Advancing trade remedies for global crises like COVID

Then some would have predicted that by the first quarter of 2021, less than a year after the pandemic began, trade volumes would surpass pre-pandemic levels to reach new record highs. Governments’ restraint in their use of protectionist trade measures, along with massive financial and monetary support, helped drive economic recovery. In October 2021, the World Trade Organization (WTO) raised its forecast for growth in global trade trade to 10.8% in 2021 – from the earlier 8% – and to 4.7% in 2022.

Policymakers don’t know whether the next major global crisis will be financial, climate-related, or will be caused by cyberattacks, another pandemic, or anything else. But if the past is any guide, we can be certain that trade and international economic cooperation will help us weather any crisis.

For example, during the pandemic, business has been a force for good. Despite initial disruptions, some ongoing export restrictions and supply-chain disruptions, the trade has provided a lifeline in terms of food and medical supplies. In 2020, even though the overall value of global merchandise trade declined by 7.4%, trade in medical goods increased by 16% – and trade in personal protective equipment increased by nearly 50% – while agricultural trade remained stagnant. Supply chains helped accelerate production of urgently needed items, so that previously rare and expensive protective face masks, for example, became abundant and affordable. Quite simply, business saved lives.

As scientists develop safe and effective COVID-19 vaccines at a record pace, multi-country supply chains came together to provide the specialized inputs and capital goods needed for mass production. Pfizer/BioNtech and Moderna’s supply chains for COVID-19 vaccines include 19 countries, while Oxford/AstraZeneca and Johnson & Johnson include 15 and 12, respectively. While vaccine production is well below the level that is needed, especially for people in low-income countries, it is hard to see how the world could have administered billions of doses without open trade.

The WTO has responded to the pandemic by working with all other stakeholders including COVID-19 vaccine manufacturers and distribution companies, NGOs and regulatory agencies to keep the supply chain running and boost vaccine production. In the long term, we need to diversify global vaccine production so that supply is more flexible and equitable.

Business has an important role to play in tackling major global challenges, from climate change to pandemic preparedness. But for the World Trade Organization to continue to fulfill its founding objectives – to raise the standard of living, create jobs and support sustainable development – ​​its rulebook to reflect changing business realities and social and environmental imperatives Needs to be improved and updated.

Three trends shaping the future of the business can be clearly seen. First, as the pandemic highlights, services and the new digital economy will become increasingly important. Even before the Covid-19 crisis, the trade in services – much of it digitally enabled – was growing much faster than the trade in goods. Between 2010 and 2019, global exports of commercial services grew by 57%, while merchandise exports grew by 25%.

And for many businesses, including micro, small and medium-sized enterprises, e-commerce has been a lifesaver since the pandemic began. Everyone knows how Amazon and China’s Alibaba have profited commercially from the crisis. But African e-commerce platforms like Jumia have also boomed, with the continent-wide value of online payments nearly doubling between the first half of 2019 and the first half of 2020.

But more can and should be done to encourage both the business and the innovations that drive it. Closing the digital divide will make the power of the Internet available to all. The new international framework for services and digital trading will increase predictability and lower regulatory costs, creating new opportunities for businesses of all sizes. Multilateral negotiations at the World Trade Organization on e-commerce and streamlining domestic regulation of services have moved important agreements quickly within reach.

Second, there is no doubt that the future of trade must be green to respond to common global problems such as ocean sustainability and climate change. The younger generation—the producers and consumers of tomorrow—emphasize this.

Many governments have committed to achieving net-zero greenhouse-gas emissions by 2050, and the World Trade Organization can maximize the potential of trade to help meet that goal. The International Energy Agency and the European Commission estimate that reaching net zero by mid-century could cost about 4.5% of global GDP. Rapid increases in investment in green technologies can lead to supply constraints and bottlenecks. But open, predictable trading will help ease any “greenflationary” pressures that drive up the cost of emissions mitigation.

In particular, reviving negotiations at the WTO on liberalizing trade in environmental goods and services would help reduce the cost of achieving carbon neutrality. The last such initiative was shelved in 2016 because politics outweighed the global public interest. We must try again now.

Furthermore, fragmented approaches to carbon pricing are almost certain to become a source of trade tensions. The World Bank has identified 64 carbon-pricing instruments at the sub-national, national and regional levels, and three are set for implementation, with prices for all industries ranging from less than $6 per tonne to $918 per tonne. Here, the WTO and other international organizations can develop common ways to think about the carbon contained in traded goods.

Finally, trade has to be more inclusive, both within and between countries. This is meant to extend its benefits to poor people in poorer economies and richer countries, who were left out of the global supply chain in the 30 years before the pandemic. Firms are now relocating operations to countries such as Vietnam, Laos, Cambodia, Turkey, Bangladesh and Ethiopia to reduce production costs, diversify risks and stay closer to customers. We need to extend this “re-globalization” to poorly integrated parts of Africa, Asia and Latin America.

We also need to expand opportunities for people and firms in all countries, and especially women and small businesses, to connect to global supply networks. Domestic social, educational and economic policies have an essential role to play in ensuring that people can benefit from economic change, whether as a result of trade or technology.

Business can help us cope with whatever the future has in store. But this will require trade policies that are beneficial to the people, otherwise we will face an even more angry backlash that does not address genuine economic grievances. And a reformed and revived WTO has an important role to play in ensuring people-centred trade. ©2021/Project Syndicate (www.project-syndicate.org)

Ngozi Okonjo-Iweala is the Director-General of the World Trade Organization.