By Gyan Pathak
Despite some positive developments, serious threat to economy and health continues, warned the mid-year review of the WTO. To overcome the risk the countries across the world need to keep the markets and supply chain open and restrictions minimized it suggested. The report was reviewed by a the WTO’s Trade Policy Review which draws attention of the world towards insufficient production of vaccines contributing to significant disparities in access across countries, especially in the low-income developing countries which are struggling to obtain enough doses to inoculate more than a small fraction of their population.
The WTO DG’s report on trade related developments presented on July 29 suggested that from mid-October 2020 to mid-May 2021, countries exercised trade policy restraint and refrained from an acceleration of protectionism, which would have further harmed a world economy reeling from the COVID-19 pandemic. The market remains volatile, and therefore the DG called for ensuring that the markets remain open and predictable while warning a failure in wider access to vaccines could undermine economic and trade recovery.
Though the harm to the economy and trade was limited by the action taken by the governments all over, some pandemic-related trade restrictions do remain in place, and the challenge is to ensure that they are indeed transparent and temporary. The multilateral trading system has shown resilience despite the severity of the global health and economic crisis caused by the COVID-19 pandemic, but the world underwent a supply chain disruption. It is therefore imperative to ensure the supply chain are kept open – which is an essential part of increasing vaccine production and distribution on the scale needed to end the pandemic. Countries across the world need to act together to achieve this goal.
It may be recalled that the WTO’s most recent trade forecast on March 31, 2021, hoped the volume of world merchandise trade to increase by 8 per cent in 2021 and 4 per cent in 2022. However, the recovery seen in the second half of 2020 was not strong enough to return trade to its pre-pandemic trend. Now the trade policy review says that trade recovery could stumble if vaccine production does not keep up with demand, or if vaccine resistant strains of the virus emerge and spread. If it happens, it would lower the world GDP growth by one percentage point and trade growth by around 2 percentage point in 2021.
The report has sufficiently highlighted that the world trade and output have actually recovered faster than expected since the second half of 2020, after falling sharply during the first wave of the pandemic. The leading indicators also point to a sustained expansion of merchandise trade in the first half of 2021. However, the COVID-19 continues posing severe risks, both to health and the economic recovery.
Since the outbreak of the pandemic 384 COVID-19 related trade measures for goods have been implemented out of which 248 (65 per cent) were of a trade-facilitating nature. However, 136 (35 per cent) were of trade restrictive nature. Several of these restrictive measures were originally introduced in immediate response to the pandemic, and have been further extended into the period to this review, ie between mid-October to mid-May 2021).
Restrictions of exports accounted for 84 per cent of all restrictive measures. The reduction of elimination of imports tariffs and import taxes accounted for 60 per cent of trade-facilitating measures taken, and several countries even reduced their tariffs on a variety of goods such as personal protective equipment (PPE), sanitizers, disinfectants, medical equipment, and medicines or drugs. During this period several countries were severely affected by successive waves of the pandemic and therefore had also eliminated import tariffs on certain goods necessary to fight COVID-19, such as oxygen, oxygen canisters, and active substances.
It is good that many of the restrictive measures implemented in response to the pandemic are being rolled back, but it is still at the higher side. As of mid-May 2021, only around 21 per cent of COVID-19 trade facilitating measures and 54 per cent of the COVID-19 trade-restrictive measures had been terminated, though the report calls it a swifter roll back. If we compare the trade facilitating measures and COVID-19 related trade restrictive measures in term of their costs, it could give a disheartening picture of the situation, because their estimates stand at $291.6 billion and $ 205.8 billion respectively. Even according to the latest WTO Secretariat estimate of the trade coverage of the trade facilitating measures still in force is of $179.6 billion while the trade-restrictive measure is of $106 billion.
Since the outbreak of the pandemic, more than 1500 COVID-19 related economic support measures have been put in place by 106 member countries and four observers, which far exceeds the activity seen in the wake of the global financial crisis of 2008. These measures included grants, loans or stimulus packages targeting sectors of the economy heavily affected by the crisis, including agriculture, health, aviation, transport, tourism, education and culture, fiscal and financial measures to support businesses and micro, small and medium-sized enterprises (MSMEs) as well as broader stimulus packages. Though some of such implemented measures have been extended even into 2021, most of those appeared to be temporary in nature, while the world is still reeling under the pandemic impact.
As for the non-COVID-19 related measures, the world has been implementing more new trade-restrictive measures than the new trade-facilitating measures, with were 70 and 61 respectively. The trade coverage of the import-facilitating measures was $445 billion down from $731.3 billion in the previous period. The trade coverage of import-restrictive measure was $127.1 billion which was also down from $440.9 billion in the previous period. Though it suggests the return of the regular trend, the deviation was the result of an escalation of bilateral trade tensions, or a significant drop in the implementation of non-COVID-19 related trade policies during the second half of 2020, as was reported in November last year.
However, 122 non-COVID-19 related measures were also introduced last year affecting trade in services. Several among the new policies trade restrictive, including measures affecting communication and network enabled services, and policies pertaining to the screening of foreign investment in areas deemed strategic.
After falling sharply in the second half of 2020, the first half of 2021 is showing promise in merchandise trade. However, in contrast, commercial services trade is recovering more slowly since it is strongly influenced by lockdowns and travel restrictions. The report warns that if international community fails to ensure wider access to vaccines, including in the poorest countries, it could lead to a resurgence of the pandemic and the recovery would set back significantly. (IPA Service)