Preserving Open Trade: Subsidies, Geopolitics, and International Cooperation

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Preserving Open Trade: Subsidies, Geopolitics, and International Cooperation

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At a time when the global economy is coping with multiple shocks, including the pandemic, the Russian invasion of Ukraine and supply chain disruptions to food and other goods, governments are increasingly turning to subsidies for relief. But the costs can be very high, in terms of public spending and distorted incentives for investment and consumption. In this event, the heads of the four key global economic policy institutions—the World Bank Group, the IMF, the OECD and the WTO—discuss the importance of trade and global cooperation for overcoming current challenges and implications of subsidies for markets and poor countries. They call for more transparency and proactive measures to reduce their harm, especially for the largest and most distortive subsidies.

Download the report: Subsidies, Trade, and International Cooperation Prepared by staff of IMF, OECD, World Bank, and WTO (pdf)

00:00 Welcome! WBG Spring Meetings 2022 | Preserving Open Trade
02:37 Main findings of the report Subsidies, Trade, and International Cooperation
07:58 The end of an era of globalization? Challenges of today's world
12:06 Where we are landing now: Globalization, development, and trade
14:13 National self-interest vs. globalization
17:18 Visions from the World Trade Organization
19:45 Enlightened self-interest
21:24 Measurement of agricultural subsidies
22:52 Greater industrial policy and subsidies in areas like semiconductors
26:01 Subsidy and economic policy in a crisis mode
29:39 Tackling subsidies: Politically expedient vs sensible things
33:51 Market distortions between the rich and poor wold
37:51 Lessons learnt from the vaccine experience
39:27 Access to information
40:39 Persistence of current shocks in the next years
41:44 What comes next?
43:16 The next shock on the horizon
45:26 Closure of the conversation

“Trade is a positive force for commerce and trading is a cornerstone for development. We need to address the largest and costliest subsidies distorting trade.”

— David Malpass, President, World Bank Group  

“It is important to avoid energy stockpiling as energy underpins fertilizer and food production.”

— David Malpass, President, World Bank Group

Poll Results

Read the transcript


  • 00:25 [Shawn Donnan] Welcome to IMF headquarters here in Washington,
  • 00:28 to all of you, wherever you are in this virtual world today.
  • 00:32 My name is Shawn Donnan, and I'm the senior writer for economics
  • 00:35 at Bloomberg News.
  • 00:36 And I'm very excited to be here
  • 00:38 with four of the very top players in the global economy
  • 00:41 to talk about something
  • 00:42 that we all need to be thinking about and talking about.
  • 00:45 And that is one tool wielded often,
  • 00:48 sometimes for good, sometimes for bad, which is, of course, government subsidies.
  • 00:52 I think it's fair to say that this discussion is taking place
  • 00:55 against a backdrop of a world in which a pandemic, and now a war
  • 01:00 have raised questions about major issues of national self-reliance,
  • 01:04 from access to vaccines, to production of essential components, like semiconductors.
  • 01:09 We all know more about supply chains than we did two years ago, certainly.
  • 01:14 We live in a world in which surging food prices
  • 01:16 mean governments in the poorer nations of this world, in particular,
  • 01:20 are under pressure to do more to offset those prices,
  • 01:23 to subsidize bread and rice and protein and cooking fuel.
  • 01:27 We live in a world confronting the need
  • 01:29 to address climate change and where governments are being asked
  • 01:32 not just to subsidize research or an energy transition,
  • 01:36 but also to subsidize mitigation measures,
  • 01:38 whether it is through tax incentives or direct funding.
  • 01:42 And we also, of course, live in a world in which geopolitics,
  • 01:45 and by that we really mean growing geopolitical competition,
  • 01:49 is increasingly defining how governments behave,
  • 01:52 the alliances they seek, and, of course, economic policy.
  • 01:56 So subsidies are all around us.
  • 01:58 The world is demanding more of them, even as we recognize that even
  • 02:02 that even well-intentioned ones can have negative repercussions.
  • 02:05 And the world is changing.
  • 02:07 So it's a very good thing that the folks at the IMF, the World Bank,
  • 02:11 the OECD and the WTO got together and wrote a very good joint paper
  • 02:15 to address the subject,
  • 02:17 which is why I have with me here
  • 02:19 the heads of those four institutions to talk it through.
  • 02:22 Kristalina Georgieva, managing director. My apologies.
  • 02:26 Kristalina Georgieva, the Managing Director of the IMF,
  • 02:30 David Malpass, President of the World Bank,
  • 02:33 Mathias Cormann, Secretary General of the OECD.
  • 02:36 And I would like to start today with Dr. Ngozi Okonjo-Iweala,
  • 02:41 who is Director of the World Trade Organization.
  • 02:43 She is going to walk us through the main points in this paper
  • 02:46 before we turn to our broader discussion.
  • 02:50 Well, thank you very much, Shawn.
  • 02:53 Before we talk about the report,
  • 02:55 let me say something about the war in Ukraine.
  • 02:58 Nothing could underline more the continued importance
  • 03:01 of the international organizations gathered here
  • 03:04 and the significance of us working together
  • 03:06 on the crucial issues in today's world.
  • 03:09 Our organizations were set up in the wake of the Second World War
  • 03:13 in order to foster peace through prosperity and interdependence.
  • 03:18 Billions have been lifted out of poverty since.
  • 03:21 Those goals and achievements are now under threat.
  • 03:24 Disintegration and destabilization of the rules based on international order
  • 03:29 are not in the interests of the people we serve.
  • 03:32 That is why the multilateral framework
  • 03:34 now requires renewed commitment and reinvestment.
  • 03:39 Since its inception,
  • 03:40 the multilateral trading system has served people well,
  • 03:43 but it now also severely lags behind developments in the global economy.
  • 03:49 And this brings me to today's topic.
  • 03:51 Subsidies are on the rise across sectors and countries.
  • 03:55 They constitute the most frequent type of intervention since the financial crisis.
  • 04:00 More than tariffs and other non-tariff measures.
  • 04:04 They can distort trade and investment,
  • 04:06 undermine other trade policy commitments,
  • 04:08 and erode public support for open trade.
  • 04:11 Currently, subsidies are a main driver of trade tensions
  • 04:14 among some of our members.
  • 04:16 As such, they can have significant macroeconomic costs
  • 04:20 and trigger retaliatory action.
  • 04:23 WTO data shows that the number of new countervailing investigations per year
  • 04:28 has quadrupled in the last decade,
  • 04:30 but concerns over subsidy practices are also a key factor
  • 04:35 impeding discussions on other areas of trade reform.
  • 04:39 Addressing this issue is therefore of central importance
  • 04:42 to the global trading system at this particular juncture.
  • 04:46 This report seeks to help foster
  • 04:48 a substantive and objective discussion in that regard.
  • 04:52 Together, the four institutions have taken stock of what we know
  • 04:56 and what we don't know
  • 04:58 about subsidies and international dimensions.
  • 05:02 It's a complex subject matter.
  • 05:04 Clearly, subsidies can be an important tool to address market failures
  • 05:09 but examples are abound where subsidies do little
  • 05:12 to achieve their intended goal or do so at an unnecessarily high cost,
  • 05:17 domestically, abroad, or with regard to global commons.
  • 05:21 In building a broad coalition of interest across borders,
  • 05:24 it should be possible to improve their effectiveness,
  • 05:27 limit their international spillovers, and reduce harm to others.
  • 05:32 Both finance and trade ministries
  • 05:34 need to work together in this effort.
  • 05:38 Going forward, the report makes clear that our four organizations
  • 05:42 intend help in this endeavor.
  • 05:45 First and foremost, we need to have better information on subsidies.
  • 05:49 This means we need to better share existing information,
  • 05:52 identify the gaps in data, and fill those gaps.
  • 05:56 We need to better coordinate among ourselves
  • 05:58 to establish data collection priorities
  • 06:01 and properly coordinate on these tasks.
  • 06:04 We need to involve other relevant institutions
  • 06:06 and disseminate the results of these efforts
  • 06:09 in an easily accessible, user-friendly form.
  • 06:13 On the basis of improved and coherent data,
  • 06:15 we need to develop a better understanding
  • 06:17 of the actual effects of subsidy programs,
  • 06:21 to what extent they achieve their stated objectives
  • 06:23 at what cost, and what are the impacts on other countries.
  • 06:28 Second, sound evidence and analysis can
  • 06:31 can feed into dialogues across and within countries
  • 06:35 on how to improve existing subsidy schemes
  • 06:38 and minimize negative spillovers.
  • 06:41 The international organizations involved here
  • 06:44 already provide a range of fora where such dialogue could take place.
  • 06:48 Making use of fora in both trade and financial institutions
  • 06:51 is likely to provide additional momentum towards reform
  • 06:55 by combining a perspective on trade impacts and concerns about subsidies,
  • 07:00 and with consideration of their fiscal implications
  • 07:03 and possible alternative uses of public funds.
  • 07:07 Last but not least,
  • 07:09 we need to support government efforts in international rulemaking,
  • 07:12 notably in updating the WTO's rulebook.
  • 07:15 When these rules were made, many current developments
  • 07:19 affecting or being affected by the use of subsidies
  • 07:22 were not foreseen,
  • 07:24 notably the importance of climate change, the growth of the digital sector,
  • 07:28 or increasing international activity of state-owned enterprises.
  • 07:33 A better grasp on the prevalence of subsidy programs and their effects
  • 07:37 can help develop and shape the necessary rules.
  • 07:40 Not to forget, we are starting from a solid base of existing WTO rules,
  • 07:46 and a few adjustments and updates to those rules might already go a long way
  • 07:51 in boosting their effectiveness to address the challenges of today's world.
  • 07:55 Thank you.
  • 07:57 Thank you.
  • 07:58 Well, let's start with that last point,
  • 08:00 which is today's world and these challenges that we have.
  • 08:04 It feels like as both a producer of news and a consumer of news,
  • 08:08 I can't look anywhere nowadays
  • 08:10 without seeing some kind of article or discussion about the end of globalization.
  • 08:15 The end of an era of globalization.
  • 08:19 You four often get described as four of the guardians of globalization, right?
  • 08:25 I think if there was a Marvel superhero movie about globalization,
  • 08:29 you four might feature in it somehow.
  • 08:32 I wonder, when you think about this world,
  • 08:35 today's world that you're thinking about,
  • 08:38 are we at the end of an era?
  • 08:42 How does that affect that whole discussion
  • 08:44 that you're having about subsidies and so on?
  • 08:46 And I'm going to start with you, Kristalina,
  • 08:48 because you're our host here today.
  • 08:49 Okay. Well, thank you.
  • 08:52 Great to have the Fabulous Four.
  • 08:57 And if we are to be heroes,
  • 09:01 as you suggested,
  • 09:03 I want to have wings.
  • 09:06 But let me get to a very serious question you're asking.
  • 09:11 We live in a rapidly changing world,
  • 09:15 that is so interconnected,
  • 09:19 that to imagine that we can wipe out this interconnectivity,
  • 09:24 it's simply not possible.
  • 09:28 If you make a list of the problems that no country can solve on its own,
  • 09:34 it is a very long list.
  • 09:37 It doesn't mean that globalization is not changing.
  • 09:43 First, we have to recognize that, over the last decade,
  • 09:50 we have realized about mistakes we have made
  • 09:55 by not paying sufficient attention to inequality
  • 10:01 to the distribution of benefits of globalization
  • 10:05 within countries, across countries.
  • 10:09 And we cannot shy away from addressing these shortcomings.
  • 10:15 Second, we do have a multipolar world.
  • 10:19 There are different countries with economic strength.
  • 10:23 They have some different interests,
  • 10:26 not entirely compatible,
  • 10:29 and that creates some tension, some friction.
  • 10:32 That doesn't mean we are throwing the baby with the bathwater.
  • 10:37 And three, as we imagine the world ahead of us,
  • 10:42 we have to be frank
  • 10:44 and recognize that there could be fragmentation that makes us all poorer,
  • 10:51 unless we act
  • 10:54 to eliminate the dangers or reduce these dangers.
  • 11:00 What do I mean?
  • 11:01 If we end up in blocks
  • 11:05 that trade within each other,
  • 11:09 and obviously don't achieve economic efficiency,
  • 11:13 but are more in the field of their understanding of security,
  • 11:19 we all would lose.
  • 11:20 And I can tell you in our meetings here,
  • 11:24 who were the voices more strongly arguing for the benefits of globalization?
  • 11:30 Emerging markets and developing economies,
  • 11:32 because they need to continue to grow using the benefits of globalization.
  • 11:39 But we can imagine a different world in which there is more diversification,
  • 11:44 in other words, maybe a little less efficiency,
  • 11:47 but more of a sense that supply chains are functioning,
  • 11:51 and across different interests,
  • 11:54 there are bridges and highways built.
  • 11:57 So we continue to take advantage
  • 12:01 of the strength we have together.
  • 12:05 David, I'm going to come to you next,
  • 12:07 because you are really our co-host here this week at the Spring Meetings.
  • 12:11 But I'm also interested because you, before you came to the bank,
  • 12:15 worked for a President who rose to power
  • 12:17 on the back of intense skepticism about globalization
  • 12:21 and a real message of economic nationalism.
  • 12:24 And I wonder
  • 12:26 given the administration you served, your new role now,
  • 12:29 you've got an interesting viewpoint on this question.
  • 12:34 I mean, what do you think about where we're landing now?
  • 12:37 [David Malpass] I also worked in the Reagan's...
  • 12:40 - [Shawn Donnan] Sure. - ...and Bush's 41 administration.
  • 12:43 So I have strong views on this one.
  • 12:45 Trade is really a very positive force.
  • 12:48 If you think of the cornerstone of development is commerce,
  • 12:52 is people trading because they get some efficiency
  • 12:56 from not making everything themselves.
  • 12:58 And that applies to a village, that applies even to a household.
  • 13:03 There's some specific tasks
  • 13:07 that someone in the family does better than other in the family.
  • 13:11 So we need to really build on that and see the productivity from it.
  • 13:16 So I want to avoid a little bit the word "globalization".
  • 13:19 That sounds almost like we're talking about agreements
  • 13:24 where all countries join in with the same idea.
  • 13:27 That's hard to achieve.
  • 13:28 But what we have to preserve is the idea of efficiencies
  • 13:33 from companies trading with each other,
  • 13:36 people being able to sell their skills in different countries.
  • 13:41 But that gets us right to the point of this report.
  • 13:44 Subsidies distort that ability to do it efficiently.
  • 13:48 If I try to achieve globalization,
  • 13:51 but then some players are subsidizing, I'm undercutting my goal.
  • 13:57 So we need to find a way to have trade that occurs in an efficient way
  • 14:02 to get the gains for the people around the world.
  • 14:05 It's going to help the poorest people the most,
  • 14:08 if they can have their skills be part of the global supply chain.
  • 14:13 [Shawn Donnan] But we're clearly in a world
  • 14:15 where we're no longer focused on efficiency.
  • 14:17 We're focusing on national self-interest as well, right?
  • 14:19 And that is something that's playing out, Matthias,
  • 14:23 in your new home, in France, this weekend,
  • 14:28 where we are seeing that same discussion
  • 14:30 about national self-interest versus a greater international world,
  • 14:36 and really manifested itself in the election campaign there.
  • 14:40 I wonder, as you said, you've come from Australia,
  • 14:44 which is a country that's benefited hugely
  • 14:46 from globalization.
  • 14:48 I say that as an Australian living here in Washington,
  • 14:52 but I wonder if you have a different take on it now.
  • 14:58 [Mathias Cormann] I think that Ngozi made a very important point
  • 15:01 in her presentation, and that is that global trade,
  • 15:04 doing business with each other around the world,
  • 15:06 has delivered enormous benefits to billions of people around the world
  • 15:11 over the last several decades.
  • 15:13 It has lifted many, many people out of poverty.
  • 15:16 But it's also true it comes with challenges.
  • 15:18 I mean, exposing yourself to competition
  • 15:21 can be extremely disruptive and uncomfortable,
  • 15:25 but there's not really an alternative
  • 15:28 because that is the engine of innovation and progress.
  • 15:31 Now, I think that the conversation that we ought to have
  • 15:34 is how we can manage global competition, global trade,
  • 15:38 and those sorts of disruptions better and make them work better for people.
  • 15:44 Because when you have structural transformations
  • 15:47 like the digitalization of our economies,
  • 15:50 at the same time as you are involved in global competition,
  • 15:54 entire population segments can be severely disrupted
  • 15:58 and need appropriate support to be able to participate and benefit
  • 16:02 from all of the upsides of global trade.
  • 16:04 And there's certainly an important role for public policy there.
  • 16:07 But I also want to support the point that David has made.
  • 16:11 The problem is that when we have a global market,
  • 16:14 and the idea is that we all do business with each other
  • 16:17 and that whoever is able to deliver the best product,
  • 16:19 or the best service at the best price, is the one that supplies
  • 16:23 those products and services into markets around the world.
  • 16:26 But then you have governments interfering
  • 16:29 by providing subsidies and creating an unlevel playing field,
  • 16:32 creating unfairness, helping to keep businesses alive and successful,
  • 16:37 even though they're not competitive and not innovative,
  • 16:39 and squeezing out innovative and more competitive businesses
  • 16:43 in the process, then everybody loses.
  • 16:45 And that is why it's so important to really focus on this work on subsidies,
  • 16:51 market distorting subsidies,
  • 16:52 which also create often environmentally harmful consequences
  • 16:57 because they drive overproduction.
  • 17:00 So there are many aspects.
  • 17:01 I think the way to look at globalization is that it's not a matter
  • 17:04 of throwing the baby out with the bathwater
  • 17:07 and stepping back from it.
  • 17:09 It's about making it work better for people.
  • 17:12 [Shawn Donnan] Kristalina, you wanted to jump in quickly or I go to her?
  • 17:15 [Kristalina Georgieva] Go to Ngozi, then it will be my turn.
  • 17:18 [Shawn Donnan] Ngozi, I feel you have, again, a unique perspective.
  • 17:24 You have worked as a policymaker in Nigeria.
  • 17:26 You've also spent a lot of time here in Washington,
  • 17:28 at the bank and elsewhere, and you are now at the WTO in Geneva,
  • 17:33 which once upon a time, and certainly should be again
  • 17:37 the center of trade negotiations and where the rules are made for this.
  • 17:43 I wonder, do you think you are looking out
  • 17:47 at the end of an era here, of globalization?
  • 17:50 How do you think about it?
  • 17:52 [Ngozi Okonjo-Iweala] Well, let me build on what my colleagues have said
  • 17:56 and say that certainly there are challenges to globalization,
  • 18:01 and they have been articulated.
  • 18:03 But are we looking at the end of an era?
  • 18:05 I think we need to be very careful in saying that
  • 18:09 in the sense that, look, this globalization,
  • 18:12 this multilateral trading system that has been built,
  • 18:16 it's a global public good.
  • 18:18 It took time to build it, since the end of the Second World War,
  • 18:23 and it has delivered as the point I made in my earlier presentation,
  • 18:28 it lifted more than a billion people out of poverty.
  • 18:31 So, yes, it's not perfect.
  • 18:33 Some people have been left behind, poor people in rich countries.
  • 18:37 There are poor countries who have been left behind.
  • 18:40 But that does not mean,
  • 18:42 as Kristalina had said or was it Matthias,
  • 18:45 throwing the baby out with the bathwater.
  • 18:47 Now what we need to ask ourselves is how do we improve?
  • 18:51 It cannot be the old globalization.
  • 18:53 How do we improve what we have?
  • 18:56 How do we reimagine globalization?
  • 18:58 So that we can correct those problems
  • 19:01 and use it to lift more people out, what I call reglobalization.
  • 19:05 But we can't do it if we have lack of transparency.
  • 19:08 And these subsidies, many times they're hidden.
  • 19:12 And therefore, for us at the WTO, it leads to a break in trust,
  • 19:16 because when members feel that certain members are given subsidies
  • 19:21 and they are not notifying them and declaring them,
  • 19:23 they really feel it creates an unlevel playing field,
  • 19:26 which is why transparency, the data,
  • 19:29 getting things out on the table is critically important.
  • 19:31 [Shawn Donnan] That was really an astonishing figure
  • 19:33 that jumped out at me in the report,
  • 19:34 was the number of countries notifying this
  • 19:37 has gone down from 60 something % to 30% last year.
  • 19:41 It's amazing. Kristalina, you wanted to jump in?
  • 19:45 Well, I wanted to make a point
  • 19:47 on enlightened self-interest all the way back to Adam Smith,
  • 19:52 that we don't do it because we want to be good to others.
  • 19:57 We do it because it is good for us.
  • 20:00 And leaders that want to serve their populations,
  • 20:04 they don't want people to get poorer, they want them to be wealthier.
  • 20:09 And in that sense, one of our main tasks,
  • 20:12 and we probably haven't done a good enough job yet,
  • 20:15 is to calculate the cost of stepping back
  • 20:21 and the benefits of stepping forward.
  • 20:24 And the second point I want to make is that
  • 20:27 what is very troubling from this paper, when you read it,
  • 20:30 is that it really brings more
  • 20:36 in the hands of those who already have more.
  • 20:40 We calculated that agricultural subsidies are 447 billion.
  • 20:46 Out of these 447 billion, 376 are in the Four Giants,
  • 20:53 the EU, the US, China and India.
  • 20:58 So we have to think about fairness
  • 21:02 without which we cannot sustain support
  • 21:07 for a trading system that is more efficient.
  • 21:11 And so we have to continue to both show what works, what doesn't
  • 21:17 and who it works for and who it does not serve.
  • 21:24 [Shawn Donnan] You've been measuring at the OECD,
  • 21:26 I guess not you personally,
  • 21:27 but the OECD has been measuring agricultural subsidies for 30 years now.
  • 21:35 What are the lessons you take from that exercise
  • 21:37 in measuring those subsidies?
  • 21:40 [Mathias Cormann] Firstly, they are overwhelmingly market distorting.
  • 21:45 It's a very inefficient way of providing income support to farmers.
  • 21:51 The politics of removing agricultural subsidies are very difficult.
  • 21:56 In fact, the politics of removing subsidies once introduced
  • 22:00 are incredibly difficult,
  • 22:02 and they also distort production decisions,
  • 22:05 and have both economically and environmentally harmful consequences.
  • 22:10 And as we talk about the green transformation
  • 22:15 and moving forward towards carbon neutrality,
  • 22:19 removing environmentally harmful subsidies,
  • 22:22 and most of the agricultural subsidies are,
  • 22:24 is going to be a very important part of the equation
  • 22:27 and it is about having a level playing field,
  • 22:30 making sure that resources are allocated to where they can have
  • 22:33 the most beneficial economic impact for everyone.
  • 22:36 And subsidies really destroyed that greatly.
  • 22:38 [Shawn Donnan] It's not just agricultural subsidies,
  • 22:41 it's industrial subsidies,
  • 22:42 and I mentioned semiconductors in my opening remarks.
  • 22:46 - I think that debate... - [K. Georgieva] Energy?
  • 22:48 [Shawn Donnan] Energy is there as well.
  • 22:50 But I wonder...
  • 22:52 There's a very live political debate in places like the United States,
  • 22:56 pushing for greater industrial policy,
  • 22:59 pushing for subsidies in areas like semiconductors,
  • 23:03 and really trying to domesticate a lot of that production
  • 23:07 or to bring production home.
  • 23:09 "Re-shoring" is a word that all politicians here in America have embraced as an idea.
  • 23:15 I wonder, David, not just what you see,
  • 23:18 given your experience in government, going back to the Reagan's administration
  • 23:22 when you see that debate here,
  • 23:23 but in your new world when you think about the consequences of that for others,
  • 23:27 for the poorer nations especially.
  • 23:29 [David Malpass] A couple of thoughts. One is it's really expensive.
  • 23:32 Two is that we have to live in the real world.
  • 23:35 It's a political and pragmatic world.
  • 23:38 And so what we can do is try to identify
  • 23:40 some of the most costly and distortive subsidies
  • 23:43 and work on those.
  • 23:45 I think it's hard to even define subsidies.
  • 23:48 What if one country has better infrastructure than another?
  • 23:51 Then they become competitive.
  • 23:54 Or if they've gotten the leap on digitalization?
  • 23:58 Is that a subsidy that gives them
  • 24:00 a comparative advantage over their competition?
  • 24:03 One of the very expensive subsidies the US is doing now is for ethanol.
  • 24:08 So is that environmentally sound?
  • 24:11 It's distorting the corn markets massively at a time when the world needs corn.
  • 24:17 So one of the things I think we can do in the report and among us
  • 24:21 as institutions
  • 24:25 is to identify the things that are most distortive.
  • 24:28 I think we have to put it in the same basket as price controls.
  • 24:33 Those end up being distortive and costly.
  • 24:36 One immediate problem that we face as commodity prices go very high,
  • 24:41 the temptation for politicians to subsidize is there,
  • 24:47 and oftentimes the cost goes up automatically as the price goes up.
  • 24:52 If you've decided that you're going to produce a certain amount of ethanol,
  • 24:58 the cost goes through the roof as the bushels of corn price goes up.
  • 25:04 So how do governments control themselves
  • 25:07 and realize that it's costly, harmful to your own people
  • 25:14 and then distorted in the global system.
  • 25:17 That hurts the formation of capital in the direction that we want.
  • 25:22 We want to let people invest in the things
  • 25:25 that are going to be productive into the future.
  • 25:27 And these subsidies really stop that process.
  • 25:31 [Matthies Corman] But it goes to an important point, though,
  • 25:32 because there are legitimate circumstances in which subsidies can be useful.
  • 25:36 I mean, market failure, national security related or strategic circumstances.
  • 25:40 But the key is the design...
  • 25:42 I mean, the design of the subsidies,
  • 25:45 making sure it's appropriately targeted
  • 25:47 with the view of minimizing market distortions.
  • 25:50 And often that is where we let ourselves down,
  • 25:53 where we don't do enough work on designing those subsidies properly
  • 25:57 to achieve the intended purpose and minimize negative consequences.
  • 26:01 [Shawn Donnan] And part of the reason for that, though,
  • 26:02 is because we live in a world in crisis right now, right?
  • 26:05 I mean, there is a food price crisis in the world today.
  • 26:08 We just wrote this week about how, if you look out at emerging economies today,
  • 26:13 they are facing a set of shocks
  • 26:16 that is akin to what we were seeing in the 1990s.
  • 26:19 [Matthias Corman] And yet not because there's a lack of supply...
  • 26:21 Available supply right now,
  • 26:23 it's because there's challenges with getting the available supply to market.
  • 26:26 - [Shawn Donnan] Absolutely. - [Matthias Corman] And there's various
  • 26:28 other related risks and expectations...
  • 26:31 [David Malpass] Relative to 2008 and 2009, there was a shortage then.
  • 26:34 This time there is enough food in the world
  • 26:36 and it's getting into the market
  • 26:39 and avoiding some of the distortions that are so tempting.
  • 26:42 [Shawn Donnan] But it's also generating these politics, right?
  • 26:45 Which are incredibly difficult.
  • 26:46 And if doing subsidy policy in a peaceful world is tough,
  • 26:50 it's even tougher surely in a world that's in crisis mode.
  • 26:54 Economic policy, good economic policy isn't always made in a crisis.
  • 26:59 [Ngozi Okonjo-Iweala] Well, that brings me back to the question
  • 27:02 you posed about the issue
  • 27:04 of subsidies for semiconductors, industrial policy, friend-shoring,
  • 27:09 if you will.
  • 27:11 In a world of shocks, multiple shocks such as we live in and we've seen
  • 27:17 of course politicians and governments will try to do some of that.
  • 27:23 But as David said, it's very costly.
  • 27:26 And the good news is when you talk to business people,
  • 27:30 they don't quite talk that language.
  • 27:34 They talk of how they will manage their risks.
  • 27:37 They talk of diversification, of sources of supply.
  • 27:41 So I think governments may want to do some of this friend-shoring and re-shoring,
  • 27:47 but businesses are going to make their calculus slightly differently
  • 27:52 and that's what we're finding.
  • 27:54 So let's say, of course, if I'm a business person
  • 27:56 and I'm offered a large subsidy to do something,
  • 27:59 I'll take it with both hands.
  • 28:01 But ultimately it's not sustainable for governments.
  • 28:04 It's very costly.
  • 28:07 And that is why I think we need to be very careful because
  • 28:13 because not all governments can afford those types of subsidies.
  • 28:17 It doesn't set a very good example.
  • 28:19 [Kristalina Georgieva] Actually, we know
  • 28:21 that we are in a more shock-prone world.
  • 28:24 That's a fact.
  • 28:25 We got the shock of the pandemic.
  • 28:27 We now have the shock of the war.
  • 28:28 Locally, we have climate shocks.
  • 28:31 And that drives the conclusion that
  • 28:34 we have to work more on supply chain resilience.
  • 28:38 It has to happen.
  • 28:39 After the shock of the pandemic, many countries looked into,
  • 28:44 "Wait a minute, we are getting all our medicines from one place.
  • 28:48 We have to diversify."
  • 28:50 There is nothing wrong in this approach.
  • 28:54 I don't know whether it applies to semiconductors,
  • 28:57 but I can objectively say
  • 28:59 that our institutions have a role to play
  • 29:02 to build the supply chain resilience,
  • 29:06 to recognize there is a security issue for the functioning of the economy
  • 29:12 and then come up with transparency of how you make this decision.
  • 29:18 As Matthias said,
  • 29:19 "Well motivated, well designed, if subsidies are to be used in place."
  • 29:25 And something that is missing, some way in which we can review subsidies
  • 29:31 subsidies and then have a fair judgment
  • 29:35 on what works and what doesn't.
  • 29:39 [Shawn Donnan] I feel like all four of you lay out
  • 29:41 an incredibly compelling case for tackling subsidies.
  • 29:45 I also suspect that when this project began to draft this report,
  • 29:49 the world was a slightly different place.
  • 29:51 And the politics out there in the world were slightly different.
  • 29:54 I wonder when you think about tackling what has always been a difficult issue
  • 30:01 in subsidies and telling governments that they can't do the politically
  • 30:05 or they shouldn't do the politically expedient things sometimes
  • 30:08 and do the sensible thing instead.
  • 30:11 I wonder if you think the world
  • 30:13 is a more complicated place to make that argument right now.
  • 30:18 [Ngozi Okonjo-Iweala] Of course it is a more complicated place
  • 30:22 and we shouldn't minimize that.
  • 30:24 Of course the geopolitics is not to be minimized.
  • 30:27 They need to feel secure in who you trade with
  • 30:32 and who you do business with.
  • 30:36 There's that, we'll take it into account.
  • 30:38 But we are saying...
  • 30:39 I want to come back to something Kristalina said,
  • 30:42 All that being given,
  • 30:43 we need to watch the extent to which we do undervalue what we already have.
  • 30:49 The cost of pulling back.
  • 30:52 WTO economists have actually started simulations of this
  • 30:56 and they show just from looking at efficiency,
  • 30:59 losses, losses in scale economies,
  • 31:02 You lose 5% of GDP in the longer term.
  • 31:05 That's not trivial.
  • 31:07 So we need to be saying yes,
  • 31:09 that your politics will have to take care of some of this business,
  • 31:12 but to a certain extent only.
  • 31:15 Beyond that,
  • 31:17 it will result in losses for everyone and especially the poorer countries.
  • 31:21 [David Malpass] That was the beginning of this report
  • 31:24 that the economic view is clear of the cost of subsidies
  • 31:28 and the need for efficiency for the world, especially for development.
  • 31:32 What's changed is two points.
  • 31:35 One is the recognition of how dependent
  • 31:40 Europe had become on energy from Russia.
  • 31:43 And the world recognized that on China, overdependence,
  • 31:48 which is a step that probably the world wanted to do.
  • 31:53 And even I've argued
  • 31:54 that for China it will be beneficial
  • 31:56 to not have people so dependent on them.
  • 31:59 That gives them more range of motion.
  • 32:01 So that's an okay step.
  • 32:03 And also the urgency because of the food spikes.
  • 32:06 This has to be addressed right now,
  • 32:09 this month, next month by the world to hold down trade barriers
  • 32:13 and to not fall into subsidies
  • 32:15 that are going to distort all of these markets.
  • 32:18 [Shawn Donnan] I got to say, like if anything,
  • 32:20 the need to tackle this has become more urgent
  • 32:23 because governments around the world
  • 32:25 have had to spend a lot of money to deal with the impact of the pandemic.
  • 32:29 They've got to spend a lot of money
  • 32:31 to deal with many of the challenges that the world is facing.
  • 32:34 And quite frankly, efficient allocation of limited resources,
  • 32:38 of limited fiscal resources,
  • 32:40 should b a key motivating factor to tackle this.
  • 32:43 We need the world to run on all cylinders
  • 32:47 and this is part of what is holding the world back.
  • 32:50 [Kristalina Georgieva] Yes, you hold one cylinder off.
  • 32:54 The driver of geopolitical consideration is there,
  • 33:00 but also the driver of government having less money is there.
  • 33:06 And so with interest rates going up,
  • 33:10 governments having debt to service,
  • 33:12 they better be smart and not jump into committing
  • 33:16 to things that they may not be able to pay for.
  • 33:20 [Ngozi Okonjo-Iweala] Can I say one more thing? I think--
  • 33:22 [Kristalina Georgieva] Of course. Which is wasteful.
  • 33:24 [Laughs] On top of it, it's wasteful.
  • 33:26 [Ngozi Okonjo-Iweala] And that brings me to the point
  • 33:28 that once you start this subsidy, then it's a race to the bottom.
  • 33:33 And poorer countries cannot compete.
  • 33:35 [Matthias Corman] That's it.
  • 33:36 [Ngozi Okonjo-Iweala] So we live in a world in which the rich
  • 33:38 will get to do everything and the poor will get left out,
  • 33:42 because they don't have the physical space to do things,
  • 33:45 so we also need to reflect that type of a world doesn't work.
  • 33:50 [Shawn Donnan] But do you need a world in which the rich world
  • 33:53 is helping the poor world extract themselves from these subsidies, right?
  • 33:56 So for the story that we did on the shocks facing the emerging economies,
  • 34:00 we sent out reporters around the world,
  • 34:02 and I was really struck by the story of a Tunisian baker, baker in Tunisia,
  • 34:07 who can't get any flour.
  • 34:09 He can't get the subsidized flour.
  • 34:11 He can't get flour on the black market.
  • 34:12 He can't afford the flour that's there on the black market.
  • 34:15 In fact they were saying that in Tunisia
  • 34:17 it's now easier to get marijuana than it is to get flour.
  • 34:20 Which is a pretty astonishing little insight.
  • 34:23 But that is, you can look at the government there,
  • 34:26 and it's a government that is going to be engaging in conversations with you.
  • 34:33 You say, how do you get out of that because you need to find...
  • 34:36 Government needs to act.
  • 34:38 There's a market distortion.
  • 34:39 There's a market problem there.
  • 34:40 You need to get the flower out there.
  • 34:42 There needs to be a subsidy.
  • 34:44 [Matthias Corman] Well, you can't solve it by pressing a button.
  • 34:46 You can only solve it by international cooperation,
  • 34:49 and by advanced economies developing,
  • 34:51 emerging and developing economies working this altogether
  • 34:54 and that is what we're saying.
  • 34:56 That is what is required.
  • 34:57 [Kristalina Georgieva] And what we have seen in 2007, 2008,
  • 35:01 is that when there is strong international cooperation
  • 35:05 you can overcome a food crisis.
  • 35:07 It took us a while but that is how we got out of it.
  • 35:11 There are three questions.
  • 35:13 [Kristalina Georgieva] One, is food being stored in rich countries
  • 35:20 just as a precaution in quantities that are unnecessary?
  • 35:26 Two, do we identify where production can be increased,
  • 35:31 including in low-income countries?
  • 35:33 In 2007, 2008, we had cases where
  • 35:37 just by providing seeds and tools to farmers
  • 35:40 you get production up.
  • 35:43 And three, do we have a good information
  • 35:47 to help us move money and food where it is most needed?
  • 35:52 So we have identified the 26 countries that are in bigger shots.
  • 35:57 We are now-
  • 35:58 and actually, the World Bank leads on that, concentrating attention
  • 36:02 So they have the money.
  • 36:03 They know where the markets are.
  • 36:05 They are facilitating buying bulk for multiple countries at the same time.
  • 36:13 And as David said, this week,
  • 36:16 we are coming up with this action plan of international financial institutions.
  • 36:21 And it is truly pressing to get it to move so we avoid people dying unnecessarily.
  • 36:28 The food is available.
  • 36:30 It just has to get to the right place.
  • 36:33 [David Malpass] Two points. One is for poor people.
  • 36:36 They can use a targeted subsidy.
  • 36:38 So a social safety net is different.
  • 36:41 This report is trying to go at those subsidies
  • 36:44 that are for producers and consumers that cause distortion.
  • 36:49 We're not talking about the survival benefits that are needed.
  • 36:53 And then second is, markets look ahead,
  • 36:56 and businesses, as Ngozi was saying, are really good at looking ahead.
  • 37:00 If there can be some vision for the world that there's going to be a resolution,
  • 37:08 that there's going to be more supply, then people won't stockpile it
  • 37:12 because they'll see that there's supply coming.
  • 37:15 One of the worries right now is countries
  • 37:18 in Europe are trying to stockpile natural gas for next winter.
  • 37:22 Well, that means that there's not natural gas available
  • 37:26 for LNG is really needed
  • 37:27 for making urea, compound fertilizer and crops.
  • 37:32 If we look around the world, that's the highest priority.
  • 37:35 Let people have that.
  • 37:37 But the advanced economies can buy up the whole supply
  • 37:41 and store it up for next winter.
  • 37:43 It would be better to say, look, there's going to be enough
  • 37:46 and there's going to be extra production and supply to make that possible.
  • 37:50 [Kristalina Georgieva] Right. So we have to avoid vaccine two,
  • 37:54 a repetition of what was done in the beginning.
  • 37:57 But the vaccine experience was a lesson in the way
  • 38:01 the world is working today,
  • 38:02 which self-interested kind of takes over in a way, doesn't it?
  • 38:05 [Ngozi Okonjo-Iweala] Yeah, I want to comment,
  • 38:07 and of course, we can't avoid a certain amount of self-interest.
  • 38:11 But on the vaccines, that's a very bad example
  • 38:14 because it's not even in the self-interest of a country in a pandemic
  • 38:18 in a pandemic to just look after their people because they're going to get it.
  • 38:22 This is one problem a country cannot solve.
  • 38:24 But since I have the floor,
  • 38:26 just a quick word on industrial subsidies.
  • 38:28 One of the things that at the WTO we're very worried about
  • 38:32 that breaks trust
  • 38:34 is these hidden industrial subsidies.
  • 38:36 And this report shows there's a real gap.
  • 38:40 We don't have enough information.
  • 38:42 We have a lot of information on agricultural subsidies
  • 38:45 thanks to the work of OECD, the World Bank, IMF.
  • 38:49 But on industrial subsidies, we all need to put our analytical capabilities to work
  • 38:55 to get information so that we can deal with this issue
  • 38:59 of feeling of unfairness and anti-competitive behavior.
  • 39:04 [David Malpass] I was going to support information for the vaccines.
  • 39:08 One of the things was people didn't know how many options somebody else had.
  • 39:14 One of our goals in our task force
  • 39:18 was to get that information out,
  • 39:21 because it turned out there were enough vaccines
  • 39:24 and so on the food, there is that bit of similarity,
  • 39:27 that information will help
  • 39:29 because there are huge stockpiles of grain in the world.
  • 39:33 Write them down and see if they can be released.
  • 39:36 [Mathias Cormann For markets to be well-functioning,
  • 39:38 they need to be open and transparent.
  • 39:40 And access to information is critically important.
  • 39:43 [Shawn Donnan] But we're in a world again, I hate to be the downer here,
  • 39:47 but we're in a world in which people aren't necessarily
  • 39:51 in the mood to share some of that.
  • 39:52 And that is why this conversation is so important.
  • 39:55 Like we can't just be limiting ourselves by the challenging situation we're in.
  • 39:59 We're also going to look to where we want to be.
  • 40:03 In our meeting with Kristalina, Canada said it was going to produce more food.
  • 40:08 Once that's stated, people begin to adjust markets.
  • 40:12 [Kristalina Georgieva] Yeah. I just wanted to say that
  • 40:15 In the vaccine story, it took us a while to get everybody,
  • 40:18 the producers, the organizations that are deploying vaccines...
  • 40:23 but once we got them in the room, it clarified that we had enough vaccines,
  • 40:28 that the problems are more around the last mile in distribution,
  • 40:32 and then your direct resource is appropriate
  • 40:34 and that is what we need to do on food as well,
  • 40:37 and we will do it.
  • 40:38 [Shawn Donnan] There is also a story through history
  • 40:41 of behavior now affecting what happens next year.
  • 40:44 You mentioned fertilizers and what's happening there.
  • 40:46 We're already seeing reports of farmers
  • 40:48 not planting as much as they would normally this season,
  • 40:53 which will affect stockpiles going forward.
  • 40:55 How much do you worry about the shocks we're going through now
  • 40:58 carrying through until the next few years?
  • 41:01 Very worried.
  • 41:02 [David Malpass] Worried. But individuals are really good at this.
  • 41:06 And so one of the things is to figure out that information helps.
  • 41:10 If they know that certain fertilizers
  • 41:13 are going to be more efficient and are available,
  • 41:15 farmers will really rise to the occasion.
  • 41:19 They have to be allowed to do that with information.
  • 41:22 [Kristalina Georgieva] And this is why the question
  • 41:24 of information available to everybody is so important.
  • 41:28 Let's say something positive.
  • 41:30 And the positive is that phones, digital technologies
  • 41:35 have dramatically changed farmers access to information,
  • 41:41 and that is what we need to write on.
  • 41:43 [Shawn Donnan] So what comes next?
  • 41:45 We need more information.
  • 41:47 When do we get this global agreement
  • 41:49 that everyone's going to get along and not do any subsidizing?
  • 41:53 [Mathias Cormann] It will always be work in progress,
  • 41:55 but it is something that we have to continue working on.
  • 41:59 [Kristalina Georgieva] And the good thing is that we are not leaving Ngozi alone
  • 42:04 to go nd work with the trade ministers.
  • 42:08 The reason all of us are here is because good decisions are made
  • 42:13 when finance ministers are involved,
  • 42:15 when industry ministers are involved, agriculture ministers are involved,
  • 42:20 the private sector is involved, and that is our task.
  • 42:24 This paper...
  • 42:25 The biggest contribution of the paper is that it brings this multiple perspective
  • 42:31 and then we have a better chance when the four,
  • 42:35 the gang of four, me with wings though, right?
  • 42:38 When we get in action, good things would happen.
  • 42:42 [Ngozi Okonjo-Iweala] And for me, I have to say that
  • 42:44 getting this work started gives a lot of hope
  • 42:47 because we need to look at some of our agreements at the WTO
  • 42:51 and we need to let members know that we're listening to what they're saying.
  • 42:56 They are very worried about each other's subsidies.
  • 42:59 So pushing to get more transparency
  • 43:02 at least is part of what they are looking for.
  • 43:05 It will be a work in progress.
  • 43:06 I really want to share what Mathias said.
  • 43:10 [Shawn Donnan] I'm told we have 1 minute left.
  • 43:12 We could go a lot deeper into this and continue.
  • 43:15 I want to go through a very quick lightning round.
  • 43:18 I've got the four guardians of the world economy here on the table.
  • 43:22 I need to ask you this question.
  • 43:24 What is the shock you worry about next?
  • 43:28 What is the shock that you look out on the horizon?
  • 43:31 You think that's the one that's really going to take us in a different direction.
  • 43:36 I'll start with you, David.
  • 43:38 I think energy is really important to sort out.
  • 43:40 It underpins fertilizer, it underpins crop yields,
  • 43:44 and so right now it's in disarray
  • 43:46 because people don't know how it's going to adjust.
  • 43:49 So that's the shock it's going to last into next year.
  • 43:53 Mathias? [Mathias Cormann] Well, I mean, the thing that worries me most
  • 43:56 is that we're not getting issues off the table.
  • 43:58 That more and more issues are coming on the table,
  • 44:01 and we're still dealing with the impact of the pandemic.
  • 44:03 We're dealing with the impact now of the war.
  • 44:05 We're dealing with structural transformation challenges
  • 44:07 related to climate change,
  • 44:08 digital transformation,
  • 44:10 pressure on the rules by its trading system.
  • 44:12 And I really do hope that we can start taking some of these issues off the table.
  • 44:18 Can I be greedy and say there are two things I'm worried about.
  • 44:21 One is geopolitical miscalculation
  • 44:25 that some powers miscalculate each other's intentions
  • 44:30 and that the conflicts, wars, spread faster.
  • 44:35 I'm really worried about that because the element of mistrust
  • 44:39 that exists in the world now is significant.
  • 44:42 The second thing that worries me is another pandemic
  • 44:46 because I don't really feel that we're prepared yet
  • 44:49 to deal with another one.
  • 44:51 [Shawn Donnan] I'm going to close with our host.
  • 44:53 [Kristalina Georgieva] I worry most about
  • 44:55 multiple shocks simultaneously hitting us
  • 45:00 and our proven inability to deal with more than one crisis at one time.
  • 45:08 Building that capacity to see,
  • 45:11 to anticipate crisis and then build resilience to crisis
  • 45:16 and act on multiple crises is what I worry we are slow to build.
  • 45:25 Well thank you to all four of you and to all of your staff who came up
  • 45:30 with this very good report and it's one that you really should read.
  • 45:34 It is available on the websites of all four of these organizations, I'm sure.
  • 45:38 Thank you to all of you out there in the virtual world
  • 45:41 and thank you to everyone here in the studio.
  • 45:44 And with that, the only thing I have left to wish you...
  • 45:47 Oh, there's the report there.
  • 45:49 Do you see it?
  • 45:50 The only thing I have left to say to you at this point
  • 45:54 is have a very good Friday afternoon.
  • 45:56 Thank you so much for tuning in.
  • 45:58 -Thank you. -Thank you.

Livechat with

Economist, Trade and Regional Integration Unit, World Bank

Torie Smith (Moderator) Welcome everyone! My name is Torie Smith, and joining me on the live-chat to answer your questions is Vicky Chemutai, an economist with the World Bank’s Macroeconomics, Trade and Investment Global Practice.

The event will begin soon. Please stay tuned and submit your questions here on World Bank Live. You can also follow the discussion on social media using #UnleashTrade.

Trade remains an important source of growth and could contribute much more to solutions for the greatest global challenges of our time. Listed on this page you can see the speakers participating in today’s conversation on the role of subsidies, trade, and international cooperation in building a resilient future.

While we wait for the event to start, learn more about subsidies, trade, and international cooperation by exploring a new report jointly published by the World Bank, IMF, OECD, and WTO: thedocs.worldbank.org

Shawn Donnan, Senior writer, Bloomberg News, will moderate a discussion with David Malpass, President, World Bank Group; Kristalina Georgieva, Managing Director, International Monetary Fund; Ngozi Okonjo-Iweala, Director General, World Trade Organization; and Mathias Cormann, Secretary-General, Organisation for Economic Co-operation and Development.

Oluchi Laura Odimuko Subsidies on petroleum products continue to affect developing countries. What advice should be given to Nigeria to put our refineries in place and as a substitute of subsidy on petroleum products imports.

Vicky Chemutai / World Bank Research shows that estimates of the effects of fossil fuel subsidies, for example, suggest opportunities for governments to better target scarce fiscal resources toward the most vulnerable households without undermining climate efforts. Countries should also be focused on how government financing can incentivize climate-friendly projects while discouraging climate-unfriendly projects. Globally, governments are currently under pressure to cease export financing for fossil-fuel related infrastructure while doing more for renewables and other green business.

AKINRADEWO A.M.OROBOLA Thank you all, happy Friday. WBG, Thank you.

Camilo Rivera What about initiatives like carbon border adjustments, or tariffs intended to make production greener in third countries? not coordinates inititatives, like these, could distort world markets even further.

Vicky Chemutai / World Bank Thanks Camilo. We address the issue of carbon border adjustments and its potential impacts in this report: openknowledge.worldbank.org

Fundacion Comunitaria Zona Azul The food quality from transnational we get in the rural areas is not only bad and dangerous - but also very expensive - Here in CR a very high percentage of earning are spent buying food. I think that working at local level, community level, can take care of the quality of food people eat, food would be more accessible money wise, and jobs can be created by empowering the rural communities the right way. Subsidies should go to the people who make the wheel go around - not to the ones who pay others to do the job of making the industrial wheel go around. Our world is made up of millions of small people with no say - And subsidies are given to the minorities who are damaging people's health and the natural environment. A second look into the past is necessary. Necessary to acknowledge what became right and what went wrong within humanity.

Sara Subsidies are often used as a way to response to some social inequalities or inequal redistributive effects. Can you explain why subsidies are not the best way to proceed?

Vicky Chemutai / World Bank Subsidies can have detrimental effects internally (such as in undermining evenhanded domestic competition), on other trading partners (especially in developing countries), on the global economy, or on the environment. The costs of subsidy-induced distortions can be substantial, especially when the goods being subsidized are already over-produced because of negative externalities. In the agricultural sector, they skew the playing field for farmers especially in terms of pricing output.

Michael Which report are they referring to?

Torie Smith (Moderator) They are referring to a new report jointly produced by the World Bank, IMF, OECD, and WTO. The report is available here: thedocs.worldbank.org

Thierno Bocar Diop Should green payments and agri-environmental subsidies, that are proven to provide little additionality in terms of environment, be consider a distortion to agricultural productivity and competitiveness?

Vicky Chemutai / World Bank Thank you Thierno! Despite the longstanding mandate to establish a “fair and market-oriented agricultural trading system” while taking into account non-trade concerns like the environment, agreement on most issues remains elusive. This includes efforts to establish concrete modalities for the reduction/incorporation of domestic support entitlements, such as the ones you raise. Additionally, addressing climate change requires greater effort to understand the environmental impacts of existing subsidies across all sectors and the priorities for reform. Equally important will be the design of any new subsidies to support the transition to net-zero carbon emissions (e.g., to minimize spillovers). As the report stresses, greater cooperation will be critical in improving our understanding of the distortionary nature of these subsidies.

AKINRADEWO A.M.OROBOLA Welcome DR Ngozi Okonjo-Iweala, Director-General, World Trade Organization. Thanks for giving a sustainable presentation on trade and international cooperation in building a resilient future. World Bank Group thanks for bringing us the best speakers who can address key points, that can make us build better and stronger in diversity, grow and develop in various economic aspects to unleash trade.

Graca Carvalho How does international cooperation approach developing country needs on trade?

Vicky Chemutai / World Bank Under all efforts of international cooperation on trade, there are flexibilities that are often incorporated to take into account the needs of developing country members, especially least developed country (LDC) members. For example, negotiations on subsidies recognize the role of subsidies in relation to many development programs, and thus incorporate aspects like subsidy phase-out plans. Check out the report for more!

Caiphas Chekwoti Subsidies are in part a consequence of powerful interest groups with strong political connections that shapes domestic policy and regulations. What would be the softer proposals (if any) that would dampen the push for subsidies?

Vicky Chemutai / World Bank Thank you Caiphas! From a global perspective (which is the lens the report takes on), focus is placed on reducing subsidies that have negative effects on third parties – e.g., through trade flows, or on the environment, etc.. Indeed, the development of these subsidies is often a gray area as you allude to in your question given the heavy political-economy dynamics that could be at play. As such, whether those subsidies were implemented because of lobbying efforts or other reasons is not analyzed in this report. On the flip side, some interest groups may be calling for subsidies that are in fact desirable, such as those that reduce the use of fossil fuels. Ultimately, what may matter more is the effect of the measure rather than who was asking for it and why.

Damian G What is the role of the World Trade Organization?

Vicky Chemutai / World Bank Hello Damian! The WTO is the global trade rule-making body. In the context of today’s discussion which places emphasis on subsidies, the WTO provides a strong basis for their regulation. In particular, this is through the WTO Agreement on Subsidies and Countervailing Measures and the WTO Agreement on Agriculture, although the agenda to negotiate detailed subsidy rules for services has been largely set aside. Granted, some recent free trade agreements have also gone beyond WTO rules, containing, for instance, provisions disciplining the behavior of state-owned enterprises and more extensive lists of prohibited subsidies.

Aocaterniz How is the WTO tackling the downsides of subsidies as an injection for growth and development in developing economies?

Vicky Chemutai / World Bank Thank you Aocaterniz! In our analysis, there is a strong recognition that the current WTO rules on subsidies are not sufficient/effective in preventing subsidies with negative spill-overs to other countries.
Moreover, reform on subsidy rules could take long to conclude - today’s global trading landscape is dealing with many crises (including geopolitical) e.g., the war in Ukraine, economic instability stemming from Covid19, a blocked Appellate Body in the WTO Secretariat etc. Hopefully, progress on fishery subsidies, for example, could at least be realized sooner than later - WTO Members have yet to agree special disciplines for harmful fisheries subsidies that contribute to overfishing.
As such, the report calls for relatively small steps to improve transparency in the use of subsidies, which would at least incentivize the reduction of subsidies which have distortive effects on trade and investment.

Torie Smith (Moderator) That concludes today’s event! Thanks to everyone who participated. Please stay tuned for the event replay, which will be published on this page.

Don’t forget to explore the new report on subsidies, trade, and international cooperation: thedocs.worldbank.org

For more information about the World Bank’s work on trade, visit our website: www.worldbank.org

Podcast

Listen to the 25-min summary

Use the timestamps to browse the main sections of the podcast.

[00:00] Welcome and introduction
[02:54] Subsidies, trade, and international cooperation
[06:19] National self-interest vs. globalization
[08:34] The end of an era of globalization?
[11:28] Measurement of agricultural subsidies
[13:40] Subsidy and economic policy in a crisis mode
[18:03] Tackling subsidies
[24:42] Transparency, access to information, collaboration
[26:34] Closure and thanks for tuning!

About the Spring Meetings 2022

The Spring Meetings bring together leaders from government, business, international organizations, and civil society, along with a diverse group of experts, to discuss global challenges and the path ahead. Watch the replay of our events dedicated to international development.

Apr. 12: Addressing Challenges
Apr. 19: Responding to Global Shocks
Apr. 20: Opening Press Conference
Apr. 20: The Digital Revolution
Apr. 21: Financing Climate Action
Apr. 21: Support to Ukraine
Apr. 22: Fragility
Apr. 22: Preserving Open Trade
Apr. 23: Human Capital

Available with simultaneous interpretation in ArabicFrench and Spanish.