What's the state of global trade? Here's what we learned in Davos

Trade and investment were an important focus of the World Economic Forum’s 2024 Annual Meeting in Davos, central to international efforts to the central theme of “rebuilding trust”.

Continued geopolitical tensions, ongoing regional conflicts, enduring supply chain uncertainty and persistent although gradually falling inflation all had a tangible impact on international trade in 2023.

Weak performance in goods trade was somewhat offset by growth in global services trade. Entering into 2024, the World Trade Organization (WTO) finds that trade growth is slowly returning to long term trends.

International trade has for decades underpinned global economic growth, technological progress and poverty alleviation. Several themes seemed to recur across many of the discussions.

It’s time to revitalise trade, said the World Economic Forum President Børge Brende at the start of the week, contending that “slowbalization” is holding back growth, employment and sustainable development. Brende also provided a menu of actions for stakeholders to consider.

Panellists debated the complexities of trade, trade policies and the future outlook. “This is a hugely transformative moment in the global economy,” said Chrystia Freeland, Minister of Finance of Canada. "We believe we have to hustle; this is a moment the cement is being poured for the new economy, we have to be out there talking to investors.”

For many in Davos, trade as a motor of development remains clear but other participants called for reflection on a new paradigm.

Ibrahim Patel, Minister of Trade, Industry and Competition of South Africa, felt that the rules of the multilateral trading system need to be rebalanced to better work for developing countries. He said that Indonesia has moved up the nickel value chain in the past decade despite of, and not thanks to, WTO rules.

Dr Ngozi Okonjo-Iweala, Director-General of the WTO, asserted that: “We need to think of globalization, not in the way it was done before, but differently, and we need to make sure that those who did not benefit during the first round, benefit this time. The reason globalization got a bad name is that some poor people in rich countries were left out, and poor countries, or developing countries were at the margin.”

The importance of practical trade facilitation to support growth and development was emphasised in many discussions. The Global Alliance for Trade Facilitation launched new projects, including one in East Africa to streamline trade in mangoes, and one in El Salvador to better measure and address logistics hurdles. Similar concrete efforts to streamline investment – especially in digital sectors – were announced for Oman and Cyprus.

Many conversations debated how best to align trade and climate policy. Climate measures have sparked trade tensions, but stable supply chains are also needed for clean tech acceleration.

“When tomorrow looks more or less like today, you can let the market fix things, but when you have to go through systemic changes, where you have to deal with both the chicken and the egg […] that requires industrial policy and more state intervention”, said Espen Barth Eide, Minister of Foreign Affairs of Norway. He added that more work is needed to make sure developing countries are not locked out of green value chains.

Critical minerals value chains were in the spotlight, as participants highlighted opportunities for developing countries but also geopolitical risks to navigate.

“I believe a number of developing countries have huge opportunities to be part of the supply chain, starting with mining but could also be processing, and that will create new trade patterns,” said Jakob Stausholm, Chief Executive Officer, Rio Tinto.

Embracing these complexities, more than 20 trade, finance and environment ministers came together through the Coalition of Trade Ministers on Climate to identify a common agenda for sustainable growth.

Ministers representing 36 countries called for exploration on “how to use trade and trade policies to advance the development, diffusion, accessibility and uptake of goods, services and technologies that can contribute to climate action”.

Elsewhere, the heads of 15 investment promotion agencies (IPAs) collectively representing 1.8 billion citizens together with the World Association of Investment Promotion Agencies (WAIPA) called for a new climate foreign direct investment (FDI) coalition.

Such a collation could help IPAs anchor climate finance in tangible domestic green growth projects in a way that best serves local communities. Coalition members could exchange best practices and work together on unlocking capital flows for climate action.

Globalization and global economic cooperation are not going away, but changing as trade rebalances towards a more sustainable and resilient equilibrium.

Ursula von der Leyen, President of the European Commission noted that “we do not want to decouple, this is neither reasonable, nor is it feasible” elaborating that the aim is to better manage overdependence in supply chains.

Meanwhile, Emmanuel Macron, President of France, noted that European efforts to strengthen sovereignty were aimed at reducing overdependence on certain geographies for critical elements of supply chains and moving towards a global economy characterized by “balance, equilibrium and respect”.

Vincent Clerc, CEO at A.P. Møller-Maersk expressed scepticism towards the notion that deglobalization is taking place, noting that “as of today, there is no data that shows this is under way”, a thought that was echoed by Professor Simon Evenett, Founder at the St Gallen Endowment, who opined that globally, companies’ “appetite to find new customers and serve new market segments abroad is undiminished and will continue to knit national markets together, countering any policy-induced fragmentation”.

Rebeca Grynspan, Secretary-General at the United Nations Conference on Trade and Development (UNCTAD), noted that “we are going from what we called 'hyper globalization' to something that we are calling 'poly-globalization'", which is more decentralized, with several centres and peripheries.

This more complex network of trade relationships will depend on technology in order to be cleaner, faster, cheaper and fairer than before – as highlighted in the TradeTech report, released at Davos.

Davos 2024’s overriding theme of “rebuilding trust” resonates strongly in the rules-based trading system. Looking towards this goal, Dr Thani Al Zeyoudi, Minister of Trade of the UAE and Chair of next month’s WTO Ministerial Conference, concluded the annual Davos Trade Press Conference with a resounding: “See you in Abu Dhabi."