## Creating a Better Global Trade System

_IMF Blog, May 29, 2018_

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**Canonical URL:** [Creating a Better Global Trade System](https://www.imf.org/en/blogs/articles/2018/05/29/blog-creating-a-better-global-trade-system)

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## Bibliographic details
- Authors: Christine Lagarde
- Published: May 29, 2018

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### Overview: the new era of trade
- Recent discussions have focused on protectionist measures and diplomatic tensions, raising concerns over growth and jobs.
- The piece argues we are entering a new era of trade in which data flows are becoming more important than physical trade.
- Between 1986-2008, global trade in goods and services grew at more than twice the rate of the global economy.
- In recent years, growth in traditional trade has barely exceeded global GDP growth.
- According to Cisco, the amount of cross-border bandwidth used grew 90-fold between 2005 and 2016, and is expected to grow an additional 13-fold by 2023.
- The role of data boosts the tradability of services—engineering, communications, transportation—leading to the central claim: "The future of trade is the future of data."

### More trade in services: findings and potential winners
- Global trade in services has been growing relatively fast and now accounts for one-fifth of global exports.
- Some estimates indicate half of global trade in services is already driven by digital technology.
- Trade barriers for services remain extremely high, equivalent to tariffs of some 30 to 50 percent.
- Potential beneficiaries if services become the main driver of global trade:
  - Advanced economies: globally competitive in many service sectors, especially financial, legal, and consulting.
  - Developing economies (examples given): Colombia, Ghana, and the Philippines, which are promoting tradable services such as communications and business services.
  - Millions of small businesses and individuals who can use digital tools to leverage expertise in the global marketplace.
- Normative statement: "We can build the Wealth of Nations in the 21st-century on trade in services."

### More productive: mechanisms and impacts
- Shift from "physical" to more data-driven trade can increase productivity.
- Increasing automation may prompt reshoring of operations, potentially rejuvenating manufacturing industries in advanced economies with more domestically-based factories and higher-paying jobs.
- 3-D printing example: companies moving production closer to customers (example of a large shoe brand printing customized soles in high-street shops).
- If trends continue, supply chains could become shorter, more productive, and less carbon-intensive.
- Digitalization will intensify competition, pushing companies to invest in new technologies and more efficient practices.
- New IMF analysis shows greater competition accelerates diffusion of technology across countries and the rate of innovation.
- It is estimated that the poorest 10 percent of consumers gain almost two thirds of their purchasing power from trade.

### More inclusive: challenges and policy responses
- The digital revolution in trade will put further pressure on workers less well-equipped to compete.
- Need for greater inclusiveness through scaled-up investment in training and social safety nets, enabling workers to upgrade skills and transition to higher-quality jobs.
- Evidence cited: experiences in Canada and Sweden show that on-the-job training is more effective than classroom learning.
- IMF roles:
  - At the global level: analyze exchange rates and monitor global economic imbalances.
  - At the country level: work with all our 189 members on policies to help remove trade and investment barriers, encouraging more open economies where the private sector can thrive and create jobs.
- Summary objective: trade should be more services-based, more productive, and more inclusive so everyone can benefit.

### More international cooperation: rules and reform options
- The postwar multilateral trade system has lifted hundreds of millions out of poverty and boosted incomes and living standards, but it needs improvement to adapt to the new era.
- Governments face issues not squarely covered by WTO rules, including various state subsidies, restrictions on data flows, and protection of intellectual property.
- Policy mechanisms suggested:
  - Use "plurilateral" trade agreements among like-minded countries operating within the WTO framework.
  - Negotiate new WTO agreements on e-commerce and digital services.
- Positive example: the Trans-Pacific Partnership, or TPP-11, for the first time in a broader trade agreement guarantees the free flow of data across borders for service suppliers and investors.
- Call to action: push for further trade reforms in a multilateral setting where rules are respected, countries work in partnership, and everyone is committed to fairness.
- Closing proposition: by building new economic bridges and shaping a new era of trade, we can foster more prosperous and more peaceful communities across the world.

*Christine Lagarde, May 29, 2018 — Creating a Better Global Trade System*

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## Content in this bundle

- **建立一个更好的全球贸易体系; IMF博客; 2018 年5 月29 日**
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  - [Mewujudkan Sistem Perdagangan Global yang Lebih Baik; IMF blog; 29 Mei 2018 (PDF)](/external/lang/indonesian/np/blog/2018/052918i.pdf){rel="external" type="application/pdf"}
- **Создание лучшей системы мировой торговли; Кристин Лагард; Блог МВФ; 29 мая 2018 года**
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  - [Создание лучшей системы мировой торговли; Кристин Лагард; Блог МВФ; 29 мая 2018 года (PDF)](/external/russian/np/blog/2018/052918r.pdf){rel="external" type="application/pdf"}

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## References

- [عربي](http://www.imf.org/ar/News/Articles/2018/05/29/blog-creating-a-better-global-trade-system)
- [Português](https://www.imf.org/pt/News/Articles/2018/05/29/blog-creating-a-better-global-trade-system)
- [https://www.imf.org/wp-content/uploads/2018/05/BLOG-1024x600-bicycle-frame-MD-trade-Stephen-Lam-Newscom-rtrlnine943489.gif](https://www.imf.org/wp-content/uploads/2018/05/BLOG-1024x600-bicycle-frame-MD-trade-Stephen-Lam-Newscom-rtrlnine943489.gif)

_Source: https://www.imf.org/en/blogs/articles/2018/05/29/blog-creating-a-better-global-trade-system_