- The Director General of the World Trade Organization (WTO) and the Managing Director of the International Monetary Fund (IMF) have emphasized that the world cannot achieve net zero without trade.
- They argue that international trade expands the market size and has contributed to the decline in solar power prices.
- Trade is needed to distribute low-carbon technology and services.
Dr. Ngozi Okonjo-Iweala, Director General of the WTO, and Kristalina Georgieva, Managing Director of the IMF, emphasized the significance of enhanced global trade in a policy paper published in June 2023.
They suggested that multilateral cooperation and common standards could accelerate the transition to a greener economy while avoiding market fragmentation and negative policy effects on other countries. To support their position, they highlighted the significant reduction in solar power prices, which have decreased by nearly 90% since 2010.
The WTO estimates that 40% of this cost reduction is attributable to scale economies facilitated by trade and cross-border value chains. One section of the paper stated:
- “Many of today’s most pressing global problems cannot be solved without international trade. We cannot overcome the climate crisis and achieve net zero greenhouse gas emissions without trade.
- “Trade is necessary to distribute low-carbon technology and services to where they are needed. Open and predictable trade reduces the cost of decarbonization by expanding market size, enabling scale economies, and promoting learning by doing.”
The leaders also acknowledged that trade restrictions and subsidies have increased since the global financial crisis. Tensions further escalated due to governments’ responses to the pandemic and conflicts like Russia’s war in Ukraine, leading to the adoption of trade-distorting policies and efforts to secure strategic supply chains.
The African Trade Context
TheTimes previously reported that the International Monetary Fund advised African countries to explore climate solutions available within the continent. The IMF highlighted the African Continental Free Trade Area (AfCFTA) initiative as a viable solution for African nations.
In a departmental paper published in May 2023, the IMF noted that regional trade integration could enhance countries’ resilience by reducing their dependence on sectors vulnerable to climate change-related natural disasters. By facilitating the movement of goods across borders, regional trade integration would enable countries to diversify their sources of climate-vulnerable products.
Furthermore, regional trade integration could create opportunities for increased trade in climate-related infrastructure, services, and finance. The intensified global competition for commodities and critical minerals might enable certain African economies to strengthen their existing integration into global value chains as suppliers of raw materials.
The AfCFTA offers African countries the chance to diversify their export destinations, import sources, and patterns of cross-border value chain integration by bolstering regional trade.