Global Trade, the Pandemic, and Multilateral Directions

This year opened with the expectation that trade issues would be one of several key “2020” areas of focus for advancing the 2030 Agenda for Sustainable Development. SDG target 17.11 is one of 21 targets with a “2020” deadline (Significantly increase the exports of developing countries, in particular with a view to doubling the least developed countries’ (LDCs) share of global exports by 2020). Likewise, SDG target 14.6 calls for, by 2020, prohibiting certain forms of fisheries subsidies which contribute to overcapacity and overfishing, while those subsidies that contribute to illegal, unreported, and unregulated (IUU) fishing are to be eliminated entirely. After nearly 20 years, World Trade Organization (WTO) negotiations were closing in on concluding talks on this issue. The WTO Ministerial Conference was set to convene in June 2020, with many eyeing the event as an opportunity to address these and other pressing trade issues, some of which have languished for years.

Instead, the year 2020 will be recalled for very different reasons for the global trade regime. The COVID-19 pandemic has had a profound impact on the global economy, including international trade flows. News about trade policy during the last few months has, in many ways, provided a barometer on the unfolding, multi-pronged crisis. As borders closed to stem the human-to-human spread of the virus, implications for trade in essential medical supplies were quickly singled out as priorities for exceptions. The need for continued trade in essential supplies also brought the inequalities that the pandemic exposed into focus. Moreover, the need for collective action to ensure intellectual property rules (IPRs) do not create a hindrance to the crisis response has also been raised in the context of the World Health Organization, where the final COVID-19 resolution includes language referring to the use of previously agreed flexibilities in the WTO’s IPR rules. The growing number of export restrictions on agricultural goods has raised concerns over whether a repeat of past food price crises and a rise in global hunger levels and food insecurity may be on the horizon.

While there were acknowledgements that the extraordinary circumstances justified breaching global agreements or taking advantage of their existing flexibilities, there have also been calls to ensure that multilateral approaches resume as soon as possible, along with reminders that multilateralism will be essential to efforts to build back better.

Furthermore, leadership changes have added to the uncertainties that the pandemic has wrought, while also focusing attention on what is needed to emerge stronger from the pandemic. The May 2020 announcement by World Trade Organization (WTO) Director-General Roberto Azevêdo of his surprise decision to step down launched a “politically charged” selection process for the next Director-General, despite having a full year remaining in his second term. His successor’s task will be to help the multilateral trading system respond to new economic realities caused by COVID-19.

The SDG Knowledge Hub is publishing news about these and more trade-related policy developments, thanks to support from the UK’s Department for International Development (DFID). The summary below offers a brief overview of the news during the last two months. We encourage you to visit our “Trade” coverage webpage often. IISD is also establishing a peer-to-peer community list to further foster the information flow on trade and sustainable development policy. Sign up for the Trade and SD News group here.

COVID-19 Puts Development Gains at Risk

As projections of the extent of the damage caused by the global pandemic are revised downward, there are growing concerns about sustainable recovery and resilience of the global economic system to future crises.

Already back in April, the 2020 Financing for Sustainable Development Report warned that the COVID-19 pandemic could lead to a new debt crisis, and recommended actions to build back better for sustainable development, including the elimination of trade barriers and restrictions that affect supply chains. In a Communiqué following its virtual meeting on 17 April, the World Bank Development Committee recognized the pandemic’s “exceptional negative shock” on the global economy and disruptions to trade, supply chains, and investment flows, warning about its potential to “erase development gains for many countries.”

The same month, the WTO forecast that world trade would fall by 13% to 32% in 2020, due to the disruptions to economic activity caused by the pandemic. A May 2020 report by the Committee for the Coordination of Statistical Activities (CCSA) and the UN Conference on Trade and Development (UNCTAD) found that COVID-19 had cut global trade values by 3% in the first quarter of 2020, projecting the decline to accelerate, with an expected 27% quarter-on-quarter decline.

The UNCTAD World Investment Report 2020 found that the coronavirus pandemic had caused a “steep drop” in investment flows, hitting developing countries the hardest. During an informal briefing among UN system leaders to discuss building on the UN’s operational framework for social and economic responses to the pandemic, President of the UN Economic and Social Council (ECOSOC) Mona Juul cited “incomprehensible setbacks to our hard-won development goals” due to COVID-19.

The 2020 SDG Progress Report warned that LDCs, land-locked developing countries (LLDCs), small island developing States (SIDS), and countries in humanitarian or fragile situations “stand to be hit hardest” due to fragile health systems, insufficient social protection coverage, limited financial and other resources, vulnerability to shocks, and dependence on international trade. Among trade-related impacts in LDCs, a WTO information note highlighted a “significant decline in export earnings” among these countries since the outbreak of COVID-19, which may affect their graduation prospects.

Overcoming the Pandemic

As the UN Environment Programme (UNEP) has suggested, the pace of post-COVID-19 recovery will depend on the length of the pandemic as well as the effectiveness of policy responses. Over the past months, world leaders, UN agencies, and relevant stakeholders have engaged on various levels to address the crisis and chart the path towards global recovery.

Some of the actions, many of which were spearheaded by the WTO or groups of WTO Members, included:

The Ottawa Group, comprised of 13 WTO Members and devoted to developing options for reforming the organization, outlined six action areasto focus on in light of COVID-19: transparency and withdrawal of trade-restrictive measures; keeping open and predictable trade in agricultural and agrifood products; e-commerce; trade facilitation through the use of information technology and streamlined procedures; an initiative on medical supplies; and deepening engagement with stakeholders.
During the 1 July meeting of the WTO Council for Trade in Services, many WTO Members highlighted the importance of sharing experiences, including on trade facilitating measures adopted to address the crisis and promote economic recovery.
The WTO and six multilateral development banks (MDBs) issued a joint statementhighlighting measures taken to step up trade finance programmes to combat the impacts of the COVID-19 pandemic.
The WTO’s ‘World Tariff Profiles 2020’ report featured market access for medical goods and COVID-19 medical supplies as the “special topic.”
The WTO’s 23rd biannual monitoring reporton trade measures, covering the period from mid-October 2019 to mid-May 2020, found that Group of 20 (G20) economies implemented 154 new trade or trade-related measures over the time period, of which 60% were linked to the COVID-19 pandemic.
Several G20 ministerialsconvened in April, many of which were special meetings devoted to the pandemic. Ministers highlighted efforts to promote international trade cooperation while minimizing impacts of COVID-19 though “a coordinated global response.”
A UNCTAD reportoutlined ways to facilitate trade in areas related to process optimization, cost reduction, transparency and cooperation enhancement, and full use of technology to ensure cross-border trade continues while reducing face-to-face interaction.
Another UNCTAD reportdiscussed how South-South cooperation can help build solidarity to weather the interconnected economic and public health crises.
UNCTAD and the five UN regional commissions launched a projectto help governments and businesses keep transport networks and borders operational and facilitate the flow of goods and services, while minimizing the spread of COVID-19.
The International Trade Centre (ITC) released a 15-point action planto support micro-, small and medium-sized enterprises (MSMEs).
Representatives from the UN and its Member States considered actionsto mitigate the potential socio-economic impacts of COVID-19 on food availability and supply, and to attain food security.
A webinarconvened by the International Institute for Sustainable Development’s (IISD) Global Subsidies Initiative (GSI) addressed trade and climate change in the context of COVID-19, showcasing examples of national responses and policies being implemented.
A webinar convened by IISD addressed the interlinkages between trade, public health, and intellectual property rights, especially given the COVID-19 resolution negotiated and adopted for the 73rd World Health Assembly.

Engagement with China included an EU-China summit on 22 June where European Commission President, Ursula von der Leyen, drew attention to “an unbalanced trade and investment relationship” between China and the EU.

Selection Process for Next WTO Director-General

Amid efforts to bring about the global economic recovery from the COVID-19 pandemic, WTO Director-General Roberto Azevêdo announced that he will step down on 31 August 2020, cutting his second term short by one year. The selection process for the next Director-General normally spans six months, but following a 10 July announcement by WTO General Council Chair David Walker (New Zealand), the process has been shortened, with the third and final phase now scheduled to begin on 7 September.

Eight WTO Members (Egypt, Kenya, the Republic of Korea, Mexico, Moldova, Nigeria, Saudi Arabia, and the UK) submitted nominations for the post of WTO Director-General to succeed Azevêdo. Following the closure of the nomination period on 8 July, candidates are meeting with WTO members at a special General Council meeting from 15-17 July to present their views and take questions from the membership. They will then have the remainder of July and all of August to continue making their case for the role.

* * *

At the SDG Knowledge Hub, our trade-related coverage can be viewed under the “Trade” tag.

This policy brief was written by Elena Kosolapova and Lynn Wagner.