Navigating the Trade Landscape



Ester Eriksson | Confederation of Swedish Enterprise (Svenskt Naringsliv)

Global trade system under pressure: read here about the challenges and how to foster a prosperous and stable international trade environment.

The future of global trade is being shaped by several factors, in particular the twin digital and green transitions, supply chain disruptions and the increased trade policy uncertainty driven by geopolitical tensions. Yet, in the face of these challenges, global trade has been impressively resilient. In 2022 and 2023, the total volume of traded goods increased by 1.2%, despite the outbreak of the war in Ukraine. The projections for trade growth are 2.6% in 2024 and 3.3% in 2025. Digital trade – particularly digitally delivered services – is the fastest-growing segment of international trade, with an average annual growth rate of 8.1% for almost two decades.

This projected growth in trade volumes reinforces how robust the global trade system is, even in these times of significant distress and adverse pressures. However, the future of trade is certainly not without its challenges. The global economic landscape is becoming more and more complex, manifested by increasing sustainability requirements, geopolitical tensions, policy uncertainty and growing skepticism toward the ability of the multilateral trading systems to deliver. As a result, a ‘trade skeptic’ narrative has started to gain traction. This frames international trade as an obstacle to, rather than a solution for, building a more secure, inclusive and sustainable world.

The challenges of the WTO

The current geopolitical context is applying pressure on the World Trade Organization (WTO) to deliver on a number of urgent topics. With companies around the world relying heavily on WTO rules, the organisation needs to reform in order to address its issues, such as stalled negotiations, including the difficulty of reaching plurilateral agreements where multilateral consensus is not feasible. There is also a pressing need to repair the – currently paralyzed – dispute resolution system.

In recent years, the development of the global economy has added several new concerns to trade relations within the WTO. Negotiations within the organisation have become progressively more complex, as they are increasingly influenced by domestic interests and politics. The conflict of interests between the developing and developed countries is also apparent, manifested in particular in the difficulties of WTO members in agreeing on new rules on agriculture. When allied to the fact that the WTO operates on consensus-based decision-making, it becomes more difficult to reach multilateral agreements among members that have increasingly diverse economic and political interests.

Some of the outcomes from MC13

The latest WTO Ministerial Conference (MC13) concluded with a ministerial declaration that laid the groundwork for a range of future negotiations. These included WTO reform, agriculture, the Agreement on fisheries subsidies, and e-commerce. This time, however, limited substantive outcomes were achieved.

One very important result emerging from the MC13 was the extension of the moratorium on e-commerce tariffs. This will now continue in force until the next ministerial conference in March 2026. The decision is crucial for digital trade, as it provides temporary relief from potential tariffs on electronic transmissions. The business community advocates not simply for an extension to the moratorium, but for a permanent solution to this issue. If a multilateral agreement were to prove impossible, the possibility of a plurilateral agreement by 2026 should be explored as an alternative.

For the business community, restoring the dispute settlement system – a cornerstone of the WTO framework – is essential. Since 2016, the US has blocked the appointment of judges to the WTO’s Appellate Body, claiming that the body overreaches its mandate. This impasse has left the Appellate Body to all intents inoperative, undermining the organisation’s ability to resolve trade disputes effectively. While members agreed to accelerate talks to reach a consensus by the end of 2024 during the MC13, businesses need to see concrete results quickly. Ideally this should be before the US elections this autumn. Unfortunately, however, this is an unlikely scenario.

Despite certain advances made during the MC13, there was a failure to reach agreements on a number of crucial topics, including agricultural issues and the second part of the agreement on fisheries subsidies. Attempts to initiate talks on limiting the harmful effects of national industrial subsidies – a key issue for business – were also unsuccessful. Leaving such issues unresolved adds to an environment of uncertainty for businesses globally, affecting a wide range of sectors. It also underscores the difficulty of consensus within the current multilateral system. The WTO should therefore explore, in depth, whether plurilateral agreements can offer a viable alternative where multilateral agreements have faltered on important topics, thus offering a pathway for subsets of WTO members to move forward in specific areas. Such agreements can be pivotal in addressing modern trade challenges, affording a more flexible approach to international trade negotiations, adapted to address current challenges.

Overcoming increasing barriers to trade

As already discussed, the geopolitical and security underpinnings of trade are becoming increasingly pronounced. In addition, the re-emergence of nationalistic and protectionist sentiments in various countries is leading to some re-evaluation of existing trade agreements and partnerships. Reflecting on a broader trend, the imposition of trade restrictions has been steadily rising, from approximately 650 new restrictions in 2017 to over 3,000 in 2023. This increase in barriers is a clear indicator of the growing complexities and challenges that face the international trade system. This is a deeply worrying situation for business, not simply because fragmenting trade relationships tend to decrease economic security and increase conflict risks, but because it also comes at a great economic cost.

The trade tensions between China and the US are a prime example of this; and the EU needs to navigate between the two. Whereas the US is the EU’s ally, and while we are closer to the US than to China in many ways, we cannot embark on a process of decoupling from China. Such a step is not in our interest. However, the opportunities to improve trade relations with the US seem brighter than they do with China.

EU and US Trade and Technology Council

The relationship between the EU and the US is crucial, as it combines the economic strength of two of the world’s largest economies, enhancing global economic stability and growth as a result. Together, the two parties can help set the international standards and norms that influence global trade, environmental policies and technological advancements. To date, the EU and US Trade and Technology Council (TTC) have regrettably failed to deliver much in the way of concrete developments. However, it remains the most important forum for close cooperation on transatlantic trade and technology issues.

The latest sixth TTC meeting in April saw some progress on a few fronts. On the technology side, the parties updated their cooperation on AI terminology and taxonomy and signaled progress in research on AI. They also published a Joint 6G vision and established a quantum task force. On the trade side, there is more to the wish list than what has been delivered to date. The latest meeting was no different, and not a great deal was achieved on the topic of trade. With elections upcoming, it is clear the US is choosing not to engage in important trade questions that could potentially increase market access for European companies. However, the TTC at least resulted in the allies agreeing to continue cooperation for supply chain resilience, particularly for critical materials such as semiconductors. A Minerals Security Partnership Forum was also established, under which the EU and US agreed to advance the negotiations on a critical mineral deal, that would make it possible for European companies to benefit from the subsidies in the US Inflation Reduction Act (IRA).

Given that both the EU and the US have elections on the horizon, the future of the TTC partnerships is uncertain. Advancing transatlantic cooperation therefore requires concrete outcomes; outcomes that are designed to endure any potential changes of leadership on both sides of the Atlantic.

In conclusion, as the global trade landscape continues to evolve in ways that reflect the complex and increasingly uncertain environment, it is crucial to remember the significant role international trade plays in addressing the most pressing challenges of our time. Policymakers must reinforce the resilience of the global trade system; such steps will be fundamental in shaping a sustainable and prosperous future for international trade and business worldwide.

To read the full article as it appears on Svenskt Naringsliv’s website, click here.