Authors: Amitji Odedra and Joseph Mate.
The UN’s Agenda for Sustainable Development is described as a defining moment for people and the planet. It combines the unfinished business of the Millennium Development Goals (MDGs) with a focus on sustainability.
The World Trade Organization (WTO) is a key participant on the quest to achieve the Agenda’s Sustainable Development Goals (SDGs) by 2030. Unlike MDGs, the SDGs acknowledge that trade is a crucial component in reducing poverty and improving health, education, as well as the overall environment. Therefore, the SDGs create new opportunities for trade-related stakeholders.
How global trade contributes to attaining the SDGs
Countries which open for trade are given the chance to specialize in what they do best and use their resources more efficiently. Specialization enhances their competitiveness. The direct impact is growth, leaving resources to implement other goals. Trade creates new job openings. It decreases prices of basic goods and services so they are more approachable to the lower end consumers. These effects combined not only promote prosperity, but also reduce poverty.
Through the multilateral trading system, the WTO encourages long-term growth of all participants. Countries receive access to new markets, get to discover new technologies and gain funds. But, to be successful, these efforts need to be supported at the national level.
It requires a deliberate effort to embody trade deeply within the country’s development strategies in order to create the infrastructure that allows a country to benefit from its blossoming trade. This is the only way to gain and observe its social, economic and environmental benefits.
The value of trade is interlinked within the following SDGs as highlighted by the WTO, showing how fundamentally important it is for their achievement. Perhaps it is a not readily definable sector, but trade is a pro-active tool with enormous potential.
SDG 1 - Poverty
Trade has already shown to be a very powerful engine for poverty reduction. By boosting growth and supporting development, it has been of great help to developing countries. It even led to an early achievement of the Millennium Goal to cut poverty in half by 2015. This extraordinary accomplishment is owed to a rapid and unprecedented economic development that took place in the last decade and a half.
SDG 2- Zero Hunger
By abolishing subsidies on agricultural exports that caused market distortions in 2015, the WTO has helped farmers with the challenge of unfair competition. It also enhanced the protection of consumers with international quality standards. This reform leveled the playing field of agriculture and surely improved the quality of life of future generations. The system needs to be further strengthened so it can continue resisting new barriers to trade. The WTO needs to make sure that the measures that have specific health or environmental objectives are not used as a disguised form of trade protectionism.
SDG 3 - Good health and wellbeing
This is where trade can help in tackling priority issues in developing countries. The amendment of the TRIPS (Trade-related Aspects of Intellectual Property Rights) Agreement has provided developing countries with a legal and accessible access to medicines.
SDG 5- Gender equality
Growth offers opportunities for all. Trade-triggered economic growth directly brings more opportunities for women’s employment. Women constitute up to 90% of the workforce in export processing zones in most of developing countries such as Sri Lanka. One third of the world’s SMEs are women-owned. So empowering SMEs has a direct impact on women.
Also, WTO’s initiatives support the service sector, globally the largest source of employment for women. In 2015, 62% of women were reported to be in this sector. Also, this sector holds a large share of GDP in developing countries. Enhancing this sector will contribute to improving gender equality by providing education opportunities and decent work. Furthermore, it will reduce inequalities and not only within but also among countries. But, to be effective, trade efforts need to be supported by adequate gender-friendly policies.
SDG 8 - Decent Work and Economic Growth
Trade-triggered economic growth increases the income-generating capacity. This is a prerequisite for sustainable development. The WTO is making efforts to create a globally stable environment that allows economic activity to flourish. In such an open environment, businesses are safe and are given equal opportunities for growth and development. Trade facilitation measures such as reduced costs have shown to be favorable especially to SMEs who are most sensitive to such burdens, i.e. bureaucracy.
E-Commerce is a crucial ingredient of this environment. It has helped micro, small and medium-sized enterprises (MSMEs) overcome barriers to access new markets. While global trade growth continues to be slow and the recover of the economy sluggish, e-commerce was valued at US$ 22.1 trillion in 2015. This is a 38% increase from 2013. Beyond trade benefits and overcoming issues relating to economies of scale, e-commerce has also improved access on other areas like education, health and information.
SDG 9 - Industry, Innovation and Infrastructure
Encouraging trade opens doors for technology exchange, creates space for innovations and encourages sharing of knowledge. A win-win for all. With the Information Technology Agreement, it is estimated that by 2019, 95.4% of ITA participants’ import duties on IT products will be fully eliminated. Innovation is crucial for new economic opportunities, such as environmental goods and services that are considered essential to achieving SDGs. The global market for sustainable natural resource products has been estimated at US$ 50 billion by the International Trade Centre.
Without sustainability in mind, even the best efforts will be short lived and therefore, unattainable. But when in line with WTO, sustainability standards can go a long way in opening new trade opportunities.
SDG 10 - Reduced Inequalities
The WTO aims to reduce the gap between the world’s poorest and richest with the principle of Special and Differential Treatment for Developing Countries. The WTO’s implementation of duty-free and quota-free market access for LDCs with transparent and simple rules of origin for exported goods is meant to add a dimension of flexibility that puts the constraints of LDCs into account. Developing countries are also given support in implementing international standards regarding food safety, also helping to achieve SDG 2 and SDG 3.
SDG 14 - Life Below Water
The WTO supports environmental efforts to preserve the oceans. It committed its members to prohibit subsidies that contribute to overfishing, and eliminated subsidies that contribute to illegal fishing.
SDG 17 - Partnerships for the Goals
This goal amplifies the impact of trade. It is up to the WTO to strengthen the means of implementation and revitalize the global partnerships to achieve sustainable development. Only such an approach ensures that all stakeholders work together in using trade as a tool to fulfill the SDGs. The WTO must call for countries to “promote a universal, rules-based, open, non-discriminatory and equitable multilateral trading system”. It should encourage the increase of developing countries’ exports and doubling of the share of LDCs’ exports. Also, trade should encourage the diversification of exports to cope more confidently with emerging challenges in the constantly changing landscape. It is more than clear that the WTO will play a big role in realizing the SDGs.
The importance of Trade Finance
Up to 80% of global trade is supported by some sort of financing. Yet, many companies cannot access these resources. While multinational companies are declined financing in 10% of cases, the rate for SMEs is as high as 58%, post the 2008 Global Financial Crisis.
The availability of financing is essential for the health of any trading system as it helps to target funds where they are needed, at the heart of a business. Hence, it is an absolute must to supplement the traditional providers of Trade Finance liquidity (namely banks) with private capital.
A strong trading system is essential for delivering the SDGs. Trade Finance has the potential to play a big role in creating that system. It can provide the much-needed support to achieve gender equality, increase decent work opportunities, boost economic growth, foster industrialization, innovation and infrastructure, reduce inequalities and increase participation in world trade.