Summary of the Key Points
This authoritative opinion, published by a researcher from the Institute of World Economics at the Chinese Academy of Social Sciences, offers a practical solution to the currently stalled global trade system. The proposal does not aim to overthrow the free trade framework that has been in place for seven or eight decades but rather to address the core flaws that have emerged over the past few decades—those that focused solely on expanding trade while ignoring the needs of weaker countries and ordinary people. The plan aims to enhance the export capabilities of countries, especially poorer ones, and provide support for the affected populations, thereby shifting the trade system towards a more inclusive model that puts people first. This approach seeks to prevent the proliferation of trade protectionism and the widening gap between rich and poor countries, which could undermine the entire multilateral trade system. The goal is for all countries and their citizens to equitably benefit from globalization.
Detailed Explanation
Why the Global Trade System Is Unpopular on Both Sides
The global trade system, established after World War II with the WTO at its core, has made significant contributions: countries have negotiated reduced tariffs and avoided arbitrary trade barriers, significantly expanding global trade. Over the past few decades, the global economy has grown rapidly, and hundreds of millions of people have been lifted out of poverty, largely thanks to this system. However, from the outset, it contained an assumption that all countries had viable export products and that everyone could benefit from free trade, without considering the complexities of reality. This has led to problems on both ends:
- On one hand, there is a growing backlash against globalization within developed countries. In the past few decades, developed countries have moved low-cost manufacturing jobs to cheaper labor markets, resulting in job losses and stagnant wages for local workers. These workers have begun to blame free trade for their plight, prompting politicians to implement trade protectionist measures. As a result, various trade restrictions are emerging in Europe and the United States, and even the WTO rules are being increasingly ignored.
- On the other hand, many poor countries are excluded from the benefits of trade. Even if developed countries grant them tariff exemptions, these countries often lack the infrastructure and manufacturing capabilities to participate in global trade. Together, the poorest countries account for only 1% of global trade, meaning they hardly benefit from globalization.
"People-Oriented" Reform Is Not Anti-Globalization
Reforming the trade system is not about abandoning free trade but rather about addressing its shortcomings. The new approach includes two essential safeguards:
- The first safeguard is a "development-oriented" approach: instead of simply granting tariff exemptions, developed countries should help poorer countries by building infrastructure, providing technology, and supporting their industrial development, so they can produce competitive products for the global market. This is beneficial not only for poor countries but also for developed nations. For example, trying to revive manufacturing through tariffs is ineffective; instead, opening up investment and allowing global capital and technology to enter can boost domestic production.
- The second safeguard is social protection for ordinary people. Free trade does not guarantee wealth for everyone. For instance, if a local factory closes due to cheaper imported goods, the government must provide support, such as job subsidies and skills training, to help workers find new employment.
Delaying Reform Will Lead to Disaster
The current trade system is in a critical state, and two major issues are imminent:
- Extreme protectionism within developed countries: If workers affected by trade losses continue to go unaided, anti-globalization sentiments will intensify, leading to more extreme trade restrictions. This will reduce global trade and increase the cost of imported goods, affecting everyone's wages and employment.
- Widening wealth disparities between rich and poor countries: Poor countries will remain impoverished, potentially leading to refugee flows and geopolitical conflicts that could spread to developed nations, undermining the entire trade system and returning to a state of isolationism, which would be much worse than the current situation.
Three Practical Steps for Reform
The proposed reforms are not just theoretical; there are three tangible actions that can be taken:
1. Deepen development cooperation: Countries can work together, such as China, which already provides tariff exemptions for most goods from the poorest countries and helps with digital infrastructure and industrial transformation.
2. Remove barriers to cross-border investment: Implement the WTO's Investment Facilitation Agreement to lower the barriers to foreign investment and facilitate capital and technology transfer, thereby boosting production capacity.
3. Share best practices: Establish a platform within the WTO to exchange strategies for supporting workers affected by trade, such as free training and job transition assistance, to reduce the grounds for anti-globalization.
In essence, the reform aims to transform globalization from a game where only countries and large corporations benefit into one where all countries and their citizens can share the benefits, ensuring its sustainability.