Call for multilateral cooperation
Our findings present yet another argument for multilateral cooperation on trade policies. If full cooperation remains elusive, pragmatic solutions must be explored to tackle the most pressing challenges: mitigating the risk of food insecurity and supporting the green energy transition.
Urgent efforts are required to ensure the unhindered flow of food and minimize the threat of food insecurity in low-income countries, especially given the increasing frequency and intensity of weather events and natural disasters.
Similarly, multilateral efforts should prioritize establishing a “green corridor,” consisting of a minimal agreement to maintain the flow of critical minerals. This would help avert climate change.
As policymakers work to mitigate fragmentation risks, countries can take proactive steps to minimize the potential economic fallout. Strategies can include diversifying sources of commodities supply, greater investment in mining, exploration, and critical mineral recycling.
Countries should also consider broader policies that strengthen resilience to shocks, including:
- More robust macroeconomic, structural, and fiscal policy frameworks
- Ample fiscal and financial buffers
- Strengthened safety nets
- Preparation for sudden disruptions of commodity supplies
An international initiative to improve data-sharing and standardization in minerals markets could also reduce market uncertainty.
Commodity market fragmentation could create a more unstable global environment, posting threats to food security, economic growth, and the cost of climate change mitigation efforts. Our findings present yet another argument for multilateral cooperation on trade policies to prevent such outcomes.
—This blog is based on Chapter 3 of the October 2023 World Economic Outlook, “Fragmentation and Commodity Markets: Vulnerabilities and Risks.” The authors of the chapter are Jorge Alvarez, Mehdi Benatiya Andaloussi, Christopher Evans, Chiara Maggi, Marika Santoro, Alexandre Sollaci and Martin Stuermer, with contributions by Marijn Bolhuis, Jiaqian Chen, Benjamin Kett, Seung Mo Choi, Peter Nagle and Alessandra Sozzi, and under the guidance of Petia Topalova.