Ladies and Gentlemen, the question raised for this Forum, “What future for the international trade of vine and wine products?” resonates directly with the key talks of the day and within all international institutions concerned about trade, the WTO first amongst them: Have we entered a new era of deglobalization or are we at the dawn of something different, what my Director General has coined as “reglobalization”?
This is quite an important question for wine and vine producers! Indeed, your recent State of Wine report stated it without ambiguity: “Overall value of global wine exports is the highest ever recorded”. Over the last 20 years, since the turn of the century, the share of internationally traded wine has more than doubled, from 20% to 41% of the total production. Production patterns have also shifted globally. Europe maintains an important stronghold — with countries like France, Italy, and Spain — but the global wine stage has also witnessed the emergence of regions like California, Australia, South Africa, and Chile, Madam Ambassador is here, as strong competitors whom have carved out significant market shares.
Therefore, today I want to try to make some sense of what is happening in world trade, what it means for businesses and what can be done about it.
The last time I had the opportunity to address your assembly my message was in essence: “We are hearing a new narrative from the trade policies of many countries, with words such as decoupling, derisking, deglobalizing, but if we look at the facts and figures of world trade, we do not see it happening”.
Today I will slightly amend this message and my central assertion will be: “We still hear the new narrative but now we start seeing something of it looming up from the facts”.
Before anything, let me be very clear, trade is not fading away, to the contrary. Talks about deglobalization still need to be supported by the data. To make a long macro-economic story short, what can be said is: yes, the share of trade over GDP, that is the rate of openness of the global economy, has been somehow stagnating around 50-55% for the last 10 years. But this can be mainly explained by sectoral or “compositional effect”, such as the increase of the weight of services which are being less traded, within the GDP. Even between China and the US, global trade has been increasing, despite the trade war. And to some extent world trade has been extremely resilient after it collapsed during the COVID-19 Pandemic. So, the point is: global trade is not ebbing, globalization is not falling apart.
So what do we see happening exactly that should be reported?
We see that some of the new trade policy narrative is starting to root and tends to lead to some fragmentation of the global trading system. Let me try to capture those trends with three words: We see that trade is becoming more political, more sustainable, and more traceable.
More political. Our WTO economists detect several signs of increasing political influence on trade: political affinity or hostility start having an impact on trade flows. The clearest example stems from bilateral trade between China and the US: while the overall figure is growing, trade in the sectors impacted by the highest tariffs adopted with the trade war have stagnated, relatively to the rest. More recent data also shows that groups of countries who tend to vote the same at the UN, have started to trade more together than with others since the onset of the war in Ukraine.
There are other signs that geopolitical tensions are biting more and more on trade flows. For instance, we note that the number of quantitative restrictions which are being notified to the WTO as National Security measures, has risen sharply over recent years. The share of global trade affected by international sanctions has also increased from 2% to 12% since the beginning of the century.
The result of these political trends is more uncertainty for businesses, less predictability from trade policy. A more political trade world means a less predictable trade world. This may not sound as a real new thing for a sector like yours: unfortunately, you have been used in the past to knowing about unpredictable sanctions against your exports. And you may be better trained against such uncertainty than other sectors. But still, this trend is something to watch for since things are getting increasingly complex and fragmented.
A more sustainable trade. That is the next big trade policy trend and matter of concern for the multilateral trading system. Not at all because trade would be the enemy of sustainability policies. To the contrary: we have accumulated evidence that Sustainable Development Goals and climate objectives, will not be achieved if there is a fragmentation of the world trading system. The reason for our concern is that the risk of uncoordinated trade and environment policies which might lead to losses both on trade and economic welfare, but also on sustainability objectives.
Climate Change is one of the most illustrative fields of this need for global cooperation. If not better coordinated, the policies of carbon pricing, subsidizing green technologies, standards, and regulations, may increase the costs of the transition towards the decarbonization of the economy, slow it down and reduce both economic and climate efficiency. On the opposite, coordinated approaches contributing to preserve the integrity of the global trading system would serve more efficiently the climate goals.
Your sector, like for any other heavily traded products will be directly impacted by these trends. At a minimum, your consumers will want to know how you have addressed climate change: how did you measure your emissions? How did you reduce them? What is your benchmark? Scope 1, Scope 2, Scope 3, you already know how it goes…. Sooner or later governments will also regulate your trade, based on their climate policies. Without more cooperative efforts, this can lead to a new “Spaghetti Bowl” of standards and regulations.
A more traceable trade. This leads me to my third trend, which is probably the most immediately related to your daily conduct of business. Consumers want to know about the qualities of your products: where do they come from? It is natural?
The regulators impose mandatory information and standards requirements. Many of those are about health risks or benefits; or about the use of certain terminologies that make the vine world a truly poetic and inspiring one, such as “Reserve”, “Chateau” or “Vintage”. Most of these quality-related information is transmitted to consumers through certification and labelling schemes. Most of these standards and regulations are being notified to the WTO and we call them non-tariff measures. Fostering dialogue and cooperation on these issues is part of our daily bread and butter work, to maintain a central asset for the operations of value chains: that is trust.
Here again we observe very significant statistical trends. The number of trade concerns raised under our specialized committees, these are Sanitary and Phytosanitary Measures and the Technical Barriers to Trade, has sharply increased since 2015, overall. Yet the trends are a little bit different for wine products over the same period: we observed a significant yearly increase in the notifications of regulations that we received, but at the same time the number of trade concerns raised by our members remained relatively stable. Does this mean that your regulators have been so transparent and inclusive that their decisions have been very manageable for your businesses? Or does this mean that your businesses are already very seasoned in dealing with diverging standards?
Anyway, here are the key trends that we see developing in world trade and economy: geopolitics, climate and sustainability, quality related regulations. What should we do about it?
The answer from the last G20 Trade Ministers who gathered in India last August was loud and clear: we need to strengthen the resilience of global value chains by all means. And the Ministers also made it clear that the number one condition to confront these challenges is more of the multilateral trading system, not less.
Against the risk of further political fragmentation and uncertainty, the Multilateral Trading System is the only and last remaining political buffer.
Against the risk of climate and sustainability fragmentation, the Multilateral Trading System is the only place where cooperative approach can be fostered, to achieve interoperability of the diverse sustainability policies, and to accommodate the special needs of developing countries for a just transition.
Against the risk of regulatory fragmentation, the Multilateral Trading System daily is the place for achieving transparency, cooperative dialogue, and the prevention of disputes on regulations adopted for legitimate policy objectives.
This is what we call Re-globalization, that is an approach aiming at preserving the integrity of the world trading system, extending its benefits to more countries and people, promoting the resilience of value chains, and embedding the sustainability and climate imperatives in trade policy.
To that end, relevant International Organisations such as the OIV and the WTO, as well as interested stakholders, need to work together and exchange more about our knowledges and best practices concerning the new challenges of global trade.
Ladies and Gentlemen, this is the key message that I want to leave with you today. Your sector has been a great beneficiary of globalization. You are such an important constituency for your governments. Please tell them: now is the time to reinvest more energy and political capital in the Multilateral Trading System.
The forthcoming WTO Ministerial meeting in February 2024 will provide a golden opportunity to demonstrate this. Thank you for your attention.
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