The World Trade Organisation (WTO) and others have warned that deglobalisation would negatively impact the world and especially emerging economies.
Speaking at the ongoing World Economic Forum (WEF) Annual Meeting 2023 at a session on trade, growth and investment, the Director General, WTO, Dr. Ngozi Okonjo-Iweala said: "We say the future of trade is services; it's digital; it's green. And it should be inclusive."
According to a statement from WEF, many nations have seen a push to relocate manufacturing closer to consumers' demand, after supply shocks associated with port blockages, the war in Ukraine and the pandemic.
Okonjo-Iweala said the future of trade must also prioritise inclusivity. As many countries prioritise national security in their trade policy, there was a risk that "friend-shoring" would distribute the gains of economic growth unequally. "When we talk of 'friend-sharing,' I don't know who is a friend," she added. "I don't ever hear countries in Africa mentioned."
Creating a trade agenda that prioritises inclusivity and decarbonisation would be a major priority. Many European governments have welcomed the recent embrace of sustainability in US economic policy.
Moreover, concerns about national security had caused many nations to question their over-reliance on certain countries for critical goods and services, such as European dependence on Russian energy.
"For the United States, Mexico is likely to be a major beneficiary of the US reconfiguration of supply chains, given Mexico's educated workforce, low wages, railway transport and pro-business political climate, noted Chairman and CEO of BlackRock, Laurence D. Fink.
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"But Mexico is not going to be the sole beneficiary of that change," he added, citing Eastern Europe, Turkey, Indonesia and other parts of South-East Asia as well.
"The world can only be happy that the United States has moved to the right side of the aisle" on climate, Prime Minister of Belgium, Alexander De Croo said.
He noted that European leaders have concerns over the specifics of the recent US legislation but, overall, the positive step gives Europe the opportunity to focus on its specific advantages, such as research facilities and long-term investments in wind energy. Without such coordination, there is a risk that Europe and the US simply compete to provide more subsidies and tax breaks for business.
Industrial policy has become a major focus for many nations rethinking their approach to trade. "Five years ago, [industrial policy] was not a very sexy topic. Today it's top of the agenda," said De Croo. Medical products, solar panels, silicon chips and digitization infrastructure are among the industries being overhauled due to new pressures to increase resilience and national security.
"Ensuring that sustainability remains at the top of the global trade agenda will require coordination with multilateral agencies. As many nations seek out bilateral trade agreements, there is a risk of global trade splintering into trading blocks. Promoting a trade agenda that is fair, inclusive and sustainable will require institutions such as the WTO to establish clear ground rules for all nations," the statement added.
