The World Trade Organization (WTO) has published its latest report on global trade, and in it is a series of recommendations about how countries across the globe may need to adjust in order to mitigate more shocks like the COVID-19 pandemic.
A key message is one of cooperation and urging nations to work together rather than pulling apart in the face of adversity, something we will examine in more detail in this article as we take a look at each of the WTO's main points.
1. Future disasters
Although we may hopefully be emerging from the coronavirus pandemic (new variants notwithstanding), the WTO warns that both natural and man-made disasters may be more frequent in future.
It points out that climate change, habitat encroachment and the increasing threat of disease, and cyber attacks are all potential scenarios that could pose a threat to global trade.
However, the report states that although our hyper-connected global economy does make us more vulnerable to shocks, it also makes us more resilient to them.
Indeed, a recent document by the Organization for Economic Cooperation and Development (OECD) explained how that trade system has the power to expedite certification to ensure essential products are traded as quickly as possible, for example, and to ensure smooth customs procedures with limited human intervention to keep goods moving.
The WTO said keeping this going will be vital in case of emergencies in the future.
2. Pull together, not apart
The second key point from the WTO was that policies aimed at re-shoring production and promoting self-sufficiency can actually reduce economic resilience, rather than protecting nations from shocks. It warns protectionism drives up prices and restricts access to vital goods, something that can only do harm in times of crisis.
This is something reiterated by the OECD in its own report, which insists trade and international cooperation are essential in keeping trade flowing. It recommended improving transparency about trade-related policy to boost confidence; maintaining supply chains; avoiding export restrictions and other trade barriers; and keeping the future in mind, even in emergencies such as pandemics.
The EU also states that "protectionism is not the answer" and cites research showing tariffs that act in this way could wipe billions from the global economy. Instead, it recommends "open strategic autonomy" to allow for growth yet keep the system moving.
3. Global cooperation, not antagonization
Finally, the WTO report calls for more regional and multilateral cooperation and an avoidance of further escalation in ongoing trade tensions. It states that tariffs will only have a negative impact on businesses and consumers who are already likely to be struggling in the midst of a disaster.
It suggests governments should commit to not imposing new tariffs or trade restrictive measures and cited the G20's 2008 decision to refrain from protectionist measures amid the global financial crisis as a good example of this working in practice.
The World Bank also said in a recent release that it supports "an open, rules-based, predictable multilateral trading system" and suggested this could be achieved through better trade facilitation, trade agreements, placing trade at the core of national development strategies, and providing aid to help low-income countries integrate into the world economy.
Lessons from COVID
The WTO highlighted the coronavirus crisis as one of the biggest stress tests the world trading system has ever faced, delivering as it did disruptions to supply chains and geopolitical tensions never faced before.
However, it pointed out that this test also allowed the system to demonstrate its incredible resilience, with rapid adaptation, cooperation on the supply of medical supplies and remarkable economic recovery all being displayed in recent months.
The report said building on this with more cooperation and strong international trade rules going forward could help to insulate the world economy from the inevitable shocks that may loom on the horizon.
WTO Director-General Ngozi Okonjo-Iweala said: "While the WTO already contributes to economic resilience in important ways, it can and must do more. Reinvigorated international cooperation, not a retreat into isolationism, is the more promising path to resilience."