Economic research and trade policy analysis

Can the flow of goods, services, and ideas build bridges where conflict once prevailed? If so, under whatcircumstances? The World Trade Organization (WTO) stands for a predictable, rules-based system based on the principle of non-discrimination. When the predecessor to the WTO – the General Agreement on Tariffs and Trade – was established some 70 years ago, conflict among nations was at an historic low, following World War II. In the changed global political landscape of today, geopolitical tensions, disruptions to trade and increasing concerns about economic inequality have come to the fore, challenging the foundations of multilateral trade relationships, and trade cooperation more generally. Pathways to Sustainable Trade and Peace is the first WTO publication dedicated to an in-depth exploration of the complex relationship between trade and peace. The publication examines a number of critical questions. How do trade and peace interact? Can trade be leveraged to foster economic development and stability? What can governments and other stakeholders do to foster positive interaction between trade and peace? The volume focuses specifically but not exclusively on fragile and conflict-affected economies, including case studies and analyses from various policy angles.

The publication “Pathways to Sustainable Trade and Peace” was prepared under the general responsibility and guidance of Maika Oshikawa, Director of the Accessions Division.

We live in troubled times. Beyond geopolitical tensions, uncertainty in the global economy, and stalling progress on collective challenges from poverty reduction and hunger to climate change, the world is witnessing the highest level of active conflicts since the end of the Second World War. According to the 2024 Global Peace Index compiled by the Institute of Economics and Peace, a think tank, fewer conflicts are being resolved, while they are becoming more internationalized.

Renewable hydrogen and hydrogen-derived commodities – such as ammonia, methanol and e-kerosene — are expected to play an important role in the transition to low-carbon energy because they are essential to decarbonize sectors such as heavy industry and transport. Jointly produced by the International Renewable Energy Agency (IRENA) and the WTO, this publication highlights the critical role of sound, coherent strategies in promoting the use of renewable hydrogen and hydrogen-derived commodities.

Artificial intelligence (AI) is transforming the way we live, work, produce and trade. As it further develops, AI is expected to unlock unprecedented economic and societal opportunities. However, it is also a source of significant risks and challenges. This report examines the intersection of AI and international trade. It discusses how AI may shape the future of international trade by reducing trade costs, improving productivity and expanding economies' comparative advantages. The report reviews some key trade policy considerations, in particular the urgent need to address the growing AI divide between economies and between large and small firms, as well as data governance and intellectual property issues. It examines how to guarantee the trustworthiness of AI without hindering trade. The report also provides an overview of domestic, regional and international government initiatives to promote and regulate AI, and highlights the resulting risk of regulatory fragmentation. Finally, the report discusses the critical role of the WTO in facilitating AI-related trade, ensuring trustworthy AI and addressing emerging trade tensions, noting that the rapid evolution of AI is prompting questions about the implications of AI for international trade rules.

The report of the Joint Task Force on Climate Action, Carbon Pricing, and Policy Spillovers, with participation by the IMF, OECD, UNCTAD, World Bank, and WTO, makes four main contributions. First, it reflects on a common understanding of carbon pricing metrics which inform on the incentives to decarbonize and on cross-country variation in carbon prices, a key determinant of international spillover effects and competitiveness concerns. Second, the report analyzes the appropriate mixes of climate change mitigation policies, emphasizing the pivotal role of carbon pricing as the only policy implementing the polluter pays principle while generating revenues. Third, it analyzes how international organizations can support the coordination of policies to maximize positive and limit negative cross-border spillovers from climate change mitigation policies. Finally, it discusses how such coordination can help to scale up climate action by closing the transparency gap, the implementation gap, and the ambition gap.

Over the past 30 years, the world has witnessed a period of unprecedented income convergence, as the wide gap in income levels between economies has narrowed. Economic growth has improved living conditions and prospects for many people around the world. However, not all individuals, regions and economies have benefited equally from the changes brought about by more open trade. The World Trade Report 2024 explores the complex interlinkages between trade and inclusiveness across and within economies. Openness to international trade can drive economic growth, but many low- and middle-income economies struggle to diversify or to integrate into world trade. Although trade supports numerous jobs and provides access to affordable goods and services, some individuals can face challenges in adapting to new economic conditions following trade openness. However, trade protectionism neither protects the overall economy, nor promotes inclusiveness within economies. Diversifying global value chains, reducing trade costs through digitalization, and transitioning to a low-carbon economy can create new opportunities for low- and middle-income economies. Addressing remaining barriers to trade and investment, facilitating the implementation of existing WTO agreements, and ensuring that the WTO is fit for new challenges are crucial to support inclusiveness across and within economies. Furthermore, trade policies need to be complemented by domestic measures, such as labour, education and competition policies, so that the gains from trade can flow to workers and consumers, and so that those individuals can move to benefit from those gains. WTO cooperation with other international organizations can magnify combined action on inclusiveness across and within economies.

WTO members are frequently referred to as “countries”, although some members are not countries in the usual sense of the word but are officially “customs territories”.

Over the past 30 years, the world has witnessed a period of unprecedented income convergence, accompanied by a steep reduction in poverty, but inequality remains high.

The World Trade Report 2024 was prepared under the general responsibility and guidance of Johanna Hill, WTO Deputy Director-General, and Ralph Ossa, Director of the Economic Research and Statistics Division. Director-General Ngozi Okonjo Iweala, Chief of Staff Bright Okogu and Trineesh Biswas from the Office of the Director-General provided valuable advice and guidance.

Trade has raised aggregate welfare and reduced poverty without necessarily raising inequality in many economies, but the impact of trade is more complex for individuals. People may benefit from cheaper prices, larger variety and export opportunities, but they may also face increased competition and may, therefore, either gain or lose from trade. This chapter reviews why, although most people gain from trade, some suffer losses. These losses can be aggravated by distortions and barriers, such as mobility costs or monopolies, that tend to impact more vulnerable groups disproportionately, and may prevent them from adjusting to import competition and accessing export opportunities. The chapter also examines why using restrictive trade policy to redistribute gains from trade is often unsuccessful and can have unintended consequences, such as retaliation by trade partners. In contrast, domestic policies, such as education and social protection, are more effective in addressing inequality. Their importance is likely to grow as the digital revolution, climate change and geopolitics continue to shape the distributional impacts of trade.

The World Trade Report 2024 was prepared under the general responsibility and guidance of Johanna Hill, WTO Deputy Director-General, and Ralph Ossa, Director of the Economic Research and Statistics Division. Director-General Ngozi Okonjo Iweala, Chief of Staff Bright Okogu and Trineesh Biswas from the Office of the Director-General provided valuable advice and guidance.

The mission of the World Trade Organization, as set out in the preamble to its founding Marrakesh Agreement, is to use trade as a means to raise living standards, create jobs and promote sustainable development. As we mark the WTO’s 30th anniversary, it is clear that members have used the open and predictable global economy anchored in WTO rules and norms to accelerate growth and development, with enormous positive impacts for human well-being. At the same time, many people and places have not shared adequately in these gains.

Global trade is often accused of creating a more unequal world, but in fact the opposite is happening. Billions of people in developing economies are catching up to the more advanced economies, as millions of people in the advanced economies continue to move ahead. This global economic convergence is only possible because the world has become more open and integrated – expanding access to new markets, new technologies and new models for achieving rapid, sustained and inclusive growth.

The past quarter of a century has witnessed an unprecedented level of income convergence, accompanied by the integration of many developing economies into global markets. Despite this, some economies have been left behind. This chapter discusses how the participation of developing economies in global trade and investment flows can accelerate structural transformation and enhance productivity growth, thereby helping lowand middle-income economies to achieve the economic growth that ensures convergence with high-income economies. The chapter also examines why some economies have taken little advantage of globalization, and focuses on barriers to maximizing the gains from trade participation, such as trade costs and commodity dependence. Finally, the chapter discusses how recent trends in the global economy are shaping future opportunities and challenges for developing economies to leverage trade and foreign direct investment for economic growth, and which policies can help to achieve convergence in the upcoming decade.

Over the past 30 years, the world has witnessed a period of unprecedented income convergence, accompanied by a steep reduction in poverty, but inequality remains high.

Global traffic from data centres is estimated to have increased fourfold since 2015 – from 5 zettabytes in 2015 to around 20 in 2021. To put that into perspective, a zettabyte is 1 000 000 000 000 000 000 000 bytes (21 zeros), that is, a thousand exabytes, a billion terabytes, or a trillion gigabytes. There are 20 times more bytes of traffic from data centres than there are stars in the expanding universe.

Today, our social and economic activities are underpinned by the movement of data across international borders. They help us connect with family and friends; they support research addressing global challenges; they enable the co-ordination of production along supply chains; and allow firms, notably smaller ones, and people to access global markets. In sum, cross-border data flows have become the lifeblood of modern day social and economic activities.

The channels of transmission across the different shocks can be gleaned by introducing the shocks one by one, cumulatively, starting from the change in trade costs, followed by the change in willingness to pay (Figure A C.1).

Figure A D.1 displays the projected change in real exports and real GDP for the four scenarios with the three types of costs (trade costs, WTP, and data management costs) entered one at a time. In Scenario A No data localisation, there is a small contribution of trade cost reductions, because the interaction of data flow and data localisation policies on trade costs is considered. Lifting data localisation policies would for some regions with less restrictive data flow policies imply a reduction in the costs of transferring data and thus an expansion of trade. At the global level the impact is marginal, because this only happens in isolated cases. The contribution of WTP/trust is larger to the expansion of real GDP and real exports, since the isolated regions would move to a safeguards regime with higher levels of trust when restrictive data localisation policies are lifted.

Acknowledgements are due to all the data providers, mostly national administrations or WTO delegations who have made this information available including through notifications presented as a special topic. In a number of cases, data has been made available on national websites or through regional organizations. Given the vast amount of statistical data and metadata that needed to be processed, and because this information is not available in one single organization, this publication was only possible as a joint effort of the WTO, ITC, and UNCTAD. Each of the three organizations has a proven track record and comparative strengths in the field of tariff analysis.

World Tariff Profiles 2024 provides comprehensive information on the tariffs and non-tariff measures imposed by over 170 countries and customs territories. The publication starts with a breakdown of the tariffs imposed by these economies. Tariff data are presented in comparative tables and in one-page profiles for each economy. A summary table on selected indicators on the imports and exports profile for these economies is also presented. Statistics on non tariff measures by economy and by product group complement the data on tariffs. This special topic deals with “Tariffs on critical minerals in the electric vehicle value chain”. The publication is jointly prepared by the World Trade Organization, the UN Trade and Development (UNCTAD) and the International Trade Centre (ITC).

The WTO’s 13th Ministerial Conference (MC13), which took place earlier this year in Abu Dhabi, reaffirmed the international community’s shared commitment to promote inclusive and sustainable development through trade. Aid for Trade remains a critical element of our collective commitment to ensuring that the benefits of trade are shared more widely, particularly with developing economies and least-developed countries (LDCs).

Aid for Trade seeks to enable developing economies, and in particular least-developed countries (LDCs), to use trade as a means of fostering economic growth, sustainable development and poverty reduction. It promotes the integration of developing economies, especially LDCs, into the multilateral trading system and aims to galvanize support to build supply-side capacity and trade-related infrastructure in these economies to improve trade performance.

The establishment of the multilateral trading system over seven decades ago was based on the understanding that interdependence and cooperation contribute to peace and shared prosperity. More recently, however, new challenges, such as geopolitical tensions, rising inequalities and climate change, have led to fears that globalization exposes countries to excessive risks. Such fears have increased pressures to unwind trading relationships and turn to unilateral policies through a process of fragmentation. This year’s World Trade Report examines the benefits of integration into world trade as well as the risks of fragmentation. It shows that trade has proved to be a source of security and peace, a driver of poverty reduction, and a critical tool for addressing climate change. The Report argues that, to make our economies more secure, inclusive and sustainable, re-globalization – or integrating more people, economies and pressing issues into global trade and strengthening multilateral cooperation – is a much more effective solution to global challenges than fragmentation. Global problems need global solutions, meaning that today’s world needs more cooperation, not less. A reinvigorated multilateral trading system overseen by the WTO has an important role to play in this process.

This chapter shows that, despite difficulties in the global trade policy landscape, global trade flows have been resilient and continue to evolve in a direction that is more sustainable and inclusive. Narratives surrounding the benefits of globalization have turned more sceptical in the past decade. These narratives have started to reflect in global trade as the first policy-driven fractures appear in the system. Yet, the digital revolution continues to promote economic integration by facilitating trade in goods and, even more so, in services. There is still significant potential for trade to contribute further to the growth of the world economy, and to bring further benefits to developing economies via the expansion of global value chains. However, if the untapped potential of new trade flows is to be accessed, policies must remain outward-looking.