The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to ensure that trade flows as smoothly, predictably and freely as possible.
The WTO has many roles: it operates a global system of trade rules, it acts as a forum for negotiating trade agreements, it settles trade disputes between its members and it supports the needs of developing countries.
All major decisions are made by the WTO's member governments: either by ministers (who usually meet at least every two years) or by their ambassadors or delegates (who meet regularly in Geneva).
The primary purpose of the WTO is to open trade for the benefit of all.
The WTO is central to achieving the 2030 Agenda for Sustainable Development and its Sustainable Development Goals (SDGs), which set targets to be achieved by 2030 in areas such as poverty reduction, health, education and the environment. The SDGs put significant emphasis on the role that trade plays in promoting sustainable development and recognize the contribution that the WTO can make to the 2030 Agenda.
By delivering and implementing trade reforms which are pro-growth and pro-development, and by continuing to foster stable, predictable and equitable trading relations across the world, the WTO is playing an important role in delivering the SDGs, just as it did with the Millennium Development Goals before them.
The WTO is playing an important role in the achievement of the UN's Agenda 2030 for Sustainable Development and collaborates closely with the UN's Department for Economic and Social Affairs in monitoring progress in attaining the Sustainable Development Goals (SDGs). The WTO reports annually to the UN's High-level Political Forum (HLPF) on WTO efforts to achieve trade-specific targets in the SDGs. The HLPF is the UN's main means of reviewing the 2030 Agenda for Sustainable Development and allows all UN members and specialized agencies to meet annually to evaluate progress on achieving the SDGs.
The SDGs put significant emphasis on the role that trade plays in promoting sustainable development and recognize the contribution that the WTO can make to the 2030 Agenda.
Historically, trade has proven to be an engine for development and poverty reduction by boosting growth, particularly in developing countries. Rapid growth greatly contributed to the unprecedented reduction of poverty levels which led to the early achievement of the Millennium Development Goal to reduce poverty by half by 2015.
Trade works for developing countries because opening up to trade increases a country’s economic growth as it allows each country to use its resources more efficiently by specializing in the production of the goods and services it can produce more competitively. By increasing growth, trade can also make available the necessary resources to implement other development targets in the social and environmental sphere. Trade also contributes directly to poverty reduction by opening up new employment opportunities, and reducing the prices of goods and services for poor consumers, including foodstuffs.
Integration into the multilateral trading system, as embodied by the WTO, also helps the long-term growth prospects of developing countries by providing them with access to new markets, new technologies and new investment, making their development sustainable. For all these reasons, trade and the WTO will continue to play a key role in the achievement of SDG 1 on ending poverty as well as several of the other
goals in the 2030 Agenda.
But in order for countries to fully reap the benefits of trade, it is necessary to adopt approaches which aim to mainstream trade into their national sustainable development strategies. This is because trade has cross-cutting effects in the economy and significant
linkages to other sectors. Therefore, mainstreaming trade policies into development plans enhances coherence in the use of trade as a proactive tool in achieving poverty reduction and fulfilling other SDGs among all stakeholders.
PROMOTE A UNIVERSAL TRADING SYSTEM UNDER THE WTO
The SDGs put significant emphasis on the role that trade plays in promoting sustainable development and recognize the contribution that the WTO can make to the 2030 Agenda.
Economic growth must be inclusive to provide sustainable jobs and promote equality.
Integrating the WTO, also helps the long-term growth prospects of developing countries by providing them with access to new markets, new technologies and new investments, making their development sustainable.
Trade works for developing countries because opening up to trade increases a country’s economic growth as it allows each country to use its resources more efficiently by specializing in the production of the goods and services it can produce more competitively.
Further efforts to strengthen and reform the WTO can help to support efforts at the national level and ensure that the benefits of trade are spread more widely. The series of successes at the WTO in recent years illustrates how the trading system can help to tackle priority trade issues for developing countries. The Trade Facilitation Agreement, the expansion of the Information Technology Agreement, the amendment of the TRIPS (Trade-related Aspects of Intellectual Property Rights) Agreement easing access to medicines and the agreement to abolish agricultural export subsidies will all deliver important benefits.
Moreover, the different approaches represented by these agreements show that the system is adaptable and dynamic in its response to the changing landscape and emerging challenges. By delivering and implementing trade reforms which are pro-growth and pro-development, and by continuing to foster stable, predictable and equitable trading relations across the world, the WTO will play an important role in delivering the Sustainable Development Goals, just as it did with the Millennium Development Goals before them.
Major advances have been made in enhancing trade opportunities for LDCs, as well as in providing continued flexibilities to implement WTO rules and disciplines. A set of concrete decisions aimed at improving market access for LDC products, such as duty-free and quota-free (DFQF) market access, preferential rules of origin and the LDC services waiver, indicate members’ commitment to LDCs’ development, while WTO members’ generous extension until 1 July 2034 of the transition period for LDCs under the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) attests to members’ willingness to allow LDCs sufficient time to integrate WTO rules. LDCs have also received special treatment in the implementation of multilateral agreements like the WTO Trade Facilitation Agreement (TFA), which has the potential to reduce trade costs in LDCs.
LDCs thus continue to remain at the heart of the development dimension of the multilateral trading system. At the same time, LDCs have not been able to take full advantage of the opportunities provided under the multilateral trading system, and their participation in global trade has not reached the desired level. The IPoA goal of doubling the share of LDCs in global exports by 2020 was not met. LDCs’ trade performance is conditioned by their weak productive and institutional capacity, narrow export base and limited market destinations, continued and widening trade deficit, susceptibility to high price volatility for primary commodities, and, most recently, by the declining demand and global economic contractions resulting from the ongoing COVID-19 pandemic.
LDCs are facing challenges similar to those they were already confronting a decade ago, and these are severely impacting their ability to recover from the ongoing pandemic. It is in these challenging circumstances that the Fifth United Nations Conference on the Least Developed Countries (LDC5) will be held. LDC5 should aim to forge a renewed partnership between LDCs and their trading and development partners over the next decade, in order to build a strong foundation of enhanced economic growth and resilience in LDCs that will overlap with the remaining years of the 2030 Agenda for Sustainable Development.
The latest LDC Trade Ministers’ Declaration, adopted in October 2021, stressed the importance of the speedy recovery of LDCs from the ongoing pandemic through increased trade opportunities.2 It set out LDC trade priorities, including the effective
implementation of commitments in favor of LDCs and positive actions on LDC graduation. Other priority areas include specific treatment of LDCs in the disciplines on fisheries subsidies, agriculture, development and trade-related response to the COVID-19. The beneficial integration of LDCs into global trade continues to be a priority, and the international community must reaffirm its commitment to and support of LDCs, so that trade can continue to be a fundamental driver of their development goals.
The following are the steps that would help to ensure that international trade contributes to accelerating progress in achieving the SDGs:
1. Mainstream trade into national and sector strategies to achieve the SDGs.
2. Strengthen the multilateral trading system so that it can continue supporting inclusive growth, jobs and poverty reduction.
3. Continue reducing trade costs including through full implementation of the WTO’s Trade Facilitation Agreement.
4. Build supply-side capacity and trade-related infrastructure in developing countries and LDCs.
5. Focus on export diversification and value addition.
6. Enhance the services sector.
7. Apply flexible rules of origin to increase the utilization of preference schemes.
8. Ensure that non-tariff measures do not become barriers to trade.
9. Make e-commerce a force for inclusion.
10. Support micro, small and medium-sized enterprises to engage in international trade.
Over the past 15 years, accelerated economic growth in developing countries has resulted in narrowing of the income gap between developing and developed countries. The growth spurt in developing countries has been dramatic: after growing a mere 1.5% annually in the 1990s, incomes have grown by 4.7% per year on average thereafter. Meanwhile, annual per capita income growth in the developed world slowed to just 0.9%, down from 2.8% in the 1990s.
Developing country G-20 members have done particularly well (5.2% growth) while both least-developed countries (LDCs) and other developing countries have grown 3.7%. Given their size, rapid industrialization and greater trade openness among developing countries, G-20 members such as China, India and Brazil may have drawn along other developing countries. Higher demand for commodities, such as minerals, ores and fuels, resulted in higher prices in the 2000s, consequently boosting incomes in resource-exporting developing
countries, including many LDCs.
Developing economies as a whole now constitute around half of both global output and global trade (rising from 39% and 32% respectively in 2000). This rapid growth, fueled in part by trade, greatly contributed to an unprecedented reduction of poverty levels, leading to an early achievement of MDG 1 which aimed at halving, between 1990 and 2015, the proportion of people whose income is less than one dollar a day. According to the most recent estimates published by the World Bank, in 2013, 10.7% of the world’s population lived on less than
US$ 1.90 a day (the current definition of extreme poverty) compared with 12.4% in 2012.
The true value of trade, however, is essentially interwoven throughout the SDGs, with explicit trade targets across SDG 2 on zero hunger, SDG 3 on good health and well-being, SDG 8 on decent work and economic growth, SDG 10 on reduced inequalities, SDG 12 on responsible consumption and production, and SDG 14 on life below water, and even more deeply underpinning targets in almost all of the SDGs.
To support the sustainable development agenda, it is important to create an open environment for trade, including through e-commerce, that generates equal opportunities for economic growth and development while guaranteeing a safe environment for consumers and businesses. Striking this balance will require a global approach that promotes dialogue and the open exchange of information between actors so as to fully understand the links between trade, economic growth and poverty reduction, and to address the challenges posed by a constantly evolving trade and economic landscape.
Because of trade’s role in supporting sustainable development, more and more governments are adopting measures which aim to mainstream trade into their national sustainable development strategies. As trade is closely linked with other sectors and investments are driven by a variety
of stakeholders, trade policies need to be mainstreamed into national and specific-sector sustainable development plans.
Such an approach ensures that all stakeholders work hand in hand in using trade as a tool for reducing poverty and fulfilling other SDGs. By mainstreaming trade into national policy, institutional and resourcing considerations, countries can make headway in achieving a range of SDG targets, including those relating to participation in international trade, decent work and sustainable economic growth, reducing poverty and strengthening environmental protection.