High Post-Pandemic Hopes for Global Trade
But deliberate pro-trade policies will need to be pursued
With vaccine rollout underway worldwide, the WTO is hopeful that it will also be a shot in the arm for global trade. According to new estimates from the WTO, world merchandise trade is expected to increase by 8.0% in 2021 after having fallen 5.3% in 2020. This is a remarkable turnaround if the projections hold. However, policy-and decision-makers will have to make the right policy choices in the short- and medium-term to make it happen.
Everything is riding on vaccines
It is becoming almost fashionable to hear politicians, media and even health experts say vaccines are only part of the solution. Yet this is only true where vaccine supply is an issue. Lockdowns, stay-at-home orders, curfews and other measures are less needed where vaccines are hitting certain thresholds.
In fact, countries around the world are roaring back to normal as their populations become increasingly fully vaccinated.
“Ramping up production of vaccines will allow businesses and schools to reopen more quickly and help economies get back on their feet. But as long as large numbers of people and countries are excluded from sufficient vaccine access, it will stifle growth, and risk reversing the health and economic recovery worldwide.” – WTO Director-General Ngozi Okonjo‑Iweala
Because many countries are lagging in vaccine rollout, the WTO is forecasting two scenarios. In the “upside scenario”, a smooth and effective vaccine rollout will add 1 percentage point to global GDP and 2.5 percentage points to world merchandise trade this year. This would see global trade return to its pre-pandemic levels by the fourth quarter of 2021.
However, in the “downside scenario”, a slower vaccine rollout that is potentially made worse should new variants make them less effective would see the same figures in reverse (global GDP lowered by 1 per cent and global trade declining by 2 per cent.)
In short, for global trade to rebound, vaccinating populations is job number-one.
Beating back protectionism
Ensuring governments resist imposing new tariff and non-tariff barriers will also be vital to in order to effectively unleash the growth-generating forces of global trade.
Over the past year, the WTO has reported an uptick of a variety of new barriers introduced by members. Yet for the most part, countries around the world are saying the right things when it comes to supporting free and open trade.
It will be vital for countries to match words with actions.
The new DG of the WTO has noted that thanks to trade value chains, countries have had stable access to food and essential medical supplies throughout the crisis. And just as trade has helped countries throughout the pandemic, it will help fuel job creation, growth, and prosperity afterwards provided policy-makers make the right choices now.
It's time to get ambitious
The most deliberate choice governments can make right now is to embrace free trade and go the extra mile to lower barriers across the board. History has shown that when trade restrictions go down, growth and prosperity go up.
However, these efforts need to be global in scope for them to succeed. There is already renewed hope that the new DG at the WTO can push for continued and desperately needed WTO reforms. There is also hope that the upcoming Ministerial Conference of the WTO will finally make some progress on a variety of long-standing issues.
Should the stars align, trade can be an effective global recovery tool. It will be up to governments to make the deliberate policy choices to make it happen.