The WTO goes “e”—but head over heels

Vision & Fiction

This year’s Public Forum of the World Trade Organization (WTO) focused on a vision of how world trade would look like in 2030. And when it comes to visions, fiction is often not too far. However, one thing seems to be already clear—the primary trade by 2030 will be e-commerce. The CEO of Alibaba, Jack Ma, went as far as to confess his believe not only in ‘free trade’ but also in the internet: “‘Made in USA’ or ‘Made in Switzerland’ or ‘Made in China’ will be out, almost everything will be ‘Made in internet’”. But how does he know that? Certainly, because he knows the history of Alibaba of the last two decades, during which his company became one of the world’s biggest e-traders (together with Amazon) by the means of internet. But does this indicate that e-commerce will continue to develop the same way—getting more global and growing endlessly—as it did over the last decades? Given the astonishing number of sudden turnarounds in the IT sector, only in the last ten years, it seems to be rather naïve to believe (and hope!?) so.

By the same token Erik Solheim (Executive Director of UN Environment)—another panellist of the Public Forum’s opening session—is evidently convinced that the assent of the e-car will be enough to avert the climate crisis and secure the achievement of the SDGs (Sustainable Development Goals) by 2030. “Yes, mother Earth is angry” (Solheim) but mankind is now much “better prepared than ever” to withstand heavy storms, rising sea levels, floods and droughts. However, is it enough to just be better prepared; should we not rather promptly adjust our lifestyle to avoid further worsening of environmental conditions? Don’t we have to rapidly change the way we produce, consume and save resources? And how about increasing equality between world regions and inside societies? The answer of Solheim, Azevêdo & Co is obviously “NO”. According to them, all we need is growth. And trade is seen as a major driver of growth. The more growth—regardless of what is growing—the better the future; we just need more of the same!

Free Trade Demoniacs & Deniers

Amongst the participants of the Forum that took place between the 2nd and the 4th of October 2018 inside the WTO headquarters in Geneva, there was very little doubt that growth, and in particular growth of e-commerce, is the future. Only a few critical voices were to be heard and were hardly welcomed by anyone. Those voices were under attack as “deniers” and “enemies of progress”—because they (the deniers) should learn that “it makes no sense to hinder or even to try to stop technological innovation. It will happen anyway.” The WTO is willing to embrace this “insight” and sees no other option as to urgently respond to the new challenges. WTO Director General Roberto Azevêdo took this line of argument to convince the audience.

All of a sudden, the old neoliberal mantra was back in the room: “There is no alternative!” Supposedly, the WTO has no choice. It has to rush into e-commerce no matter what and it might be head over heels. The easiest way to propel this is to adopt the demands of the big players in digital business: Amazon, Apple, Facebook, Microsoft, Google & the likes, which are the major partners in WTO’s “trade dialogues”. Thus, it is no surprise that some of the proposals on e-commerce at the WTO include mandatory rules on allowing cross-border data transfers and preventing localization restrictions. Besides, despite all the (hyper)determination deliberately displayed throughout the Public Forum, this rushed urgency also came across with an undertone of fear. The future of the WTO is in limbo, therefore, it urgently needs to prove its importance by showing its determination and ability to act.

Nevertheless, common wisdom would suggest otherwise. “A premature commitment to rules with long-term impacts in this fast-moving area, where influential actors are driven by narrow business interests, should be avoided.” (Power, Platforms and The Free Trade Delusion, UNCTAD Trade and Development Report 2018, p. IX)

Trade & Industrialisation

There are various good reasons to be careful and vigilant.

First, trade is never an end in itself. It is just a means to improve economic and social development by providing access to regional and global markets, increasing scope and efficiency of production and—most importantly—to improve livelihoods and wellbeing of people. Therefore, trade needs to be put back in perspective. However, ‘inclusive’ but ‘free’ trade is the wrong approach altogether. Free Trade will at best preserve the status quo but is most likely to increase polarisation between countries and inside societies. But trade need to bring about more equality, more in development. Therefore, it needs a bold and proactive policy intervention and guidance. Achieving development is a complex process, in which trade is just one tool in a toolbox, and progressive industrial policy is a significant other tool.

Second, when it comes to e-commerce, it is necessary to pay attention to the complexity of the phenomenon as well. There is e-trade (marketing, payment, delivery of services and information, etc.), there is e-business communication (cloud-computing, cell-phone, and blockchain technology) and finally there is e-government or administration (regulations, permits, certificates, processing of requests and applications etc.). All of these facets require unique policy approaches and no generalizations should be made about the associated opportunities and risks.

Third, the “internet” is just another, certainly an essential and powerful, tool of e-commerce. It allows compressing time and space by accelerating processes. Thus, it enables hitherto unknown services and it “creates” efficiency mostly by generating information and providing services. However, in a proper sense it “produces” nothing. Nevertheless, it is a key infrastructure, and setting up of alternative platforms is a crucial endeavour. “Regulating digital super platforms and developing national marketing platforms is essential for developing countries to gain from e-commerce. Without this, linking into existing super platforms will only provide the companies that run them with more data, strengthening them further and facilitating their greater access to domestic markets.” (UNCTAD: Trade and Development Report 2018, p. VII)

Fourth, there are (a lot of) strange assumptions. There is, for example, the idea that every producer has to reach the world market, and e-commerce will enable him or her to do so. In reality, however, most of the small and medium size producers aim not farer than their region. Jack Ma’s vision of “billions of parcels instead of millions of containers” is just another scam. It is not only because the intent to deliver billions of small parcels all around the globe will come along with severe increases of CO2-emmissions, which would render the Sustainable Development Goals (SDGs) even more unachievable; it is also futile to accomplish global delivery within 24 hours when production is not decentralised. If the aim is to truly to include everyone in the consumption of world-class products via e-trade without any delay in delivery, there is no other option as to transfer production know-how and technology to the most remote of places. This reallocation of production, by the use of advanced technologies like 3D-printing, would also create employment and thus income. Therefore, Alibaba and Shippo are not the future. Inclusiveness and more equality can only be achieved by giving up the exclusiveness of intellectual property rights. Open source—Mozilla—is the future not the protection of source codes.

The “e” in trade does not necessarily mean “global” but needs to stand for “predominantly local.” This could be a trade vision of 2030 that can be brought in line with the SDGs through strong governmental intervention and guidance. What is needed—if the core value is inclusiveness—is more local production and less trade, more knowledge transfer and less export of physical goods. But this would also mean a sure redistribution of industrial production—at the expense of the global North.
The WTO—in all its lasting complacency—is taken aback by, what some call, the digital revolution. However, confronted with new challenges, it is eminently inadequate to persist in stubbornly repeating the free trade mantra “(a)nd simply pledging to leave no one behind while appealing to the goodwill of corporations or the better angels of the super-rich are, at best, hopeful pleas for a more civic world and, at worst, wilful attempts to deflect from serious discussion of the real factors driving growing inequality, indebtedness and insecurity.” (UNCTAD: Trade and Development Report 2018, p. II and XI.)

About the author: Arndt Hopfmann works as a senior adviser in trade and economic policy with the Rosa-Luxemburg-Stiftung in its office in Brussels. The last passage of this article summarises his intervention that he presented at a Working Session which RLS jointly organised together with the Southern and Eastern African Trade Information and Negotiations Institute (SEATINI)-Uganda at the WTO Public Forum in Geneva.