Good morning, everyone. It's great to be back here in Singapore, to see how rapidly and beautifully this place is developing. Amazing.

Dear Adam and dear Danny, thank you so much for your kind words. I'm even more grateful for something else: your eye-opening research, and especially your consistent advocacy for open, rules-based multilateral trade.

Adam and Danny don't just support the WTO and highlight its record of enabling growth and poverty reduction.

They make the case for reforming the WTO to keep it fit for purpose, so it can keep helping countries and people use trade to meet the evolving challenges they face.

This past September, they both did us the honor of travelling to Geneva for our Public Forum — where Adam in particular delivered a bit of tough love to our members in his remarks.

Excellencies, ladies and gentlemen, I'm really delighted to join you here in Singapore at this critical juncture for the economic prospects of people and countries around the world. I can't think of a more appropriate location for us to be thinking about middle powers or third countries, and the WTO.

Whether you call them middle powers or third nations, many economies today are deeply integrated into global commerce, with a substantial stake in its smooth functioning — and while not large enough to significantly steer trade flows on their own, they have enough influence to help shape trade rules and norms, especially when acting collectively.

For several of these countries, a functional trading system is necessary for their very existence as nations: they are often net importers of food and energy.

My main argument today will be that middle powers have a lot at stake, so they can and should be doing more to shore up the open global economy, and the WTO.

Why? Why ‘can’? ‘Can’ because even though these countries might be relatively small individually, in aggregate they are major players in global trade.

Look at a back-of-the-envelope calculation for countries that account for more than 1% but less than 4% of world trade, which excludes the likes of China, the United States, and Germany, but includes countries from France and Korea through to Malaysia and Türkiye. Together, they account for around half of world trade.

To put this in context, US-China trade gets many more headlines, but direct bilateral trade between them accounts for — guess: 20%? 10% 5% of global trade? It's actually less than 3% of global goods trade, but it gets most of the headlines.

As for the ‘should’, it is because the open and predictable global trading system we have grown accustomed to — and come to take for granted — over the decades is under threat. Unilateral trade restrictions, subsidies, and other distorting measures have been on the rise this year.

That said, we shouldn’t lose sight of the fact that global trade and the trading system have been resilient through the shocks of the past five years.

Total goods and services trade was worth a near-record $30.5 trillion in 2023, in a $105 trillion world economy.

Core WTO tariff terms continue to underpin over 75% of global merchandise trade.

WTO rules and committees for health and safety standards and technical regulations help protect consumer safety, whilst providing a forum for countries to manage and minimize related trade frictions.

Companies still benefit from the protection abroad of their intellectual property, all thanks to WTO agreements.

And I really want to insist on these other benefits that are often forgotten. And I could name more. The WTO is the home of a plurilateral Government Procurement Agreement that makes government procurement more competitive and open and delivers value for money for citizens — a $13 trillion business. This is something very important that is a strong instrument.

So it's not just about tariffs. It's about consumer safety, product safety, intellectual property, government procurement, and so much more.

Nevertheless, the global trading system has been fraying — let's admit it — amid geopolitical tensions, unilateral measures, misdirected blame for the effects of macroeconomic imbalances, and, we have to acknowledge this, the difficulties WTO members have had when it comes to updating the global rulebook.

WTO monitoring suggests that as of October, the stockpile of trade-restricting measures that has accumulated since 2009 was affecting nearly 12% of world imports and 3% of world exports.

A new bout of restrictions and retaliation could become the proverbial straw that breaks the system's back, and destroys the benefits it continues to provide every day to people and businesses around the world.

And while the big powers might be able to tell themselves that they can get by on domestic demand, middle powers know they cannot. They don't have the luxury of pretending they can produce everything or grow everything at home. They know their prosperity relies on the specialization and scale that come with trade — with predictable tariff terms, and clear, shared frameworks for non-tariff policies.

Consider Singapore, whose remarkable rise to prosperity was and is closely tied up with trade. Its ratio of goods and services exports plus imports to GDP averaged more than 315% between 2021 and 2023.

As an entrepot, Singapore is exceptional. But Viet Nam has a trade-to-GDP ratio of 181%, Malaysia, 168%, Thailand, 132% and Switzerland, 127% — all have trade-to-GDP ratios between 100 and 200%.

Even in substantially larger economies, both rich and middle-income, the figures are high: 93% for Germany, 85% for Korea, 83% for Mexico, 74% for Türkiye, and around 65% for the United Kingdom, South Africa, Canada, and France. Though I should note that for EU member states, half or more of this trade tends to occur within the EU single market.

• Contrast this with the biggest economies, where most economic activity is domestic.
• For the United States, total imports and exports add up to only 26% of GDP.
• For China, the level is around 39%.
• For the EU as a bloc, trade with the rest of the world is equivalent to 46% of its GDP.

In addition, middle powers don't just depend on trade — they depend on trade with a range of partners.

Looking again at Singapore, its biggest trading partner for goods is China. Its biggest trading partner for services is the United States. For both goods and services, its top five trading partners include China, the US and the EU. But close to half of its trade is with other, smaller economies.

So, for example, 12% of Singapore's merchandise exports go to China, but 50% go to ‘other’ countries not among its top five export destinations. 26% of its services imports are from the US, but 47% are from ‘other’ countries.

This is why Foreign Minister Vivian Balakrishnan is so emphatic that Singapore and other ASEAN member states want to maintain good relations with a wide range of countries, and do not want to be forced to choose between a US-aligned or China-aligned bloc.

As it turns out, Singapore's trading patterns are not unique. We see something comparable from Brazil to South Africa, and Japan to Indonesia and Australia, where ‘other’ countries collectively account for between a third to half of goods trade, far outstripping the shares of their largest single partners, and often the top few combined.

The trend is particularly pronounced for India: 58% of its goods imports, and 53% of its exports, involve partners other than the US, the EU, and China, and the rest of its top five.

The framework governing trade among all these economies is, of course, defined primarily at the WTO — making the WTO a key element in trade-driven growth, development, and job creation.

In sum, it's one thing for the big economies to look at trade from one slant, but it is another for middle powers to take trade for granted — for them, trade is serious business.

The signs of fragmentation that are becoming visible in global trade should be of particular concern to the trading system's middle powers.

Since 2018, bilateral trade between the United States and China has grown 30% more slowly than their trade with the rest of the world. This likely overstates the true extent of bilateral economic disengagement, given indirect trade via “connecting” economies like Mexico and Viet Nam. But trade has fallen in many specific sectors that saw the imposition of tariffs, such as semiconductors and IT equipment like modems, routers and network servers.

More broadly, WTO economists find that if we divide the world into two hypothetical blocs based on voting patterns in the UN General Assembly, trade between the blocs has grown 4% more slowly than trade within them - a trend that dates back to 2022, and specifically to the war in Ukraine.

They estimate that if the world economy were to decouple into two self-contained blocs, the resulting losses would be equivalent to at least 5% of real global GDP. The IMF puts the losses as high as 7% - like dropping Germany and France from the global economy.

Over the past couple of years I have found myself repeatedly telling audiences that the 1930s collapse in global trade cooperation is a movie we should not be keen to watch again.

So I asked our economists to look at how a 1930s-style breakdown of the multilateral trading system would play out for different countries, especially mid-sized economies and the Global South. This kind of full meltdown of trade cooperation, with all-encompassing tit-for-tat retaliation, even at the regional level, is improbable. But still, their estimates keep me up at night:

• Double-digit losses in real GDP by 2040 compared to the current trendline, with the drop in developing country regions like sub-Saharan Africa and Southeast Asia even steeper than those in rich countries like Australia, Canada, Korea, and the UK.
• What this makes clear is that allowing the world trade system to disintegrate would have a serious material impact. Middle powers have an interest in standing up to prevent this from happening. They have the most to lose and the most to gain.

What would this mean in practice?

• First, they need to build a coalition of like-minded countries supportive of the multilateral trading system with the WTO at its core. In doing so, they should reach out to the Global South, much of which faces a major potential blow to development prospects. Such a coalition would be a powerful voice for safeguarding the multilateral trading system.
• Second, they should undertake quiet joint diplomacy with the US and China aimed at shoring up open and predictable trade relations. One potential issue for such engagement could be the large trade imbalances for which the WTO and trade policies are regularly blamed. But as the IMF has noted, these imbalances are largely in fact the product of domestic macroeconomic forces within the two giants — and the solutions lie not so much in trade policy, but in boosting demand within China and in fiscal consolidation in the United States.
• Third, middle powers can make trade work better for more people by helping to persuade their businesses to extend supply chains to encompass more countries and communities currently on the margins of the global division of labour.

As important sources of investment, middle powers can help advance this process — which we at the WTO are calling ‘re-globalization’.

We already see Samsung investing in Vietnam, and Japanese auto manufacturers making India a production base for local and global markets.

The next step is to bring in other parts of Asia, Africa, and Latin America.

Turkish companies are making strides in Africa, and are already major investors in Ethiopia’s textiles sector, producing for export to the US and Europe. We need more of this kind of deconcentrated, decentralized supply chains in developing countries.

And finally, middle powers should visibly lead efforts to reform the WTO, and to improve all of its core functions, from how rules are negotiated to monitoring and dispute settlement.

Taking forward work to modernize WTO rules and keep them fit for purpose for the 21st century would also help address perceptions of unfairness on the part of some members.  Level playing field issues.

Some of this is already happening. Mid-sized economies are leading players in our plurilateral negotiations on digital trade. Singapore, Australia, and Japan — and I'm very happy to see Ambassador Hung Sen here in the audience because he is one of the co-convenors of the very important e-commerce negotiations — rules that are being made by a subsection of WTO members to underpin global digital trade. Chile and Korea led the process that delivered an agreement on investment facilitation, a plurilateral which is still trying to be inserted into the WTO rulebook. Costa Rica and Australia, together with the EU, did the same for the new rules on services domestic regulation that entered into force earlier this year.

Middle powers are active in ongoing talks to reform our dispute settlement system, and make up the bulk of signatories to the interim appeals arrangement.

I just want to pause here to really emphasise the significant support and role that Singapore at all levels has been playing — from the President to the Prime Minister to the Minister of Trade, Minister of finance, Minister of Foreign Affairs. I couldn't ask for better. The same with Australia, the same with Korea and Japan, we've received a lot of support. So when I say they can do more, it doesn't mean they are not already acting — they are.

But together they can be so powerful — so I just want to take a minute to acknowledge the fantastic help we are getting from these countries.

So, I say they can do more. We need to improve the WTO's governance system so that our biggest strength — the consensus-based decision-making that gives each of our 166 members an equal voice — does not become a recipe for gridlock. This consensus decision-making system — WTO is one of the few multilateral orgs where developing countries, the smallest member has the same voice as the largest member. We often complain about multilateral organizations where the bigger countries have the larger shares, and have more of a voice, and the smaller countries cannot speak — well at the WTO, they can. So we must husband this as a precious resource — we mustn't allow it to be handled in such a way it blocks the organization from making decisions. Because people will step back then and say “Well, maybe this is not such a good thing.” So we need to look at this governance system, how do we husband it and keep it whilst making it work better for decision-making.

We need to solve the reservations on the part of some members that are keeping new plurilateral agreements out of the WTO framework. We need to listen carefully to their concerns and fears and see if we can allay them and persuade them that plurilaterals are good instruments for us to have.

Our subsidy rulebook, which dates back to 1994, needs an update, and middle powers are well placed to lead the development of shared rules on level playing field concerns and environmental subsidies. I insist on this, because the perception of an unfair and unlevel playing field is leading to a lot of discontent among members. But the rules we have to deal with these issues in my view are not fit for purpose and need to be reformed. It will be quite a difficult task but I think middle powers can lead this.

They can also help find ways to minimize negative trade spillovers from members’ decarbonization policies.  And again it is long past time for WTO members to deliver new rules on agriculture. One of my biggest points of stress or disappointment is the fact that after 25 years there has been no breakthrough in agriculture negotiations and we must do that, just as we must complete the ongoing negotiations on the second part of disciplines on fisheries subsidies.

Ladies and gentlemen, let me now conclude.

The international economic environment is less benign than it has been at any point since I started my career over forty years ago. And I think that's a bit of an understatement.

But the WTO's middle powers are not helpless rule-takers. If they work together, and build coalitions with each other and with smaller developing countries, they can help keep international markets broadly open, and advance the much-needed modernization of the WTO.

The open global economy underpinned by the WTO has served middle powers well. I think it is now time for them to step up to defend it.

Thank you. I'm looking forward to the discussion.