Roberto Azevêdo, director-general of the World Trade Organization, told Ahram Online in an interview that the coronavirus crisis has caused a shock to the world's economies that will hit growth and reduce the volume of international trade exchange by more than 13 percent.
He also said that while WTO regulations allow countries to temporarily ban some strategic exports, may of these initial trade restrictions have now been lifted.
The director of the international body also explained that recovery from the economic crisis caused by the pandemic depends on how quickly the pandemic is controlled, and then on whether governments support the right fiscal, monetary and trade policies.
Ahram Online: After the effects of the global outbreak of the coronavirus, what are your expectations for the growth or decline of the global economy and trade in the year 2020?
Roberto Azevêdo: This health crisis, the likes of which we have not seen in over a century, has also dealt a major and ongoing shock to the global economy.
WTO economists estimate that all regions of the world will suffer significant declines in exports and imports in 2020. Their most recent analysis confirms that we are heading towards the sharpest drop in trade volumes on record, around 13 percent, which is worse than what we experienced during the 2009 financial crisis.
Services trade may be most directly affected by COVID-19 due to transport and travel restrictions and the closures of retail and hospitality establishments.
Our most recent evidence suggests that we may be avoiding the catastrophic trade effects of the Great Depression of the 1930s, but this does not mean policymakers can sit on their hands: prolonged uncertainty about the economy will cause consumers and investors to cut back on spending, holding back growth and job creation.
AO: What is your comment on the measures taken by some countries to restrict exports, especially basic and medical commodities, recently?
RA: WTO rules do allow members to take trade restrictive actions in a crisis, provided these measures are "transparent, targeted and temporary." Export restrictions are permitted in the event of domestic shortages. But just because something is allowed under the rules does not make it the optimal policy to pursue. We should remember that such measures can have unintended consequences.
Export restrictions can cut off countries reliant on imports for food and medical supplies. And even for net producing countries, export restrictions can be at best a short-term palliative -- over time, they can backfire by disrupting value chains, disincentivising domestic production, and even raising prices.
I should stress that while export restrictions on medical products like gloves, masks and ventilators were indeed part of many governments’ initial response to the crisis, we have also seen many import-facilitating measures, such as lower tariffs and non-tariff measures.
The WTO secretariat has been monitoring COVID-related trade measures, as part of its broader work to foster transparency in international markets. It is welcome that many members have been sharing information on their trade policies. Our recent report looking at trade measures introduced by G20 economies between mid-October and mid-May showed that 36 percent of the group’s COVID-related export restrictions had already been phased out as of the middle of May.
AO: Some countries took preventive measures by announcing massive unprecedented fiscal stimulus packages. How would you evaluate these measures? And to what extent can these measures be effective, and until when can they be relied upon?
RA: Governments and central banks moved promptly to unveil fiscal and monetary stimulus to counter the economic effects of the pandemic -- though space to introduce such policies varies considerably across countries. These measures have helped sustain demand, and are an important factor in why the fall in trade has not been steeper.
Our recovery from this economic crisis will depend on two things: one, how quickly the disease is brought under control. And two, governments’ policy choices going forward. Fiscal policy, monetary policy, and trade policy must all pull in the same direction. In 2008-09, trade policy choices kept international markets broadly open, which helped countries make the most of fiscal and monetary stimulus that in hindsight could have been more ambitious. This time we hope to see strong fiscal and monetary measures, but we must also ensure that trade policy does not end up pulling in the opposite direction.
AO: What is the role of the World Trade Organization in light of the decline in trade between countries? How can the WTO help the international community to overcome the effects of this crisis?
RA: The more coordination there is between countries, business and international agencies, the more effective our response to the pandemic will be. International organisations like the WTO work to foster coordination among governments.
Since the start of the pandemic, we have joined hands with other agencies, such as the World Health Organization, the Food and Agriculture Organization and the World Customs Organization to make the case for cooperative policy responses, and to warn that widespread recourse to protectionist measures would only add to the demand and supply shocks that businesses and households are currently facing.
In addition to making the case for keeping markets broadly open, we have intensified our monitoring activities, providing transparency about WTO members’ COVID-related trade policies. We are informing members and the public of the impact this pandemic has had on trade and the broader economy. This in turn gives them the tools they need to make better decisions.