The role of international trade as a key driver for sustainable development has been a recurring theme since the First International Conference on Financing for Development (FfD) in Monterrey, Mexico in 2022. Building on this established consensus, the “Zero Draft” of the FfD4 Outcome Document emphasizes the transformative potential of international trade in driving sustainable development, particularly for developing countries. Contrary to the trends observed in the early 2000s, the current global landscape is marked by a noticeable shift away from trade liberalization towards the increased use of tariffs and trade restrictions, as well as geopolitical fragmentations. This shift poses significant challenges to open, fair, and predictable multilateral trade, and to the benefits that could be derived from it for development finance.
The Zero Draft calls for strengthening a fair and transparent multilateral trading system under the World Trade Organization (WTO), ensuring policy space for nations to address issues like food security, and expanding market access for least developed countries (LDCs) through duty-free and quota-free measures. Regional trade agreements, such as the African Continental Free Trade Area, are highlighted as tools for inclusive growth, while critical minerals and commodities are framed as opportunities for sustainable value addition. To support trade integration, the draft advocates investment in physical and digital infrastructure and enhancing trade finance for marginalized groups, including women-owned businesses. It also urges the elimination of trade-distorting subsidies and promotes global partnerships for fair and transparent value chains.
Several aspects of the “Zero Draft” related to trade could be considered controversial or subject to debate, as they touch on sensitive economic and political interests among countries. Some important potentially contentious issues include the following:
- Multilateral trade and WTO reforms: The draft advocates for reforms to strengthen the WTO and ensure better representation for developing countries, particularly LDCs. However, divergent interests between developed and developing nations, as well as disagreements over issues like agricultural subsidies, special and differential treatment, and dispute resolution, could stall consensus-building.
- Policy space for developing countries: The zero draft emphasizes granting developing nations sufficient policy space to address issues like food security. However, this may conflict with existing trade agreements or commitments that restrict subsidies and protective measures. Balancing this flexibility with global trade rules could face resistance from more developed economies advocating stricter compliance.
- Trade-related environmental measures: Concerns are raised about the impact of unilateral trade-related environmental measures on developing countries. The draft calls for discussions to mitigate negative effects, which could conflict with the environmental agendas of nations implementing such measures, like carbon border adjustment mechanisms (CBAM) (e.g. the EU CBAM).
- Critical minerals and commodities: Proposals to create global traceability and accountability frameworks for critical minerals could impose additional costs on developing nations. These measures may face pushback from resource-rich countries concerned about external interference.
- Digital trade and automation: The draft recognizes digital trade as a transformative opportunity but highlights risks to traditional export-based models due to automation. Efforts to regulate and support digital trade, including cross-border e-commerce, could spark disagreements over data localization, intellectual property rights and global governance of digital platforms.
These controversial points reflect the inherent tensions between fostering equitable trade, protecting national policy space and addressing broader global challenges like climate change and inequality. Reaching consensus on these matters will likely require substantial negotiation and compromise – but is essential to securing the future of a rules-based global economic order.
The recent return of U.S. President Donald Trump to office poses significant challenges to global rules-based cooperation. Against this background, the FfD process remains vital. As one of the few truly inclusive platforms, it brings together a wide array of stakeholders to forge consensus. This inclusivity is particularly critical at a time when other global institutions, like the WTO, face growing challenges and risk becoming dysfunctional. The ability of the FfD process to create shared understandings and collective commitments can serve as a stabilizing force, helping to build trust and advance coordinated solutions in international trade systems.
While the challenges are undeniable, the FfD process offers a unique opportunity to sustain dialogue, ensuring its continued relevance in shaping the future of global cooperation. The next step is now to make the draft consensual without diluting its effectiveness.
This blog post is the second contribution to a blog series on the 4th FfD conference by the German Institute of Development and Sustainability (IDOS). Please also read the first post “Cumbersome but Essential – The United Nations Financing for Development Process Ahead of its 4th Conference”.
