After five years with the GED team, Christian Bluth is leaving to join Germany’s Ministry of Economic Affairs and Energy. In this farewell blogpost, he is looking back on the highlights of GED’s work during that time and the lessons learned.

When I joined GED in 2016, the trade world seemed still in reasonably good shape: the WTO still had the Appellate Body, TTIP and free trade was a political priority, Brexit had not yet happened and Trump was still only one more unlikely presidential candidate. But just within my first year at work, all of this would change. The trade world was suddenly in deep trouble.

This trouble was the backdrop to many research projects my GED colleagues and I undertook. For me, the areas of public opinion and trade, Brexit, WTO reform, digital services trade and EU Trade Strategy were the most prominent ones. And as you will see, not only is most of this still relevant, it also highlights what went wrong in the trade world and how it can be fixed.

Public Opinion and Trade: Support for Globalisation is Eroding

One of my core projects was research on public opinion and trade. Based on fresh survey data from YouGov, my first publication was triggered by the intensifying debate on Transatlantic Trade and Investment Partnership (TTIP) in Germany – but went beyond that (LINK: https://www.bertelsmann-stiftung.de/en/publications/publication/did/attitudes-to-global-trade-and-ttip-in-germany-and-the-united-states/)

For the first time, I got a hunch that the consensus on free trade was under pressure. In the US, people were worried about the Transpacific Partnership (TPP), in Germany about TTIP. People welcomed the idea in general but were worried about what they perceived as an erosion of social and sustainability standards. These worries intensified quickly and sharply, not only was the TTIP project soon declared politically dead it also became a strongly toxic brand that might tarnish any future attempt of US-EU trade integration.

In 2018, we deepened our work on public opinion and trade and surveyed 12 countries, both advanced and emerging (LINK: bertelsmann-stiftung.de/fileadmin/file…). Again, people were in favour of trade and globalisation in general but had specific concerns.

In particular, they were worried that globalisation has negative effects of social cohesion, wage developments and (in advanced economies) the feeling that governments do not provide sufficient assurance against negative side-effects was widespread.

At this point, allow me a quick aside: The realisation that people feel insufficiently protected against negative side-effects of globalisation prompted me to look closer into the link between globalisation and the welfare state – this is not really a public opinion and trade paper, so a quick aside:

It seems that initially (post WWII), the link between openness and a strong welfare state was pretty strong – but it weakened over time until it disappeared almost completely (see the link in three charts below, evolution over time). The paper is here: bertelsmann-stiftung.de/fileadmin/file…

graph openness economy

graph openness expenditures

graph government expenditures

But back to trade and public opinion: We repeated the survey in early 2020 – I participated in the survey design but most of the analysis was done by Thomas_Rausch and Daniela Coka Arregui A central finding: support for globalisation continues to erode. (LINK: ged-project.de/globalization/…)

Another interesting aspect of that survey regarded the WTO: While the institution is seen generally as an important organisation, this seems to be declining with level of development.

WTO

WTO

Brexit – The Frustrating Topic

After trade and public opinion, Brexit was one of the topics that I worked on since the referendum. Probably the area on which I worked least – and the one on which I gave by far the most interviews. When I arrived at GED (three months before the referendum) my colleagues had already been busy and published a fully cost/benefit analysis (ged-project.de/trade-and-inve…) and a survey amongst business leaders (ged-project.de/trade-and-inve…) – the result of the former was that economically Brexit is clearly a loose/loose situation, but more harmful for the UK than for the EU.

The survey showed that business leaders, in particular in the UK, underestimated the potential impact of Brexit. Later, we also looked into the impact on value chains, coming up again with a similar insight: for traders, Brexit is not a good idea: ged-project.de/trade-and-inve…

On Brexit, the public speaking that was part of my job was really interesting. From German audiences, most questions centered around why are the Brits doing this? Being far from a Brexiteer, it was hard for me to explain but endless (and fruitless) discussions with fellow students while I was still in the UK gave me a few clues what might drive pro-Brexit sentiment.

From British audiences, I often got a reaction of the kind: Why did nobody explain these economic consequences to us? If only I had known, I might have decided differently. Of course, there had been many colleagues out there, explaining the consequences – but the debate was so shrill and polarised that sober analysis was often overlooked.

This experience was invaluable to show me the value of the work that many think tankers are doing: scrutinise public policy, provide expert analysis and explain the facts to the public. If it works, it contributes to better public debates and more fact-based decision making.

Digital Services Trade – The topic everyone should be interested in but hardy anyone is

That’s not the only task of a think tanker though: another is to draw attention to new and rising topics and to draw the attention of policymakers towards them. I tried to do this with the topic of digital trade and services trade in particular.

Why should we care about digital services trade? Services make up the lion share of value added in GDP, for some countries around 90%. And digitalisation makes them tradable worldwide. But most EU countries only do so so, according to a study we did with ECIPE.

digital service sector trading

There are many reasons for this underperformance of most large EU countries vis-à-vis competitors like the US, the UK or Australia which are investigated more closely in this 2017 paper (LINK: ged-project.de/trade-and-inve…).

Unfortunately, the paper did not receive much attention, despite its relevance. Definitely since Covid there is no excuse for ignoring competitiveness in digital services trade. It will be a key issue to focus on in the future.

In a second paper on digital trade, also with ECIPE, we looked into the important question whether digitalisation ran make services more productive and which factors determine uptake of digital technologies by services firms (LINK:ged-project.de/digitization-a…)

The insights are that indeed digitalisation can help overcome sluggish productivity growth in the services sector. But uptake of digital technologies varies across services sectors. Especially those with more competition are digitalising quicker.

Covid19 could turn out to be a blessing in disguise: As it forced many services firms to digitalise, it may have helped to build skills, break path dependency and forced firms to modernise. Something to watch out for as data becomes available!

WTO Reform – Fixing bugs in the operating system of globalisation

The topic on which I have worked on most over the last five years was WTO reform. It is also the topic on which we best managed to feed into policy processes. After the Trump years, 2021 marks a first chance to start the necessary projects for rebuilding this vital institution. The WTO could be described as the operating system of globalization: it’s the forum that negotiates and enforces the rules for the global trading system. The problem is that it hasn’t really had an update in over 25 years.

WTO

The first stage of this project was build around a group of high-level experts who first convened in 2017. Based on the deliberations of this group, we put out a first report aiming at making the WTO more relevant and effective (LINK: bertelsmann-stiftung.de/fileadmin/file…). Much of the content of this report remains relevant to the current date.

Some of the good ideas include: improved institutional learning, more flexible working methods (open plurilateral cooperation), stronger role for the Secretariat and engaging with areas of trade not yet (sufficiently) covered: in particular e-commerce and subsidies.

Our work on WTO reform was not finished with this report, up to the current date, we produced a series of research papers which detailed ideas of the first report and in many cases went beyond. All can be found here: ged-project.de/trade-and-inve…

They deserve to be presented in more detail though. First, why should we care about #WTO reform anyway? The simple answer is, because every member actually gains from it. In particular small open countries, but also the US, China and Germany – the simple fact of having a stable-rules based system makes trade predictable for exporters and of course tariff reductions lower trade costs. Both are essential factors driving globalization.

WTO

It’s really worth bearing in mind how important the public good of a rules-based trading system is for everyone of us (LINK: bertelsmann-stiftung.de/fileadmin/file…).

Having established that WTO has considerable value to its Members, we turned to other questions: how do you get Members to invest political capital in reinvigorating the institution? We singled out 4 areas of reform:

  • fix the Appellate Body (AB),
  • allow the system to become more flexible,
  • deal with the headache of industrial subsidies/unlevel playing fields and
  • improve working practices in WTO bodies. Let’s have a look into all of these.

No rules-based system can survive in the long-run without enforcing the rules. The demise of the AB was a shock to the WTO system. But was the US alone in criticising it? In a survey of professionals, the AB was seen both as valuable as well as being sometimes baised:

panel report survey

The full survey is available here: bertelsmann-stiftung.de/fileadmin/file…

dispute settlement survey

In another paper with Petros Mavroidis and Bernard Hoekman we develop suggestions how to restore the AB and resolve underlying issues – central points are to return to the original DSU, more independence from the Secretariat and better legal governance: bertelsmann-stiftung.de/fileadmin/file…

Possibly the biggest factor in the WTO’s crisis is the use of consensus. Not only that 164 members need to agree on legal texts but sometimes, consensus is even required to start talking about new issues. If the WTO is to become more salient it needs to become more flexible.

The question is how. Majority voting is theoretically possible but there is consensus on not using it. The best course of action is to allow “coalitions of the willing”, i.e. subsets of the membership who start talking and negotiating.

This happened after MC11 with the Joint Statement Initiatives. But there are many unresolved questions: how to deal with non-members? Do you discriminate? Under which conditions can they join later? Also, is this supported by the Secretariat and eventually scrutinised by the DSB?

We are in favour of plurilateral cooperation but we emphasise that it should remain transparent and open. That means that no excessive burden should be placed on those joining later on. Also, developing countries should receive help in capacity building to meet their obligations.

We believe that this is a crucial element in revitalising the negotiating function of the WTO. Details of the paper by Bernard Hoekman and Charles Sabel can be found here: bertelsmann-stiftung.de/fileadmin/file…

The third aspect of WTO reform – after dispute settlement and plurilateral cooperation – is to make its working practices more efficient and effective. The thought behind it was that this is a relatively low hanging fruit and it might be a reform make more reform more likely.

For this srand, we worked with Bob Wolfe who wrote a series of excellent papers for us. His first was on improved institutional learning in the WTO. Basically, the idea was how to get Members to reflect on the state of the organisation and to take better care of it. Bob looked at such practices in other organisations and made a series of excellent suggestions. You can find the paper here: bertelsmann-stiftung.de/fileadmin/file…

In a later paper, Bob added another excellent suggestion: to make more use of “thematic sessions” that allow WTO committees to “think outside the box” and be more forward looking rather than just to stick to the existing agreements: bertelsmann-stiftung.de/fileadmin/file…

Finally, Bob looked into the use of “Specific Trade Concerns” which are great tools to prevent trade disputes before it goes to DSB. A great tool that could defuse trade tensions and help build a more stable system if used more: bertelsmann-stiftung.de/fileadmin/file…

The fourth (and last) strand of our WTO work was on dealing with subsidies. While subsidies can make economic sense (for example in the green transition) they can result in unfair competition. Many Members agree that the current disciplines are insufficient. (competition)

It is not quite clear though what the way forward is, as we lack data on the use and impact of subsidies. We look at the example of the PSE Index that measures subsidies in agriculture. While industrial subsidies are much more complex, such indices have been really helpful in providing facts and going groundwork for future negotiations. It’s a great paper with a great title: “Yours is bigger than mine!” (LINK: bertelsmann-stiftung.de/fileadmin/file…  ). Credits for the title (and the paper) go to Bob.

But we also had some reflections on guiding principles for future subsidies disciplines. Basically, it makes no sense to use a legalistic “thou shall not…” approach. What matters is the purpose of a subsidy and its competitive impact. Depending on which different types of subsidies could be placed into green, amber and red boxes as is done for agricultural subsidies. Here are our papers on the principles of WTO subsidy disciplines:

bertelsmann-stiftung.de/de/publikation…

bertelsmann-stiftung.de/fileadmin/file…

https://www.bertelsmann-stiftung.de/de/publikationen/publikation/did/spillovers-subsidies-and-multilateral-cooperation

We did this work on subsidies before Covid hit. But Covid and the related support and stimulus packages made it all the more relevant. Suddenly we all became non-market economies and spillovers need to be addressed in order to avoid future #trade disputes.

There is one more publication in our #WTO workstream that deserves a special mention: Ignacio Bercero diagnoses the causes for the WTO’s sorry state and develops a series of excellent recommendations on how to get it back on track.

bertelsmann-stiftung.de/fileadmin/file…

It ties in very nicely with our other papers but adds additional ideas, including on how the investment of political capital in the WTO can make a real difference. It’s a must read.

EU Trade Strategy – The topic that brings all other topics together

I want to mention one final publication before this very long blogpost ends: My book on EU Trade Strategy, published this February. It looks at how different megatrends – demographicstechnology, epidemics, geoeconomics – change the world economy and the nature of globalisation over the next one or two decades and develops strategies for the EU to best adapt to these trends.

I argue in favour of investing political capital into multilateral organisations, developing defensive geoeconomic capabilities, working closer with the US in various areas and form a real partnership for development with Africa. You can find the e-book free of charge here: voxeu.org/content/europe…

Farewell and Thank You

Before leaving Bertelsmann Stiftung, HR put me a questionnaire. Two questions were: What were your expectations when you joined? And have these expectations been fulfilled?

These questions made me realise that thanks to the help of my teammates, outside experts and many friends, we actually achieved a lot. Think Tanks play an important role on public life, producing ideas that policymakers can pick up. That alone is not sufficient for change but often an important precursor.

Over time, my desire to get more involved in the implementation of policies grew. This is why I made the decision to join Germany’s Ministry of Economic Affairs and Energy. But I leave with a heavy heart – my colleagues at Bertelsmann Stiftung will be missed as well as the amazing opportunities to tackle important challenges and develop solutions. I am deeply grateful to Bertelsmann Stiftung and my colleagues for the past five years.