throughout   the developing world to try to facilitate trade,  and that includes regional, you used a fancy term,   plurolateral, but it can be regional and it can  involve multiple players that decide on rules   that make it possible to have a lot more trade. I guess a closing thought I have, and then maybe   you have, and I know we're going to have a really  good panel right now, is that the value added from   this framework is gigantic. That goes back to  the original purpose of trade is to allow and   create the value added from people specializing  in services, in goods, in agriculture across their   framework. And we desperately have to avoid losing  that, as countries look to be self-sufficient,   that you're going to lose a giant part of  your growth potential if you go down that   route. Closing? [Adam Posen]  Yeah. Just to say, and what David said, it is  of course something I completely agree with and   the Bank has a great agenda here, what I'd like  everybody to take away is, if trade facilitation   and trade finance have outsized returns and all  the evidence is that they do, that says that   there are $50 bills on the ground waiting to be  picked up if we just enable them to pick them up.   The fact that the trade will happen if we just do  a few things tells you how big the gains are. The   other piece is that as long as we care about human  welfare, not about welfare of borders or nations,   it's about increasing opportunity for individual  workers and individual businesses. And all the   talk that the US or others engage in  about the damage to trade, that is   a rich country problem at best and a self-serving,  self-interested obsession at worst. For developing   countries, if it's about human opportunity,  you want more open borders. Thank you.  [David Malpass] Great.   Someone guide me, what do we do? [Adam Posen]  Who's in charge? [Mari Pangestu]  No, I'm not in charge, but… [David Malpass]  But yes, you are. [Adam Posen]  You're the Master of Ceremonies.  [Mari Pangestu] You could say that, I guess.  [Vicky Chemutai] Well, thank you very much. That was   as fiery as it gets, from helping us understand  why protectionism really needs to come down,   how important trade facilitation is and  how subsidies are really just growing. I   really liked what you said about subsidies  almost taking over tariffs because yes,   they're increasing worrying trends we need  to think about. Thank you very much for that.   I'm going to introduce the next session. [Adam Posen]  Thank you. [David Malpass]  Thank you. Thanks. Great. [Vicky Chemutai]  In this second phase of the trade conference,  we shall be having a panel discussion to   explore the challenges and opportunities  for business and how developing countries   can help farms continue to rely on trade  as an engine for growth and development,   especially in developing countries. To moderate  this discussion, we are absolutely honored to have   Mari Pangestu, who is our managing director of  development policy and partnerships at the World   Bank. Mari, [foreign language]. And our esteemed  panelists include, with the research perspective,   Jeffrey Schott, who is a senior fellow at the  Peterson Institute for International Economics,   working on international trade policy and economic  sanctions. Jeff, an absolute pleasure. And then,   with the policymaker perspective, our next  panelist is Mr. Alfred K'ombudo Ombudo,   who is the principal secretary of trade with the  government of Kenya. Alfred, [foreign language].   And critically, which is very important, as we  all know, with the private sector perspective,   our other panelist is Sunny George Verghese,  who is the founder and group CEO of Olam   International Limited, a leading food and  agro business headquartered in Singapore.   Sunny, [foreign language]. I must have butchered  it. And then, also, as you can see on the screen   with the perspective of trade multilateralism,  we have Anabel Gonzalez, who is a deputy   director general at the Wall Trade Organization.  Anabel, [foreign language]. Mari, over to you.  [Mari Pangestu] [Foreign language] Thank you, Vicky.   I think we've had a good sweetener, not  just the chocolates in front of you,   but we've had a good sweetener from David and  Adam to set the stage for our really very well   packed panel discussion. We heard about continued  premise for open trade that will deliver growth   and development, but realizing the challenges  that we face in terms of increased protectionism,   but also the new opportunities from services  and so on. I think we are going to discuss,   in this panel, what are the challenges and  opportunities for businesses and developing   countries and what are the important policy  and institutional responses, whether national,   regional or global, so that we can still  leverage trade for development. This is   really the aim of the panel. I think Vicki already  introduced the four excellent panelists and we are   hoping to get the government policy perspective,  the academic perspective, the WTO perspective,   as well as the private sector perspective from  those who are online as well as those physically   with us here today. We have Alfred and Jeff with  us here physically and Anabel, good afternoon,   Anabel, in Geneva, and Sunny, in Singapore, I  guess, so good evening to you joining us online.  Let me start with the first round of questions  to get all of your perspectives on the current   set of challenges that was already well outlined  by David and Adam, but also the opportunities for   reshaping globalization that will lead to still  trade delivering on development and how to respond   from your different perspectives. Let me start  with Sunny. We have heard about the disruptions   of global supply chains which was caused by COVID  and the war in Ukraine, which has really called   for increased resilience, diversifying sources and  a shift from just in time to just in case. How is   your company adapting to a world of significantly  heightened risk, be it climate, geo-economic or   pandemic induced? Do you think these risks will  have an enduring impact on your business? Please,   all panelists, you have three to five minutes  each to answer your questions. Over to you, Sunny.   You're muted. [Sunny George Verghese]  Sorry. Thank you, Mari. It's an absolute pleasure  and privilege to be here this evening. It is past   midnight in Singapore, the session has kept  me awake, given the importance of the issues   that we are all confronted with and dealing  with. There is absolutely no doubt in my mind,   and based on our experience, that all of the  events that you mentioned or all of the key   trends that you mentioned have a direct impact on  how we serve our customers. By way of a very quick   introduction, we are a leading global food and  agro business. We grow, we ordinate, we process,   we manage the logistics and we deliver to over  23,000 customers worldwide, about 47 agricultural   raw materials and food ingredients, everything  from cocoa and coffee to palm and rubber,   and cotton, and various kinds of raw materials and  ingredients. Obviously, as population is growing,   per capita incomes are growing, as we are having  a more younger demographic in terms of a younger   population, the urbanization trends, the  change in dietary habits, the demand for   food and feed people is also growing. How do we  meet the growing demands of a larger population   without destroying the planet and being climate  positive, nature positive and livelihood positive   as we seek to meet these growing demands of  food and feed demanded by a growing population?  The first is, we already had the supply chain  disruptions which was a result of COVID pandemic   with the availability, and more importantly,  the access to the food from where it is produced   to where it is required being disrupted as a  result of the COVID pandemic. And of course,   the Russia-Ukraine war has added fuel to  the fire and exacerbated the situation in   terms of the war induced supply chain disruption.  Russia and Ukraine put together is one of the six   big bread baskets in the world. The grains and  oil seeds that Russia and Ukraine produces and   feeds the rest of the world is about 105 million  tons out of a global trade of 400 million tons,   which is about 26% of global trade in grains and  oil seeds just comes from these two countries, and   that has impacted the global trade flow in this. In the case of Olam, in 2021, we were supplying   about 41 million tons. In 2022, our volumes  have come down to 38 million tons. As a result   of these supply chain disruptions, we had  a lower contribution of supply for wheat,   and corn, and barley and other seeds that  were produced in Russia and Ukraine. We were   able to make that up by our presence in other  trade corridors and trade flows, but overall,   our volumes declined by about 3 million tons,  although the source of that decline in volumes   were attributed about 5 million tons to the Russia  and Ukraine disruptions, but other trade flows   grow for us, so that is a direct impact. In terms of the climate change and how   it's impacting our trade flows, it is also  very clear. In Olam Agri, one of the three   operating entities within Olam, in 2022, we had  a greenhouse gas emission footprint of 61 million   tons. Out of the 61 million tons, only 0.8% was  scope one and two, and 99.2% was scope three.   Since we have committed to a net zero commitment  by 2050, we have to reduce our greenhouse gas   emissions by 50% by 2030, which means, as our  greenhouse gas emissions will grow from the 61   million tons to 73 million tons by 2030, we  have to bring it down to 31.5 million tons,   which means we have to reduce 36  million tons in the next eight years,   which is 5 million tons a year. If you value it  at $40 a ton, which is what our major shareholder,   the MassCEC, has assigned as a carbon cost for us,  that cost of carbon is 200 million dollars, which   is roughly about more than half after tax profits. There isn't a bigger priority for me or my CFO   but to first try and mitigate and reduce  and abate our greenhouse gas emissions   if we have to be true to our purpose of  transforming food feed and fiber system   so that we can have a more sustainable and  food secure future for all. Last year, in '22,   70 countries have imposed various export bans and  other tariff and non-tariff barriers to maintain   food security in the countries. 179 countries  have had food price inflation significantly   higher than the hedge line inflation of 9%, 10%,  11%. And food price inflation last year was 178%.   Many countries have suffered very high levels of  food price inflation and food insecurity. The way   we try to manage this disruption and navigate  through this is to follow a rule that we will   be present in at least 90% of the producing  countries for every raw material that we are   trying to supply to our customers. Either we are  growing them in these producing countries or we   have direct farm gate ordination and sourcing from  about 5.2 million farmers around the 67 countries   that we are present in. As a result, we are able  to compensate if there is some supply disruption   from one producing country or region by being able  to source more of similar quality and grade raw   materials from other producing countries. That's  the way we are trying to navigate through this.  [Mari Pangestu] Thank you, Sunny. So diversification   and the longer term issues on climate, that  you're addressing. Now, let me turn to you,   Alfred. As a policy maker from a developing  country, how important is trade for development   and poverty in your country? How are all these  disruptions of supply chain affecting trade in   your country? What are some of the key challenges  you face in terms of designing your national   policy actions to make sure that trade continues  to be the engine for economic development?  [Alfred K'Ombudo Ombudo] Thank you so much and thank you   for having me here this morning for this panel on  global trade and development. I will straight go   to the point that global supply chains, over the  last few years, have obviously had an impact on   countries' ability to trade everywhere: rich,  developed, poor, growing nations. But it has   also hit the developing nations quite hard,  particularly in some sectors whereby a lot   of the raw material for example, is accumulated  from elsewhere and some of the processes, then,   are finished within our countries for onward  destinations into certain markets. The textile   industry is an example and the upper industry is  an example. Those disruptions have been there,   but aside from COVID, we should also appreciate  the fact that African and developing countries   have been participating in global trade at  less optimum levels, even before the pandemic.   Therefore, my point there is that there are a  number of structural and developmental issues   that probably need to be taken a look at in the  context of disruption of global supply chains,   but also in the context of the more foundational  structural issues that African countries,   for example, will need to address in order to  basically benefit more from global trade. The   disruption of supply chains has been critical in  our ability to be able to finish accumulation and   to supply markets, but at the same time, we are  beginning to see a situation whereby there are   conversations that are going on amongst a number  of developed countries and other countries that   are beginning to become more sensitive around  where the supply chains are coming from. Even if,   for example, a country like ours has  preferential access to certain markets,   we are beginning to see conversations around  where countries are more interested to find out   where are you getting your raw materials from  and are you getting those raw materials from   places which are compatible to our foreign and  external trade policies, and so on and so forth.   This raises further interesting conversation that  must be had. It is potentially an opportunity for   countries like Kenya to basically take a look  at this and try and make a pitch for investment,   investment whereby we are then able to have  more of the cost buildup structure for any   goods that we are trying to export being done  from within Kenya, and if not from within Kenya,   from within the region. That's one of the  other things that I would like to raise.  Another point that comes up from a policymaker's  perspective is some of the shocks that we are   seeing over the last few years that is  affecting our company's ability to export   and get settlement in external markets. I'll give  you a tangible example. Tea is our largest export.   We export about 1.2 billion dollars of tea from an  economy of about $100 billion. It's significant.   Our exporters are currently not able to easily get  settlement because there are no dollars available.   And we have containers of tea stuck in a number  of ports for which they're still waiting for   settlement months on end. One of, then, the key  thing that has to be addressed in the context of   COVID, our post COVID world, some of the global  crises in terms of the wars and so on and so   forth is how do we ensure sustained settlement for  traders that are basically coming from developed   countries and basically have little muscle around  which to basically have long working capital.   If I can reflect further on this particular  issue, I would basically say that we have lots   of opportunities in this new emerging order.  Environmental sustainability is emerging as   a serious issue in sourcing, in manufacturing and  so on and so forth, and this presents significant   opportunities for a country like Kenya. I'll tell  you why. Kenya, right now, has an energy mix that   is comprised of at least 97% clean energy, and  the other 3%, we are basically moving to get rid   of it from our energy mix. What does this mean?  It basically means that for anybody who wants to   do manufacturing in Kenya and has products that  require a high contribution of energy already   gets a leg up when you are manufacturing in Kenya.  We are trying to tell this story and we are also   trying to get the investments that are necessary  for us to have, located in Kenya, the kind of   investments for people who want a green badge for  their exports. This becomes a very significant   opportunity that I believe we need to work on. To conclude, when we reflect on global value   supply chains and when we reflect on our ability  to participate in trade, we also realize, then,   that we need to work significantly with  development partners like the World Bank   Group and so on and so forth, and we need to be  able to open new markets and to negotiate in new   markets so that we are able to have more markets  for our products out there. We are, for example,   working with the global trade team of the World  Bank Group to basically help our negotiators   understand and be more effective in understanding  the global trends, and that has also helped us   with our current conversations that we are having  with a number of our trading arrangements. We are   also, for example, having conversations with  the finance competitiveness and innovation   team that basically is putting up a significant  jobs and economic transformation program that   hopefully will also look at the key issues  that need to be resolved on the export side.   Allow me to conclude by saying that to participate  in global markets, pre-COVID or post-COVID, to me,   makes a little difference because there are  significant foundational structural issues that   are still not yet solved. What do we need to do?  We need to open new markets, we need to invest in   investment led trade whereby our proposition is  to attract investment as a basis for trading in   external markets. We need to leverage green energy  that we have in abundant supply and create a   magnet for that. We need to ensure that our export  markets become pro-poor, pro-farmer and pro-young   people so that they're able to participate  in external trade. Thank you very much.  [Mari Pangestu] Thank you. Thank you so much,   Alfred, for outlining the challenges as well as  the opportunities. Over to you, Anabel. Let's   start by saying that the multilateral trading  system has played a very important role in   ensuring developing economies are integrated into  the global economy and framing their national   policies. Now, given the uncertainties and the  lack of leadership currently in the system and   a big discussion about WTO reforms, can you share  how you are seeing the WTO reforms can help this   continued agenda of trade and development and  any other issues like dispute settlement that you   would like to raise? Over to you, Anabel. [Anabel Gonzalez]  Thank you. Thank you very much, Mari. I'm  delighted to be here with our fellow panelists   in this event organized by the Bank and the  Peterson Institute for International Economics.   Though WTO reform may sound technical and  even geeky, it turns to be anything but. At a   fundamental level, WTO reform is really about the  global economy of the future. Without WTO reform,   a situation where power replaces rules in  global trade relations becomes more likely.   And that would hurt everyone and benefit no one.  The cost of the resulting economic fragmentation   would be massive, as much as 5% of long-term  world GDP if the world economy was split in   two self-contained blocks according to  WTO estimates. To put it into context,   that would be worse than the damage caused by  the 2008-2009 global financial crisis. Small   and mid-site developing countries would  be hit the worst as they would see their   prospects for trade led growth and development  severely curtailed. WTO reform is first and   foremost about safeguarding trade's roles  as a tool to create jobs, reduce poverty and   increase economic opportunity, especially in the  poorest developing countries. Now, beyond that,   WTO reform is also about promoting more  resilience, more sustainable and inclusive trade.  First, let me say a word on resilience.  Turning inward and retreating from trade   is hardly the answer to make economies more  resilient to shocks. I think David and Adam   were referring to this before. On the contrary,  what we need, are deeper, more diversified and   deconcentrated markets alongside with guardrails  that protect against excessive fragmentation.   A reformed WTO can play a key role in several  areas, improving transparency and monitoring   to map concentrated trade relationships,  promoting policy dialogue and coordinated   solutions and fostering trade facilitation  to bring alternative supply sources into   the global economy. Again, David made a strong  pitch for trade facilitation and I would like,   probably, to say a bit more on that later on. Second, WTP reform is about sustainability.   We need a reformed WTO to be able to leverage  the global market for effective and ambitious   climate action. There are many ways  that this can be done, for example,   by reducing the trade barriers that prevent green  technologies from moving to where they are needed.   The WTO must also play a bigger role in  ensuring a just and fair climate transition,   not least by ensuring that climate measures such  as carbon border adjustments do not put experts   of green goods and services from developing  countries at a competitive disadvantage.  And third, the WTO reform is about inclusiveness.  We need a reformed WTO to allow new actors to   tap into new sources of growth, especially for  countries and businesses that have not been able   to benefit from trade integration and as a result,  remains in the margins of the global economy.   Though the merchandise trade growth has slowed,  Adam alluded to the great opportunities that   services that digital and delivered services in  particular can bring. And this is a market and   expert opportunity that, in 2021, amounted to 3.7  trillion dollars. This is very, very significant.   This is also the case of green trade. Now, turning briefly to some of the   specifics of the WTO reform, let me say a  word on negotiations and dispute settlement.   On the issue of negotiating new rules, our  successful 12 ministerial conference last   June demonstrated that it still can be done, that  there is still life in the multilateral approach.   But we need to complement this with a basket of  alternative rule making approaches so the willing   members can move ahead on relevant issues without  being held back by those that are not ready to   engage. And such alternative approaches are  beginning to deliver. We have delivered lateral   outcomes on services domestic regulations through  slashed red tape on services trade. Conclusion   is within reach on investment facilitation  and the talks on e-commerce are proceeding.  On disputes, the lack of a fully functional  dispute settlement mechanism not only clouds   business perceptions of the utility of the WTO,  but it also weighs on negotiations and deprives   developing countries, particularly small and  mid-sized ones, from a unique instrument to   ensure that WTO rules are applied consistently  across WTO members no matter their size. That is   one reason why having a fully functional dispute  settlement mechanism is a top priority. Now,   at the same time, I also have to say that the  dispute settlement system is not closing. The   system is still being used by members. Members  are also using alternative modes of dispute   resolution and in going forward, thinking  in terms of a basket of tools for resolving   disputes is something that could help us return  to full functionality by 2024, the deadline that   was established by our ministerial congress. Let me conclude by saying that WTO reform is   likely to be a slow burn rather than a Big  Bang. In fact, bits and pieces of WTO reform   are already happening, but we need to accelerate  the pace to ensure that WTO is fit for purpose   in a more complex and rapidly changing trade  policy landscape. And here, I have to say,   Mari, that the World Bank is a very constructive  partner in our efforts to support WTO members to   reform the WTO. So great thanks to you, to David,  to Mona, to the whole team for your strong support   and commitment for a revitalized WTO. [Mari Pangestu]  Thanks, Anabel. Okay, WTO reforms are not geeky  and we are looking at a slow burn and not a Big   Bang, but let's all work to get the a bigger bang,  let's say. Jeff, I know you've been thinking about   this topic for some time. I just want to get  your take, we see the trend of fragmentation,   the discussions on friend shoring, near shoring.  Give me your take on how this impacts developing   countries and what should be done. [Jeffrey Schott]  Well, thank you, Mari. Of course, David and  Adam's conversation at the beginning really   laid out the key issues that are involved  with your question. But if I were to   point to one word that is the focus of all this  friend shoring, near shoring, it's the need for   investment. Alfred pointed this out. [Mari Pangestu]  Yeah. [Jeffrey Schott]  This is what we're really talking about. Some  people are talking about, how do you create   the incentives to lure the investment into your  country by hook or crook, by carrots or sticks,   by trade preferences, by subsidies, by trade  discrimination, forcing that flow of funds by   economic sanctions, for penalizing countries  or companies if you don't do it. I think Adam   spelled out very clearly some of the costs of  this discrimination in lost opportunities, in   wasted resources. But it's clearly what has been  prompting the discussion today because the friend   shoring has mostly been focused about China,  and what do companies and countries do facing   the China shock, the shock of the trade war,  rising costs in China, in very limited sectors,   the economic export controls that prohibit  the flow of investment to different markets.  But there is much more that needs to be  done. I think the incentives, the subsidies,   the discrimination that the United States has  put forward are actually very small. You may   be talking about 50 billion dollars over five  years, but it's small in terms of the movement   of funds and production, the reordering of  distribution networks that are at issue. And   here, I think one has to look at why friend  shoring has been in existence and important   for the international economy for a long  time, but it's just not been called that.   Trade agreements create preferences that open  opportunities for trade and investment. They're   meant to encourage more opportunities. Economic  reform, regulatory reforms, the investment in   infrastructure and ports and logistical  networks, that all creates the environment   for growth that Alfred was talking about. These  are things that trade agreements, over time,   have been promoting, opening opportunities for  increased trade in investment or friend shoring,   but you never hear anyone saying a trade agreement  is a tool of friend shoring. Actually, it is at   its essence, as long as it emphasizes the openness  of opportunity and not the cost of discrimination.   I think this is what governments need to think  about when they are pursuing these policies.   They have to ensure that they are creating the  climate to take advantage of these opportunities,   so encouraging the types of economic reforms  that create the opportunities throughout the   society. And I think Alfred and his own country  create the opportunities for young people,   men and women, to move forward in new technologies  where there is an emerging growth. That's critical   to support that with the infrastructure,  whether it's physical or education and to   work with trading partners and friends to  deepen regional integration arrangements,   to create new opportunities for secure  and efficient sourcing of raw materials   and components and access to the markets.  This, I think, needs to be supplemented by   the broader alignment of regulatory policies.  This is something, actually, the United States   is trying to do in the Indo-Pacific economic  framework and in the Americas framework and   through its bilateral initiatives and regional  initiatives in Africa and elsewhere, to align   regulatory policies that often, as a practical  matter, determine whether can one can enter   and compete in foreign markets. I think that is  critical. I think the guidance of the work at the   Bank in promoting good regulatory practices and  around the world is helpful and something that I   think we can build on. Thank you. [Mari Pangestu]  Thank you, Jeff. I've been not a good moderator.  We only have eight minutes or so for the second   set of questions, so if I can get your indulgence  to be very brief in your answers. Let me turn to   Sunny. I think you already mentioned how you, as  a company, as a business, are responding to these   different challenges. If you can just also  maybe elaborate more on this diversification   strategy as well as how do you respond, you  have a net zero commitment as a company and   you mentioned a few things, but how else do  you think you will respond in the near future?   You're muted. Sorry. [Sunny George Verghese]  Sorry. I'm sorry about that. I think the first  is to harness the power of technology in making   a fundamental difference to becoming climate  positive or nature positive or livelihood   positive in the way we do our business. On the  first part, in terms of being climate positive,   we have launched an AI mission learning based  application for being able to measure scope one,   two and three, particularly scope three. As  you know, today, only about 15% of the world's   companies measure scope three and 90% of those  who measure scope three measure it inaccurately.   How do you develop a more reliable measurement  engine that can measure scope three so that you   can meet your commitment based on the SBTI 1.5  degree pathway that if your total greenhouse gas   emissions, more than 50% of it is scope three,  then you need to reduce it by two thirds by   2030 and reduce it by more than 90% by 2050.  This is a product called Telescope. We have   launched it now. It started with people  in the food and ag sector using it. Now,   we got other sectors who are on this net zero  journey also adopting it. That's one example.  We want to be nature and biodiversity positive,  which means we want to ensure deforestation free   supply chains. And in order to be able to do  that, we have got the Forest Lost Risk Intake,   which is, again, a digital tool that helps us  anticipate which are the next potential landscapes   that are vulnerable for deforestation, and then  understanding the root causes of why that would   be the case and trying to preempt deforestations  in those vulnerable landscapes. That is an   example for deforestation free supply chains. We want to make sure that our supply chains,   as much as possible, we can make them child labor  free, for example. And for that, you need to have   very granular traceability systems right up  to the farmer level to be able to provide that   granular traceability. I think harnessing the part  of technology, we have launched another digital   intervention called Jiva, which is a smallholder  services platform. In the developing economies,   more than 70% of our food is produced by  smallholder farmers. Globally, 40% of the   world's food is produced by smallholder farmers.  How do you help them improve productivity and   livelihoods and get to a living income through  more targeted nudges on what is the next best   action they can take on the farm to close the  yield gap? China, in 1960, had paddy yields of 1.8   tons per hectare. Today, they're at 7.5 Tons per  hectare. And that is possible for other countries   to do as well by adopting technology. [Mari Pangestu]  Yes. Thank you. Thank you, Sunny, for those  really valuable insights and what you're   doing. To Alfred, just quickly, what do you think  developing countries need to do to participate and   be more proactive in the WTO reforms? And how do  you see the role of the African continental free   trade area as well as the bilateral agreements  that I know you are negotiating with the US play?  [Alfred K'Ombudo Ombudo] Yeah, thank you very, very much for that. Kenya   is extremely committed to seeing more trade on the  continent. We see very strong markets in places   like the Congo, whereby we have endless demand for  diary products. We see endless demand for products   in Sudan, where, for example, we have lots of  opportunities for trade in manufactured products.   We see lots of new markets in Ghana, Nigeria and  so on and so forth, whereby we are seeing markets   for tea and so forth. The African Continental free  trade area is going to remain a key instrument for   us to actualize that. For that to work, we need to  ensure that we thin the borders a bit more. It's   still a bit more difficult to trade across borders  within the continent, and notwithstanding lower   tariffs, then, it becomes an issue if, then, the  borders remain something that's difficult to use   for trade. That remains one of the issues that  we really want to make sure that we work on.  On the WTO, I see that it is extremely important  for African countries to play a bigger role in   the standard setting processes because if we are  to trade and if we are to engage globally, then,   the standards around goods and services need to  also reflect our contribution in a more meaningful   way. This therefore becomes a key developmental  and trade issue for which you can expect us to   be talking about more and more as time goes by. On dispute settlement, we look forward to a more   engaging stance from the WTO whereby developing  countries are able to actually engage in the   dispute settlement process in fairer ways.  Finally, I think developing countries, and   African countries in particular, we need to always  keep looking at our trade defense instruments and   see how we can ensure that trade within the  multilateral system remains fair and that we are   able, then, to be able to detect instances whereby  there's unfair play and mitigate that. Thank you.  [Mari Pangestu] Thank you, thank you,   Alfred. I think the standards, and especially  in the emerging climate change standards,   whether it's CBAM and so on, this is a very key,  I think, development and trade issue. Anabel,   if I can just turn to you, there are discussions  about market opening in agriculture and services,   and we heard Adam earlier mention the potential  for services. We also heard, David emphasized   the role of trade facilitation, and I would  add capacity building within that. What is   the WTO doing with regard to that? And I see it  as ways to get membership interest in the WTO.  [Anabel Gonzalez] There's no magic formula for   restarting market access talks, but there are some  things I believe that the WTO and its partners,   including the World Bank, can do to improve the  prospects for such talks. Let me mention three   concrete actions. First, to improve transparency  of policies and regulatory frameworks. Jeff was   referring to this before. Second, to ramp up  evidence-based research and policy dialogue   on the effect of opening markets. And third, to  expand technical assistance and capacity building,   as you rightly mentioned, Mari. Now, when it comes to services,   I think this effort must focus on the critical  role of services in today's global value chains.   For developing countries, this means  that specializing in services can have   big payoffs in terms of scale, innovation  and spillover effects. Take, for example,   the ICT sector in India, which is sustained  largely by experts. It supports 16 million   workers and has generated more jobs than any other  sector over the past two decades. Let's also not   forget the importance of having access to high  quality and competitively priced services also for   manufacturing and agricultural competitiveness.  Now, on agriculture, our efforts must focus on   the role of agricultural trade in achieving  many goals, from ending hunger to supporting   the transition to net zero from helping countries  buffer the impact of extreme weather events to   grasping the opportunities that digitalization  of farming offers to developing countries.  Now, let me just say a word on what countries can  do at home to reap the gains of trade in digital   trade and green products. There are many, many  things, but let me just mention two elements.   First, countries can and must work to improve  their trade policy and regulatory environment   because this is critical to attracting  the necessary investments to develop   digital infrastructure and closing the digital  divide and also to improve digital skills and   entrepreneurship. One way to do this is to use WTO  initiatives to anchor a process of domestic policy   reform. For example, our agreement on services  domestic regulation, adopted by a large group of   WTO members, contains disciplines to cut red tape  and foster transparency, which will save service   providers 150 billion dollars each year. We have  an agreement on investment facilitation that is   being negotiated and hopefully finalized this year  to help improve the investment climate. Again, our   work on developing global rules on digital trade  can increase predictability, reduce fragmentation   and lower cost in the digital economy. We  have, I think, a very successful example in   the implementation of the WTO trade facilitation  agreement as a mechanism for anchoring domestic   reforms to simplify and streamline the border  processes and reduce credit costs, again, with   strong support from partners like the World Bank. Finally, let me just say that green economy   developing some standard certification and quality  infrastructure can help developing countries   leverage their green comparative advantage. [Mari Pangestu]  Thank you. Thank you, Anabel. Finally, over to  you Jeff. I just want to ask you a question.   We see the retreat of leadership in the major  economies in the multilateral trading system.   How do you explain this retreat? And how do  you also deal with this anti-globalization   movement? The seeds of this anti-globalization  movement is the perception, real or not,   that the trade has not delivered equally to  everybody. How should we respond to that? Not   to blame the trade policy, but what is the  comprehensive approach that will be needed?  [Jeffrey Schott] That's easy to do in one minute,   but I think you hit the highlight, that there are  multiple and interrelated causes for the impasse   in the multilateral trading system that we have  seen for a long time. This is not a new event.   We've had a failure of WTO negotiations from  the start to update the rule book, therefore   that WTO is not fit for purpose for 21st century  trade, particularly in the area of services.   We've seen an abuse of the consensus rule by both  developed and developing countries. Effectively,   veto by the big players that are not invested  in maintaining and strengthening the system.   That wasn't true during the GATT era, but then, it  was mostly the United States and Europe investing   in the system and providing countries a free  pass. Now that everyone is invested in the system,   we're seeing the major economies pulling back.  In part, they're doing it by abuse of national   security exemptions to justify industrial  policy by disabling multilateral enforcement,   which enables unilateral enforcement and therefore  goes against the system. What has happened in the   history of the post-war trading system is that  to get multilateral deals, you've had to have all   of the big players agree, come together, and then  they can provide the core for a broader agreement.   Very hard to envision how that's going to happen  today with the United States, China, Russia in the   system and the European Union, though being more  proactive on WTO reform, still raising questions   about the carbon border adjustment mechanism. There's an opening for developing countries and   middle powers to take up their leadership mantle  and begin to say, "We are the ones that need the   disciplines, the reforms, the common rulemaking  the most to protect and enable our economies.   Take the leadership, don't rely on the United  States and China to do so. Do what you're doing,   expand it beyond Africa, beyond Southeast  Asia." And we see, as Adam said earlier,   that this is what the CPTPP countries  effectively have done in the midst of   a US-China trade war. They have continued an open  regionalism, not just in the Asia Pacific region,   but for any country that wants to pursue  an upgrading of their economic policies.  [Mari Pangestu] Thank you. Thank you, Jeff. I think I'm   really running out of time, so I'm going to borrow  a bit of time from the concluding session to take   some questions. I'm going to take one question  online, and then I will open it up for one or two   questions from the audience here. I just want  to also mention we have a large audience also   following this online. One question from online I  would like to ask each one of you. I'll direct the   question, or the questioner can also direct which  panelists they want to answer. And then, when you   respond, all of you will respond at the end as  well as give your final remarks. Let me give   you one question from the floor: "After COVID-19,  what was learned about the role of international   trade during the global health crisis?" If I can  ask Sunny to give the private sector perspective   and then Anabel to highlight the role of the WTO  during this crisis. Just to highlight, there's a   World Bank, WTO Trade and Health report out there  on the table, so please take a copy or look for it   online. Now, let me open the floor for anybody  here. Okay, the lady over there, and one more.   One more? [Woman 1]  [Inaudible]. [Mari Pangestu:]  Okay. [Woman 1]  Thank you so much for the presentation. Actually,  I want to follow up on what Alfred has said,   that countries in Africa and developing countries  are trying to have their initiatives on green free   trade zone, for example, in Ethiopia also now  what Kenya is thinking about, but the issue,   according to many reports, including Mackenzie,  is that the problem with the green agenda and   the application of that is not at the suppliers  level. It's about what happens throughout the   supply chain from the time products get out of the  country. The issue is how to have all the players,   when the products get out of the country, all  the players, including shipping companies,   multilateral countries on the exporting countries,  etcetera, to have them in sync to ensure that all   the benefits of this green agenda is realized.  Also, that will benefit in return the importing   countries. Thank you. [Mari Pangestu]  Thank you. Please keep the questions short  and tell us who you want to, which panelists-  [Woman 2] Thank you.  [Mari Pangestu] Who you want to… Which panelists or-  [Woman 2:] Thank you.  [Mari Pangestu] Which panelists you want to address?  [Woman 2] Thank you very much.   So I think the question is general for all  panelists of this panel and even eventually   the previous. We heard from many from of you that  basically to save trade we need to look beyond   trade to competition, to product regulations,  to labor regulations. But we are still talking   about a global agenda or a multilateral or a  international agenda for trade while this issues,   we are thinking at how to deal with them on  a national scale. But this is the recipe that   we followed in the last 30, 40 years. So what  is it that needs to change to make it happen   this time? Thanks. [Mari Pangestu]  Okay. I think I will perhaps reverse the order  and start with… So I think you had one general   question to all of you. One question to  Alfred and then the COVID-19 question to   Anabel and Sunny. There was also another question  actually on climate change and trade and maybe   Jeff, from online, maybe you can also address  that and then also give some wrap up comments.   But all in, we are running out of time, so  all in one to two minutes at most. So Jeff.  [Jeffrey Schott] Well I'll focus on   the last question because you're saying are we  doing the same thing all over again? In the past   it was really top down and if you look at the  trading system, the post-war trading system,   it was designed on US law and practice.  Many people in Washington forget that,   but to meet the challenges of the 21st century,  it has to be bottom up. It has to be countries   recognizing that for their own welfare they need  to work with their neighbors and develop a set of   guidelines that will ensure the ability to produce  trade, finance and grow, all for the men and women   young and old in their societies. And that's not  going to come from the United States or China   telling you what to do. It has to be an awareness  among the developing countries in the middle   powers on how to move the system forward. [Mari Pangestu]  Thank you. So if I reverse the order that  means Anabel, right? Did I get that right   or did I get that wrong? [Anabel Gonzalez]  I'll go ahead anyway. Let me just briefly say  that contrary to popular perception and despite   initial hiccups, trade played a critical  role in making sure that vaccines, that   therapeutics and diagnostics  reached all over the world. And   the evidence is very clear. While in 2020 trade  decreased by 7%, trade in critical medical goods   increased by 16%. So this is to show that in  combating a health crisis such as the pandemic,   trade played a very important role which goes  more broadly to the role of trade in addressing   global challenges, the global challenges that  we confront today, be it in terms of health,   food security, climate change or others. So this  is again one more reason to invest in WTO reform   to make sure that it's fit for purpose to support  these global challenges that the world faces.  [Mari Pangestu] Thank you. Thank you, Anabel. Alfred?  [Alfred K'Ombudo Ombudo] So thank you very much for the question on   greening exports and the economic zones  around that. I do agree with you that   we need to look further than just what we  are able to do in Kenya in as far as greening   goods and services and look through the entire  value chain, how we are also sourcing products,   whether those products are greening themselves  and onwards onto the market. What we are saying   is that we have a very good start and we have a  start whereby we have clean energy. We are trying   to commit to green principles in production and  then that already gives us a very good start for   that. And I'm just hoping that in conversations  with development partners for example,   hopefully even with their finance, competitiveness  and innovation teams for example, is that then we   are able to think through what does it take  in reality to have a green export strategy   whereby the supply chains are also responsive  enough for the product to arrive on the shelf   premiumized and green. Thank you. [Mari Pangestu]  Thank you, Alfred. Last but not least, Sunny. [Sunny George Verghese]  I think we've all seen the importance of keeping  trade flows and the ability to access food,   basic life's essentials, from whichever  country has the most comparative advantage   to produce their cheaper, better, and take it  to destinations where it is most required and   where there's a deficit of the production  of these raw materials. And it is therefore   unfortunate that we have the precisely  the wrong policy response when we have   disruptions like the one that we have seen from  COVID or the one that we have seen from Russia,   Ukraine War when more and more countries  exacerbate that supply, demand disequilibrium   by export bans and import tariffs and export  tariffs which only worsens the situation.   So coming back to the question that was raised  from the floor about how can we remove some of the   vulnerabilities of trade that is not regulated or  controlled in a way that the vulnerable sections   of society who might be disadvantaged by more  free trade can be re-skilled or can be provided   for or taken care of is an important lesson for  us to have trained drive good quality GD people.  [Mari Pangestu] Thank you. Thank you,   Sunny. And thank you to all of you panelists.  I'm sure all of you will agree that we've had   really great discussion with excellent panelists,  more questions to be answered but therefore more   work for all of us to do. But I will ask you  to give a round of applause to the panelists.   Now we'll move to the closing session.  I think you can stay there or up to you,   stay there or sit down. But I'm going to  reverse the order. I'm going to invite David   first because David has to leave and then I will  finish with the second closing remarks. David,   if you can come to the podium and I beg  your indulgence to go a little bit over 12.   David. [David Malpass]  I'm happy to and we are flexible here at the World  Bank. I want to first thank very warmly Anabel and   Sunny, and Alfred, and Jeffrey. It's been a great  conversation. Also, I want to thank Adam Posen.   It's been a great knowledge exchange and so it's  fitting that I'm here closing with Mari Pangestu.   She's been, as she approaches the end of her term,  Mari has been vital in the knowledge exchange of   the Bank, what events just like this, but also  all of the makeup of that for the Bank. If I think   back on the arrival of COVID, the knowledge that  was needed in the mobilization of the vaccines   effort, I see Mum Demerti is here, who was vital  in that effort. As I think back on the challenges   posed by food and fertilizer, I see Jurgen Vogle  here who was vital in that effort and still is.   And I thought it was very important that we heard  Sunny's closing points about the difficulty of   getting feed and fertilizer and food stuffs around  to various parts of the world. So these are all   core things that Mari's been so instrumental in  over the years on trade and investment. I was   very happy that Jeff mentioned the importance of  investment. As we think about the private sector   role in facilitating trade, it's going to be  vital and I think we heard Alfred talk about   the importance of sustained settlement. So as  we're in this field of trade liberalization and   facilitation, the details matter of each way that  the importers and exporters, whether services,   goods, agricultural products actually exchange  money and how that can be done in a robust way.   One of the concerns I have and I'll just mention  is the, or I'll put on the table, a big problem   facing the world, that's the absorption of capital  is so intense by the advanced economies. As you   think about what's going on with pricing for  the poorer countries, they're not buying the   fertilizer they need to create the crop yields  that are out there. And under the surface we're   beginning to see rice prices go up. That's  an early warning sign and we're beginning to   see nutritional levels decline for people in the  poorer countries. So whether you call it pricing   effect or a shortages effect, it's having this  impact that is at the core of the world's success   over the next few years. So I'm troubled by that.  I'm really very happy to have this conversation   today and I want to congratulate Mari on all she's  achieved here at the World Bank and thank her for   that including today's fabulous panel. Thanks. [Mari Pangestu]  Thank you, David. [David Malpass]  Thank you. [Mari Pangestu]  Thank you so much. [David Malpass]  Thank you. [Mari Pangestu]  Thank you. Thank you so much, David, for those  kind messages. I will now try to give a few key   takeaways from our excellent session today. And  first of all, thank David for participating. That   shows you the high level of priority we as  an institution put on trade and development.   Thank Adam and Jeff for the partnership with  Peterson on this event. And Anabel we have   continued partnership with you with the WTO and  of course thank you to Sunny for staying up,   must be beyond midnight for you now, to provide  the private sector perspective and also to Alfred   for joining us today as the policymaker  developing country perspective. I think,   let me try to be brief. We heard today the  challenges we are facing. We have slowed   down in the world economy where subdue trade and  investment is affecting growth and development for   developing countries in the foreseeable future. We  see threats of disruption in economic and social   systems due to climate and technological change.  And we also see a rise in protectionism by many   countries but led by the largest global players.  And this is creating costly inefficiencies.   I think we heard many remarks on that. Risks of  fracturing the open and rules-based trading system   and risks especially to take away opportunities  for developing countries to follow a trade led   growth strategy. What we heard is also that  whilst there are challenges and uncertainties,   driving trade for development still matters. And  I'm a great believer in that myself. And we heard   that there are new opportunities in trade that  have emerged such as green products and services,   especially digital based services. If you  look at the recovery of trade post-COVID,   actually business services recovered very quickly  and countries that have been able to deliver on   business services have been benefiting from that.  And the best response to increasing resilience to   shocks and security considerations of dependence  is still diversification. I think we heard Sunny   mentioning that in the case of his remarks. And  we saw how countries which are part of the global   value chain were more resilient and recovered  faster during the crisis. But we also know   realistically the solutions that we have long  relied on may not be the most obvious pathways   moving forward to reap these opportunities given  all the geopolitical tensions. And we can expect   the continued use of various instruments in  the name of resilient security and national   development. So really not to be blue as the MC  mentioned in the beginning. I'm wearing red. I   see some of you're wearing red because it's  Valentine's Day. I think we need to look at   the way forward. We had a good discussion on  the way forward. Let me reflect on three key   messages about the way forward in terms of what  we need to do to respond in terms of policies,   knowledge exchange, evidence-based policymaking  and how the Bank can inform on this.  First key message, taking the country level  perspective. I think trade matters is really what   we are wanting to emphasize. And our assessment  actually shows that trade tensions that lead to   fragmentation with higher barriers of imports  and increased subsidies in advanced countries   and China will hurt everyone with the world  economy losing as much as 1.4 trillion, but hurts   developing countries more with 52 million more  people entering into extreme poverty. This is the   type I think of evidence-based and information,  and I know that Peterson also has this kind of   information to show the costs and that it hurts  developing countries the most. Not to mention   small economies that depend on trade or landlocked  countries that need connectivity. So the main   message is that developed country actions that  may be justified from national security, climate,   and income inequality need to take into account  their impact on developing countries. Similarly,   developing countries that are also wanting to  conduct industrial policies also need to consider   the impact on other developing countries or, as  Jeff mentioned in our discussion just then before   the event, how do we avoid beggar-thy-neighbor  policies that benefit you but hurt at the expense   of others. So how do we design policies that can  achieve the goals of, whether it's resilience,   security or addressing geopolitical concerns, but  in the least or even industrial policy objectives   in the least trade disruptive and costly ways?  And this is where the Bank in its knowledge and   evidence work will continue its work on this and  provide the voice for developing countries in the   current debate on trade and development.  And furthermore, I think many mentioned,   especially Alfred was mentioning that really  the importance of investment in trade including   the new opportunities in services are there.  And this is where we need to accelerate our   evidence-based analysis and continue to support  developing countries to design the right kind   of policies and institutions. That's still the, I  guess, the bread and butter or the usual policies   about how to attract investment. I think many of  you mentioned that and how to attract investment   that will lead you to a trade led growth and  development, which includes trade facilitation,   efficient infrastructure and logistics, conducive  investment climate and capacity building that will   improve the functioning of domestic markets and  institutions. And I think there was a mention   of trade finance. How can we help the T-traders  really access trade finance and how do we reduce   the thick borders? And I think attention should  be put, this pushback on globalization. I was   a trade minister and the amount of blame that  trade gets on all the ills and all the downside   of the economy is really something that's  just easily targeted. So attention needs to   be put on complimentary policies that ensure  that we can have the benefits of trade that   are more equally distributed and this includes  inclusiveness, human capital, paying attention   to human capital and gender and so on. Second, new trends in technology, climate,   supply chain resilience and industrial policy are  creating challenges and opportunities. So it's   both challenges and opportunities for developing  countries. But we need to monitor all this to   ensure transparency and fairness. And I think  Alfred mentioned the point about standards,   and it's key that measures in the name  of climate for instance are transparent,   that are not unilaterally determined, that do  not distort trade in the guise of protection.   And this is where the multilateral discussion on  trade and environment and how impacts development   needs to happen. It's about transparency of  subsidies, making them targeted and time bound,   supporting data collection on an analysis on  trading services and also understanding better the   types of smart versus costly industrial policy and  understanding better trade costs. For businesses,   understanding the trade costs is really key. And then finally, not to be gloomy about the   multilateral trading system. It's not geeky as  Anabel said. Maybe it's a slow burn. Maybe it's   we can work on a big bang, but we can also explore  opportunities while we have lack of leadership and   maybe a slow process of reforms, what can be  done because we still need the frameworks to   underpin trade policies as well as certainty for  the private sector. I'm speaking as a former trade   minister where a lot of our trade reforms that  we did or even investment reforms and policy   reforms were to attract investment, but they  were done with a framework of what were the   international frameworks and standards. So we  will be working on this together with the WTO.   But just to mention two opportunities while we  are facing uncertainties and lack of leadership   in the multilateral trading system was the notion  of club of clubs and open regionalism. I would say   open club of clubs and open regionalism. The key  is open. Club of clubs is about having like-minded   countries move together where they can. And it  doesn't have to include China and the US. It can   be the JIS, Joint Initiative on Services, it  can be on digital, but they need to be open.   I know the digital one is open, even if you're  not ready yet to sign on to the negotiations,   you can participate and listen. And believe me,  just by participating and listening is already   capacity building for many developing countries,  just to think about what these new areas are.  And then open regionalism with the African  Continental Free Trade Area, CPTPP, in Maya,   in the East Asia region, it's the Regional  Comprehensive Economic Partnership of East   Asia. These can reduce thick borders. It's not  just about tariffs, as Alfred said, reduce the   thick borders. Do it in a way which is deepening  and broadening, open to members, open club,   and link it to the multilateral system. I'm just  going to quote one of your founders of Peterson,   Fred Bergsten, "Keep the bicycle moving." That's  what he always said. Just however way you can do   it, just keep the bicycle moving. So let me close  on that note, optimistic note that I'm not blue.   I'm a half full glass person. And I hope that all  of you will work together with us as partners,   as collaborators, and to support countries like  Kenya to really achieve not just a slow burn,   but if it's not a big bang, at least a certainly  significant impact for development for the people   that matter in these countries. Thank you very  much and thank you all of you for coming today.

Channel: World Bank

Views: 43,754

Keywords: world bank, international development, poverty, sustainable solutions, developing countries, prosperity, sustainable development, economic growth, development challenges, financing, policy advice, technical assistance, yt:cc=on, trade, wto, World Trade Organization, Peterson Institute for International Economics, supplies, goods, services, customs, commerce, globalization, crisis, war, conflict

Id: dpSd5P9dId4

Length: 100min 35sec (6035 seconds)

Published: Tue Feb 14 2023