Question

Identify and critically discuss four (4) key priority issues impacting international trade which you believe the new WTO Director General should seek to address in order to get the global economy going again. Ensure that the identified issues fall within the mandate of the WTO.

Include in your discussion, reasons to support your identified priority issues and strategies which can be considered for implementation by WTO members to deal with the identified issues.

Answer

Four key priority issues impacting international trade. In 2020, the world has experienced a global health crisis, where every business was negatively affected and has since been trying to regain some sort of stability. One of the main business operations has been affected heavily is international trades. International trade between different countries is an important factor in raising living standards, providing employment and enabling consumers to enjoy a greater variety of goods. Trade is essential to save lives and livelihoods; and international co-operation is needed to keep trade flowing. As stated by Director-General Elect Dr. Ngozi Okonjo-Iweala to the Special Session of the WTO General Council For the global economy to return to sustained growth, the global community will need to get a tight grip on the pandemic by intensifying cooperation to make equitable and affordable access to vaccines, therapeutics, and diagnostics a key plank of the recovery. For recovery of International Trades there are four things we can do: 1) boost confidence in trade and global markets by improving transparency about trade-related policy actions and intentions; 2) keep supply chains flowing, especially for essentials such as health supplies and food; 3) avoid making things worse, through unnecessary export restrictions and other trade barriers; and 4) Government support today needs to be delivered in a way that ensures it serves the public interest, not vested interests, and avoids becoming tomorrows market distortions. Covid-19 continues to spread throughout the globe, placing health systems under unprecedented stress in the battle to save lives. The human scale of this tragedy is set to worsen as the virus spreads to lower income countries with weaker healthcare systems. Against this background, there is a clear need to keep trade flowing, both to ensure the supply of essential products and to send a signal of confidence for the global economy. Trade is essential to save both lives and livelihoods. In keeping with trade flowing requires co-operation and trust for example, the market will supply essentials that countries will not impose export restrictions, and that imports do not pose health risks. This is a particular challenge at a time of trade tensions, where the international trading system was already subject to an increased number of new restrictions and distortions, from tariff increases among major traders, to significant government support in key sectors. Efforts at dialogue to manage and prevent tensions through ongoing negotiations are now complicated by mobility restrictions. But in the context of the severe economic strain from the virus, it is more important more than ever to avoid escalation of the current trade tensions. Secondly, an important priority is keeping the key supply chains for essential goods for the crisis including medical supplies, food products and ICT goods and services open and functioning. However, we are starting to see a number of challenges to keeping these supply chains going related to the business of trade. For example: Cancellation of passenger flights linked to travel bans has limited the availability of air cargo while urgent shipping of essential goods has increased demand, resulting in increases in the price of air cargo (compared to October 2019 air freight costs are up by about 30% between the Peoples Republic of China (hereafter China) and North America and by over 60% on some important Europe-North America routes) (Curran, 2020) Keeping the trade in essential medical supplies flowing means removing barriers such as tariffs (a tax imposed on imports, effectively increasing the cost to the buyer) and Quota (a quantitative restriction placed on imports or exports of a specific product over a specified period of time) on medical goods essential for combating COVID-19 (e.g. several countries maintain tariffs of up to 10% on COVID test kits) (Evenett, 2020) as a number of countries have already done. It means expediting certification procedures to allow new products to be traded as soon as possible and ensuring that technical requirements are science-based and do not unnecessarily restrict trade. Thirdly, there is a need to avoid export restrictions on essential goods, such as medical equipment and, especially, food products. Currently, more than 60 countries have restricted exports of essential goods and increasingly agriculture and food products. Export restrictions are a recipe for self-inflicted harm, undermining food security for everyone. Experience has shown that export restrictions temporarily lower domestic prices and raise availability, but they also discourage domestic production and so any benefit tends to be short-lived. Critically, by diverting supplies from world markets, they put upward pressure on international prices, which harms other countries in particular those most dependent on international markets for food. The global market situation for medical supplies is very different; there is a critical need to increase the overall global supply of essential medical supplies for combating COVID-19. Governments need to invest urgently in boosting production capacity, including in co-operation with the private sector, for local, regional and global markets. Some governments are taking measures designed to ensure supply for their own population that have the effect of limiting supply for others. Export restrictions often take the form of special licensing requirements or outright bans on the export of certain products. Other measures include guaranteed purchase or requisitioning of goods. These are difficult issues. While governments rightly are concerned to protect their own populations, the effect on other countries and thus on global efforts to contain the virus and prevent damaging second or third wave recurrences can be severe. Finally, Governments are necessarily and rightly providing huge amounts of support to prevent the COVID-19 crisis from destroying livelihoods, businesses and production capacity. However, governments will need to take a careful look at the measures in place to ensure that they have not become sources of unfair competition and distortions in the global economy. There is a need to pay attention to the design of essential support such as transparent including with regard to the terms of any support through the financial system; non-discriminatory amongst similarly affected firms and targeted at those experiencing the most disruption, while avoiding rescue for those who would have failed absent the pandemic; time bound, and reviewed regularly to ensure that it is hitting its target and remains necessary; and Targeted at consumers, leaving them for to decide how to spend any support, rather than tied to consumption of specific input and final goods and services. With these essentials taken into consideration countries will begin to recover gradually from the pandemic. The current crisis offers an opportunity to develop readiness for future pandemics. In addition to national measures to ensure supply, there may be scope for an international agreement to provide greater predictability and certainty on availability of key supplies in international markets and build confidence that trade will keep flowing to support the management of future pandemics. These analysis will help inform governments as they consider the priorities for action, both nationally and critically as they act together to build a more sustainable, inclusive and resilient global economy.

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