Episode 131: Multilateralism in a Fragmenting Global Trading System
Jeff Rathke
President of AGI
Jeffrey Rathke is the President of the American Institute for Contemporary German Studies at the Johns Hopkins University in Washington, DC.
Prior to joining AICGS, Jeff was a senior fellow and deputy director of the Europe Program at CSIS, where his work focused on transatlantic relations and U.S. security and defense policy. Jeff joined CSIS in 2015 from the State Department, after a 24-year career as a Foreign Service Officer, dedicated primarily to U.S. relations with Europe. He was director of the State Department Press Office from 2014 to 2015, briefing the State Department press corps and managing the Department's engagement with U.S. print and electronic media. Jeff led the political section of the U.S. Embassy in Kuala Lumpur from 2011 to 2014. Prior to that, he was deputy chief of staff to the NATO Secretary General in Brussels. He also served in Berlin as minister-counselor for political affairs (2006–2009), his second tour of duty in Germany. His Washington assignments have included deputy director of the Office of European Security and Political Affairs and duty officer in the White House Situation Room and State Department Operations Center.
Mr. Rathke was a Weinberg Fellow at Princeton University (2003–2004), winning the Master’s in Public Policy Prize. He also served at U.S. Embassies in Dublin, Moscow, and Riga, which he helped open after the collapse of the Soviet Union. Mr. Rathke has been awarded national honors by Estonia, Latvia, and Lithuania, as well as several State Department awards. He holds an M.P.P. degree from Princeton University and B.A. and B.S. degrees from Cornell University. He speaks German, Russian, and Latvian.
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Luz Maria de la Mora
UN Trade and Development
Luz Maria de la Mora is the Director of the UN Trade and Development's (UNCTAD) Division on International Trade and Commodities. As a former Vice-Minister for International Trade and decades of government and private sector positions, Ms. de la Mora developed a career in international trade policy, negotiation, operations, and trade promotion.
During her tenure as Vice-Minister for International Trade of Mexico from 2018 to 2022, Ms. de la Mora led Mexico's trade and investment policy, overseeing fourteen free trade agreements with 51 countries. To bolster Mexico's development, she steered discussions in the World Trade Organization, the United States-Mexico-Canada Trade Agreement, Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and Pacific Alliance, among others. She also coordinated policy dialogues and handled private sector consultations.
Ms. de la Mora holds a PhD in Political Science from Yale University, United States, a Master's degree in International Affairs from Carleton University, Canada, and a Bachelor's degree in International Relations from El Colegio de México, Mexico.
She is fluent in English and Spanish, and proficient in French.
Peter S. Rashish
Vice President; Director, Geoeconomics Program
Peter S. Rashish, who counts over 30 years of experience counseling corporations, think tanks, foundations, and international organizations on transatlantic trade and economic strategy, is Vice President and Director of the Geoeconomics Program at AICGS. He also writes The Wider Atlantic blog.
Mr. Rashish has served as Vice President for Europe and Eurasia at the U.S. Chamber of Commerce, where he spearheaded the Chamber’s advocacy ahead of the launch of the Transatlantic Trade and Investment Partnership. Previously, Mr. Rashish was a Senior Advisor for Europe at McLarty Associates, Executive Vice President of the European Institute, and a staff member and consultant at the International Energy Agency, the World Bank, UNCTAD, the Atlantic Council, the Bertelsmann Foundation, and the German Marshall Fund.
Mr. Rashish has testified before the House Financial Services Subcommittee on International Monetary Policy and Trade and the House Foreign Affairs Subcommittee on Europe and Eurasia and has advised three U.S. presidential campaigns. He has been a featured speaker at the Munich Security Conference, the Aspen Ideas Festival, and the Salzburg Global Seminar and is a member of the Board of Directors of the Jean Monnet Institute in Paris and a Senior Advisor to the European Policy Centre in Brussels. His commentaries have been published in The New York Times, the Financial Times, The Wall Street Journal, Foreign Policy, and The National Interest, and he has appeared on PBS, CNBC, CNN, NPR, and the BBC.
He earned a BA from Harvard College and an MPhil in international relations from Oxford University. He speaks French, German, Italian, and Spanish.
The global trading system is in flux, with increased multipolarity and uncertainty. Disruptions in supply chains and concerns about sustainability and national security have caused countries to reexamine trade policies. Dr. Luz Ma de la Mora, Director of UNCTAD’s Division on International Trade and Commodities, joins this episode of The Zeitgeist to discuss the role of multilateralism in global trade, the characteristics of the future trading system, and how international trade can benefit emerging and established economies.
Host
Jeff Rathke, President, AGI
Guests
Luz Maria de la Mora, Director, International Trade and Commodities, UN Trade and Development (UNCTAD)
Peter Rashish, Vice President and Director, Geoeconomics Program, AGI
Transcript
Jeff Rathke
Welcome to all of our listeners. Very pleased to have you with us for another episode of The Zeitgeist. I’m joined today on the AGI side by AGI Vice President and Director of our Geoeconomics program, Peter Rashish. Peter, hello.
Peter Rashish
Jeff, good to be with you.
Jeff Rathke
And we are always very pleased to have interesting and accomplished guests with us, and today, I would like to introduce Dr. Luz Ma de la Mora. Thank you for being with us.
Luz Ma de la Mora
Thank you very much for having me, Jeff. Nice to see you.
Jeff Rathke
Same here. Luz Maria de la Mora is the Director of the UN Trade and Development Division on International Trade and Commodities. She was previously the Vice Minister for International Trade in Mexico and has had a career in international trade policy negotiation and trade promotions. I think it’s worth pointing out that during her time as Vice Minister of International Trade for Mexico from 2018 to 2022, Mexico concluded fourteen trade agreements with fifty-one countries, and we are here to talk about the global trading system today.
Global trade is in flux. It is heavily contested politically, also becoming more multipolar. That’s not just because of the policies of the Trump administration here in Washington, but because of other systemic and structural factors. I look forward to talking about this today. Luz Ma, how do you see the state of multilateral cooperation on trade policy? On the one hand, there’s a more multipolar development, even a conflictual one, perhaps, and there’s a greater diversity of actors than before. How do you see this?
Luz Ma de la Mora
Thank you, Jeff. If I could use a word to tell you about how I see the state of multilateral cooperation on trade policy today, I would say it’s “uncertainty.” Uncertainty is basically what international rules and multilateral rules try to address. That’s why we have an international trading system. That’s why we have a World Trade Organization. Let me go a little bit into history, if you’ll allow me. Between 1995 and 2015 (that’s when the WTO started, in 1995), for twenty years, basically, we could say that business operated in a relatively stable and predictable policy environment. We saw a flourishing of international trade, and I would like also to share with you with that here at UNCTAD (UN Trade and Development), we work with the Trade Policy Uncertainty (TPU) Index, and we see that during those years, uncertainty really remained very low because there were rules and rules were observed. This also helped developing countries to integrate into the WTO; today the WTO has 166 members. They were able—and particularly China without a question—were able to use the international market and international trade, international rules to participate in the global economy and also to promote exports. That momentum continued until around 2015. Since then, for the last ten years, we have seen a sharp decline in the observation of trade growth by different members in the system. So, today we have a very different landscape from when the WTO was created thirty years ago. Trade growth is slowing. This year in our global trade update, we reported that trade grew 3.4 percent last year and we are projecting around 2 percent this year. And the reason is that the rules are changing. We have seen an increase in unilateral trade action, trade measures from different countries, developed and developing countries. And we have seen that, for example, between 2010 and 2014, there were about 190 new unilateral trade policy interventions. And between 2020 and 2024, this number really skyrocketed to 1,200 annually. Now, I have to say not all of them are restrictive trade measures. Some of them are liberalizing. But what I want to say is that the lack of progress at the multilateral level in terms of creating or crafting the trade policies that are required for the twenty-first century has pushed, encouraged, triggered countries to adopt their own. So, the system is multipolar. It’s more fragmented and it’s more contested.
Jeff Rathke
If I could pull out maybe two big structural changes and talk about that for a minute. On the one hand, you mentioned China. China, in our view, remains very strongly committed to a state-driven economic model, and that also includes an important role for government subsidies to industrial production that has unleashed reactions in many countries, including here in the United States. Now in the U.S., there’s a rising skepticism toward free trade—you mentioned 2015 as kind of the end of that first period in the history of the WTO. And so now the second Trump administration is leveraging trade policy in a unilateral way, connecting to that last statistic you mentioned of the expansion of unilateral trade interventions. So, with this happening in the two biggest economies in the world, how should other countries, especially important emerging economies, respond to these developments? How are they responding?
Luz Ma de la Mora
That’s a great question. And I’m sure that it would take hours to be able to really tackle it, but I’ll do my best to be brief. But I would like to go back to the point that I was making in terms of the importance of multilateralism. I think that member states, countries, even companies, have taken multilateralism for granted and the rules for international trade, in the sense that there are rules that are predictable, that they tell you the direction of where you’re going and that they force countries to also transparently inform of their rules. Many have taken it for granted, and many are criticizing it, and I think that with great legitimacy. The fact that the WTO seems to be stalled because there have been no real substantive negotiations since it was created; we only have the fishery subsidies agreement that was negotiated, we ended that negotiation in 2022, and that trade facilitation agreement. Those are the two really multilateral negotiations that have been taking place in the WTO. But there’s this sense that the WTO doesn’t work, so let’s look for something else.
What is the alternative to multilateralism? I think that for developing countries this is extremely dangerous, but also for developed countries. The reason is that when you start creating your own set of rules based on your own needs at home, you may create a spaghetti bowl, not only of different rules of origin, but of different rules and that creates a lot of uncertainty and unpredictability for trade and for firms. We have to remember that trade is an instrument. Trade is a policy that is meant to trigger economic growth, to trigger jobs, investments, innovation, expanding opportunities. It’s a way of increasing the size of the economic pie, so it’s not an end in itself. What we are seeing today is that what is tending to create the rules are those that have the market power, and market power is good for those that are big and that can control the access to the market, but I would say that 80 percent of those that are members of the WTO and developing countries find it very hard to really be able to participate in international trade when those rules are very different according to the market that you want to access. So really what may end up happening is that the fragmentation of international trade is also creating a lack of certainty for investors not knowing exactly where to invest and how to invest. And if you see, for example, some of the instruments that some countries are using, they are using trade policy as a way to restrict access, as a way to control who accesses the market and how they can access the market. They’re using trade policy for non-trade purposes.
An additional question that we are seeing today is also that after the COVID-19 pandemic, we saw that many of the supply chains were sort of taken for granted in the sense that we have very competitive, very efficient, very effective global supply chains, well, we realize that some of the fragmentation of the supply chain as a result of confinement and the result of health conditions really raised the alarm about the need to build more resilient supply chains. In that respect we see a surge also of new policies, industrial subsidies, and support for domestic industry as a way to face those vulnerabilities of the supply chain. Therefore, we are seeing a change, an actual change, a de facto change in some of the international trade rules, but some of these changes are taking place outside the multilateral fora, and that for developing countries is very, very dangerous because they will not be able to have a voice at the table and they will not be able to shape how those rules or to just explain or understand where those rules are going to and what are the perspectives for them.
Peter Rashish
Luz Ma, you mentioned supply chains and the increased concern that governments have had about them at least since COVID and some of the actions that governments have taken. They’ve used the name reshoring or near-shoring, onshoring, and we’ve seen some concrete moves in this direction. Sometimes, therefore, because of concerns of national security, sometimes they’re out of concerns about the climate or about technology and AI and things like that. But my question to you would be what could be the division of labor by governments or frankly also with international negotiations between free trade agreements on the one hand and what you’ve called unilateral, or we could also call national measures. You mentioned some of them: export controls, industrial policy, and investment screening. Is there a role for both? How do we know when to use which one? Can they complement each other, or do you see them as somehow competing with each other?
Luz Ma de la Mora
Well, that’s another great question, Peter. Absolutely. I would like to just go back a little bit to COVID. COVID really changed the way we think about supply chains, about globalization. Before the pandemic, the focus was almost entirely on cost effectiveness and how we could reduce cost: Make the product in the best place and then just produce in one place for the world. And that worked. But what we learned is that efficiency alone does not guarantee resilience, because there are things like COVID, natural disasters, or any other event that is beyond our control, that happens. Then we see that we are stuck in a situation in which we have real trouble in terms of supplying the demand for citizens or companies. So, I think that countries saw first hand, the risks of relying too heavily on just one or a few sources for critical products, for example, semiconductors, pharmaceuticals, personal protective equipment, or critical minerals. When lockdowns and shutdowns disrupted the supply chains, it became very clear that diversification was essential—not just for imports, but also for exports. That realization has shaped, or is reshaping still, how we think about globalization, why we talk about near-shoring, reshoring, ally-shoring, friend-shoring, all of the shorings that you may want to see. But I think that the real problem that we have is that we really do not have the rules set to really face what are seeing, because we have a dichotomy in terms of international trade, market access, making sure that the rules that we have given ourselves through the international trading system work. But then we have other sets of rules that you already mentioned, also Jeff, industrial subsidies for example, or the need to have production processes that are zero emissions, or they need to guarantee the digital transformation, the digital inclusivity. There are very important shifts that are taking place right now in the economy in this twenty-first century that we are facing today that are central to how supply chains are being restructured, but also how developing countries can participate in those supply chains.
Today, what we don’t have, is on one hand, rules. In the past in the WTO, certain countries tried to come up with a set of rules on what how to discipline industrial subsidies. It did not go through. It failed. But we are stuck in that situation. So, what we need is on one hand to understand that even if we are in a fragmented world, even if we are seeing that probably the cost effectiveness of supply chains that we used to work in the past may not work in the future, we still need to sit down at the table and explain to ourselves, what are these challenges and how best to address them. There are options within the WTO. For example, in the WTO we have seen plurilateral agreements, and example is the Government Procurement Agreement or the ITA, the Information Technology Agreement. But there has to be a willingness, there has to be a leadership, and there also has to be an understanding, and that would be my last point here, is that really international cooperation and multilateralism is a win-win game. It’s not a zero-sum game. It’s a win-win where maybe the little ones win a little bit and other ones win more, but everybody ends up in better place.
Peter Rashish
Thanks. You’ve mentioned some of the shifting factors that are determining the trading system, whether it’s the challenges the WTO has faced in responding to some things we couldn’t have expected over the last thirty years, including perhaps the evolution of the way China or the U.S. have approaching global economy. Also, we just talked about supply chains. How do you see these kinds of dynamics affecting the North American region, which we call home at the American-German Institute in the United States.
Luz Ma de la Mora
Well, I think that the North American region is a good example of how trade can promote regional production schemes. Because really, North America today, as I see it and I have to share with you that I was part of the initial NAFTA negotiation in the early 1990s, so I’ve seen the evolution since then. North America was built through NAFTA, and then it evolved through the U.S., Mexico, Canada Agreement, which is what is today in place. But this trade among the three countries and investment among the three countries really created a North America factory, a North America production scheme, where the three together produce not only for North America, but also for the world. I think that that’s something that we need to bear in mind because the three countries were able to put together their own comparative advantages to be able to compete. These are the other regions, like for example, the European Union, that also has a very strong presence internationally as a global actor in terms of trade investment or the Asia Pacific, for example, ASEAN.
Another important thing that I would like to bring to your attention is that NAFTA was the first agreement where you have one developing country, Mexico, integrating with two developed economies, the U.S. and Canada. And at the time that was innovative. That was something that had not been seen before and that created a path forward for other opportunities. I’m not saying at all that this was a model and that this was perfect. I’m just saying that it was possible to create regional trade and regional value chains that allowed North America to compete in the world. And basically, I would say that the trade that North America, the share of trade of North America in the world is close to maybe 30 percent or a little bit less than 30 percent and that’s, especially for the two main trading partners of the U.S., thanks to NAFTA.
And an additional issue, and I will end with this, is that in this case, NAFTA, but then what we have today, which is CPTPP, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, these are agreements that at the time in which they were negotiated, they were pathbreaking in terms of rule creation for international trade and investment. That was the case of NAFTA, for example. When NAFTA was created there were certain provisions regarding, for example, intellectual property protection, investment protection and some others. But, for example in CPTPP or in USMCA, you had the possibility of testing new rules that, for example, in the case of CPTPP, that Comprehensive Trans-Pacific Partnership Agreement, you saw a new agenda: an agenda for development, for environment, for labor, for regulations, for state-owned enterprises that maybe could be taken to the multilateral forum or to other agreements. But the idea was to provide better rules and the standard, the golden standard rule for international trade, supply chains, and investment.
Jeff Rathke
Looking at the future—and I think you talked persuasively about the competitiveness advantages that come from regional trade integration such as we’ve seen in North America—except for the U.S., Mexico, Canada Agreement, the only other major deal the United States has signed since 2007 is the one with Korea. On the other hand, you have the European Union, along with partners around the world, signing many new trade agreements, including, most recently, the Mercosur agreement. There’s also the discussion about finding ways for the EU to connect with the Trans-Pacific Partnership that you mentioned. That would cover a huge part of the global economy, so maybe free trade agreements do have a future? Or does it depend? Do you see the nature of those agreements changing?
Luz Ma de la Mora
Thank you Jeff, for that question. Yes, as the WTO itself, when it was created and I would say since GATT, we had this idea that, “OK, if you cannot reach an agreement with all of the membership, why not try to go the regional or the bilateral way to deepen integration and also sort of to build more building blocks for a deeper integration among countries?” I think that the regional way and the bilateral way could be an alternative, or an additional option, or a complement to multilateralism. I really think that multilateralism and international trade rules, global trade rules, are essential and cannot be replaced by free trade agreements at the regional or the bilateral level.
However, in the current context, I think that regional trade agreements can be an alternative for different countries to be able to keep profiting and benefiting from international trade, attracting investment, creating jobs, and obviously promoting sustainable development. Let me share with you that I think that, if I’m not wrong, since 1995, we have seen an incredible growth of regional trade agreements. I think that when the WTO was created, there were around 50 regional trade agreements and by early 2025 there are close to 370 a little bit more than 370, and this is not to undermine the WTO, but to build on the WTO. In fact, some of these agreements, I would say, they referenced WTO disciplines, for example, in technical barriers to trade and even some of them had the dispute settlement resolution mechanism was referred to in the WTO. And when you had dispute settlement mechanisms, you would have to choose between WTO or the one in the agreement. There is a clear connection between these agreements and WTO disciplines. So, I would say that free trade agreements can be effective and can be a way forward so as not to lose the momentum that we need to build in order to move forward toward an international trading system that works for all. We also know that the international trading system needs to be reformed. So maybe those disciplines that we negotiate or that are negotiated in regional trade agreements could help as test labs for what kind of disciplines could work for all. At the end of the day, really, we have to remember that every organization, all these agreements, really need to have some kind of willingness, some leadership on those that are participating. This is cooperation, so when you sit down at the table and you talk about establishing rules for yourself and your partners, it’s because you see that getting involved brings you a benefit.
Peter Rashish
Luz Ma, let me build on what you just said to round out our conversation with you today. You’ve talked about the World Trade Organization. It was founded at a time in the 1990s, I think it’s fair to say there was a lot of optimism in general at the end of the Cold War and the sense that the whole global economy is coming together. There was a lot of faith in the market economy and in international cooperation. I think it’s fair to say we’re not in that kind of optimistic time, but you just sounded, if I characterize it correctly, reasonably optimistic that there are ways forward for trade and for a rules-based system. Do you think that the major economies can have enough policy bandwidth to pursue reform of the World Trade Organization on the one hand, and the other kinds of things you just talked about (regional or plurilateral initiatives)? Is there enough room to do those things at the same time, and do you think they can and will be complementary?
Luz Ma de la Mora
That’s an excellent question, Peter. I have to tell you that I’m going to quote my Secretary General, Madam Rebeca Grynspan. Multipolarity is a reality. Multilateralism is a decision. And I really think that we cannot give up in multilateralism because we are talking about global issues. International trade is about the world. What happens in one country or what happens in one region can affect what happens in another country and in another region. We have talked for decades about the need to reform the WTO. There was the launch of the Doha Round in 2001, where the WTO was supposed to negotiate a development agenda, and we are still not there. I know that after many decades, there is frustration. There is disillusionment about the WTO and about the possibility of really reaching an agreement in the WTO. And it may take time before that reform can take place. But what I think it’s important to remember is that the WTO, that 166 members have built and the international trading rules that are there are there for a reason. And really, even though there needs to be a better—from the UNCTAD perspective, we care about development—we think that there has to be a development perspective when we’re talking about trade. What do we mean by this, development perspective? We mean that trade should be used to leverage economic growth, allowing countries, for example, to use some kind of policy toolkits related to fiscal policy, industrial policy, scientific policy, innovation, labor, environment that really can allow developing countries to leverage trade, leverage tariffs, nontariff barriers, rules of origin regulations to be able to grow their economies. So we think that there has to be a development angle that everybody could agree on. Now, there has to be a willingness on the part of all to push forward this WTO reform. This will not be easy. No, of course not. It will not be easy because if it had been easy, member states would have already resolved it by now. But I think that it’s important not to lose perspective that having international rules is better than not having them. It’s much better than the alternative. Creating another WTO is going to be extremely difficult. It’s going to be very, very difficult to have another set of rules like that. So, better take care of what we have and try to be strategic in terms of how to move forward, and from our perspective, UNCTAD, UN Trade and Development, I think it’s really important to keep in mind that for developing countries this rules are extremely important. These rules allow them to participate in international trade, to get financing for their own development, the exports allow them to get foreign exchange, exports allow them to get some kind of financing for public spending, attract investment, create jobs; it gives them political stability. So, for developing countries, the system is extremely important. How we are going to move forward is not a given. Of course, there are very important challenges, but I think that at the end of the day, there has to be a realization that the WTO and international trade rules are the best alternative for every country in this world.
Jeff Rathke
I think that’s a great place for us to wrap our conversation. Luz Ma de la Mora, thank you for helping us get perspective on the fragmentation in the global economy, the way that market power is increasingly being used in international trade relations, the way trade policy is now increasingly being put in service of non-trade purposes, and what is going to characterize this new era in international trade that we are still I think at the beginning of. So, thank you for sharing your perspectives with us, and I want to wish you all the best and thanks again for being with us today.
Luz Ma de la Mora
Thank you, Jeff. Thank you, Peter. It was my pleasure to be with you. Thank you.
Jeff Rathke
And we look forward to having all of our listeners with us on the next episode of The Zeitgeist.
