Leadership Insight Series: The role of trade in post-COVID-19 recovery
25 February 2021
Speakers at the latest ICS Leadership Insights series discussed the importance of maritime and trade in the post-COVID-19 economic recovery.
All noted the immense impact the pandemic has had on the global economy and how shipping has weathered the storm amid the rise in nationalism and protectionist policies around the world.
Amb Tan Hung Seng, Singpore Permanent Representative to WTO & WIPO said that the short-term impact [of COVID-19] has been “devastating and has accentuated economic populism” as fears of shortages in essential medical and food supplies led to export restrictions and onshoring.
“We witnessed a slew of trade restrictions as countries scrambled to ensure enough supplies for themselves. Consequently, global merchandise trade shrunk by around 20% in 2020 while services trade dropped approximately 24%. And the prospects of improvement will remain subdued as economies take time to recover.
Naturally, these have an impact on global maritime transport industry given that 90% of global trade volume is carried by sea. Additionally, the pandemic has threatened supply chain connectivity and highlighted the vulnerabilities of the global trading system.
However, I am hopeful that the pandemic will not lead to a wholesale rejection of rules-based multilateral trading system. As we are fast realising, COVID-19 knows no boundaries and continues to rage globally, one year on. No one is truly safe until everyone is safe, and– this is a powerful reminder for us of the merits and necessity of international cooperation and collaboration.
“Let’s be clear, free trade has lifted hundreds of millions out of poverty in the last few decades. Current figures show that the pandemic is pushing people, especially people in less developed countries, back into poverty. Protectionism from my point of view delivers the opposite from its promise; it reduces trade; it makes goods more expensive; it deprives people of work and food where it is needed. Less protectionism at the end means less poverty
The WTO, UNCTAD and many others have shown the positive effects of lifting trade barriers and we must not destroy these achievements with new protectionism in the face of COVID-19.”
Nagel explained how “classical protectionism” is not the main problem:
“The ICS study shows the dramatic effects that non-tariff restrictions, such as such as cargo reservation, discriminatory treatment of foreign ships and limitations on the provision of port services, can be five times worse than traditional tariffs. The Study outlines four scenarios for reform, and under the most ambitious cutting restrictive trade policies could boost global economic recovery from COVID-19 by 3.4%.”
In opposition to protectionism, speakers advocated for the need to boost globalisation and multilateralism. Marco Marco Felisati, Deputy Director, International Affairs & Trade Policy, Confindustria, said:
“The big elephant in the room that all the speakers have mentioned is multilateralism. The B20 has been striving over the past decade for further multilateral trading systems. Now it seems all G20 countries are sincerely committed to renew multilateral agreements. We have gone through years of harsh protectionism and unilateralism and we must admit there is still some mistrust that remains among governments.
The reality test is imminent. With the appointment of new director general of the WTO is the first good news for the organisation in years. The role of the WTO secretariat and the director general must be reinforced and that of WTO committees. There is a lot to do there and we look forward to the G20 to be able to agree on a common proposal to push forward.”
Meanwhile, Ian Goldin, Professor of Globalisation & Development, University of Oxford expressed a strong hope that the opportunities opened up by COVID-19 are not lost.
“What we have seen in this crisis, of course, is both the good and the bad of globalisation.
The bad is what I call the butterfly effect of globalisation. Our hybrid connectivity leads to the spreading of risk, whether it is an airport, hub, cyber center, or a financial center. Complex network systems inevitably spread negatives, and it is our failure to manage these. Not least through the stymying of organisations like the WTO, but also the WHO and many others that has led us to where we are today.
Pandemics can be stopped, but the failure to stop it is a failure of global governance. It is also, of course, a failure of international solidarity to provide the health systems needed around the world.’
The good we’ve seen in globalisation, of course, is an unprecedented development of vaccines. We all look to globalisation now for a restoration of our personal health, national health, and global health. Ensuring that vaccine nationalisation does not triumph is absolutely essential in this.
Goldin outlined some key trends shaping global trade that are already having an impact on shipping, from moving towards service based economies and a decline in manufacturing. “The decline in bulk shipping is a reflection of broader trends being accelerated,” he explained. He added, “A new cold war between China and the US could be much more devastating for globalization than the pandemic.”
A key concern during the discussion was the need to ensure developing countries can reap benefits from changes to global trade, from technological advancements around digitalisation and AI to advances in material technology.
Shamika Sirimanne, Director, Division on Technology & Logistics, UNCTAD noted the maritime industry faces a “perfect storm” of three main challenges: COVID-19 and the fallout from the pandemic, the technological revolution and climate change.
“International partners need to ensure developing countries can face these challenges and are not be left behind.”
She added: “We need a lot more research like the Protectionism in Maritime Economies Study to show the world that the maritime industry is important. This must be done fast as we are already in the midst of the perfect storm.”
Calls for cooperation and collaboration to face such challenges were echoed by all the speakers. Ralf Nagel concluded:
“Addressing trade related challenges requires leadership from politicians, organisations and the shipping industry. We will be partners in the difficult but necessary job that needs to be done.”
To watch the full Leadership Insights discussion click here.