Digest Content
- World trade primed for strong but uneven recovery after COVID-19 pandemic shock
- Joint Statement on the Results of the Council Meeting of the U.S. – Central Asia Trade and Investment Framework Agreement (TIFA)
- Director-General urges WTO members to deliver concrete results this year
World trade primed for strong but uneven recovery after COVID-19 pandemic shock
Prospects for a quick recovery in world trade have improved as merchandise trade expanded more rapidly than expected in the second half of last year. According to new estimates from the WTO, the volume of world merchandise trade is expected to increase by 8.0% in 2021 after having fallen 5.3% in 2020, continuing its rebound from the pandemic-induced collapse that bottomed out in the second quarter of last year.
Trade growth should then slow to 4.0% in 2022, and the effects of the pandemic will continue to be felt as this pace of expansion would still leave trade below its pre-pandemic trend.
The relatively positive short-term outlook for global trade is marred by regional disparities, continued weakness in services trade, and lagging vaccination timetables, particularly in poor countries. COVID-19 continues to pose the greatest threat to the outlook for trade, as new waves of infection could easily undermine any hoped-for recovery.
“The strong rebound in global trade since the middle of last year has helped soften the blow of the pandemic for people, businesses, and economies,” WTO Director-General Ngozi Okonjo‑Iweala said. “Keeping international markets open will be essential for economies to recover from this crisis and a rapid, global and equitable vaccine roll-out is a prerequisite for the strong and sustained recovery we all need.”
“Ramping up production of vaccines will allow businesses and schools to reopen more quickly and help economies get back on their feet. But as long as large numbers of people and countries are excluded from sufficient vaccine access, it will stifle growth,” she said.
The Director-General added that trade through value chains has helped countries access food and essential medical supplies during the crisis.
“Manufacturing vaccines requires inputs from many different countries. One leading COVID-19 vaccine includes 280 components sourced from 19 different countries,” she said. “Trade restrictions make it harder to ramp up production. The WTO has helped keep trade flowing during the crisis. Now, the international community must leverage the power of trade to expand access to life-saving vaccines.”
Short-term risks to the forecast are firmly on the downside and centred on pandemic-related factors. These include insufficient production and distribution of vaccines, or the emergence of new, vaccine-resistant strains of COVID-19. Over the medium-to-long term, public debt and deficits could also weigh on economic growth and trade, particularly in highly indebted developing countries.
In the upside scenario, vaccine production and dissemination would accelerate, allowing containment measures to be relaxed sooner. This would be expected to add about 1 percentage point to world GDP growth and about 2.5 percentage points to world merchandise trade volume growth in 2021. Trade would return to its pre-pandemic trend by the fourth quarter of 2021. In the downside scenario, vaccine production does not keep up with demand and/or new variants of the virus emerge against which vaccines are less effective. Such an outcome could shave 1 percentage point off of global GDP growth in 2021 and lower trade growth by nearly 2 percentage points.
For the whole of 2020, merchandise trade was down 5.3% (Table 1). This drop is smaller than the 9.2% decline foreseen in the WTO’s previous forecast in October 2020. The better than expected performance towards the end of the year can partly be explained by the announcement of new COVID-19 vaccines in November, which contributed to improved business and consumer confidence.
The participants affirmed the TIFA as a valuable mechanism to strengthen trade and investment ties between the United States and the countries of Central Asia, as well as among those countries in the region.
Participants focused on expanding trade and creating an enabling environment for business that will strongly promote regional private sector activity and enhance regional connectivity. Participants also reviewed trade, transit, and investment issues among Central Asian countries. In addition, they discussed the lapse of duty-free treatment under the U.S. Generalized System of Preferences (GSP) and noted the benefits of GSP to Central Asian countries’ economic development as well as the importance of meeting the GSP eligibility criteria, including protecting internationally recognized worker rights and providing adequate and effective protection of intellectual property rights.
The United States provided its counterparts with information on the key themes of the Biden Administration’s trade policy, including with respect to labor, environment and climate concerns, and the equitable distribution of the benefits of trade to underserved communities.
The participants reaffirmed that meetings of the TIFA Council and Working Groups foster bilateral, regional, and global trade and investment opportunities in Central Asia. As part of the TIFA engagement, participants met in focused Working Groups addressing customs, intellectual property, technical barriers to trade, sanitary and phytosanitary measures, and women’s economic empowerment.
The participants also discussed issues related to digital trade among Central Asian countries and the United States, noting that digitally enabled business services are essential to broad-based inclusive economic growth and innovation across economies. Participants agreed to focus on ensuring the free flow of information across borders with a cohesive legal, regulatory, and policy environment characterized by openness, transparency, competition, and non-discrimination. In the development of policies affecting digital trade, participants agreed to prioritize broad stakeholder participation, including focusing on the ways in which the digital economy can broaden the reach of small and medium enterprises into global markets, enhance women’s economic empowerment, and support the development of a robust private sector. Participants also agreed to emphasize consistency, evidence-based policymaking, and regulatory accountability. The TIFA Council agreed to launch an additional working group on digital trade.
Furthermore, the participants recognized the importance of implementation of the WTO Trade Facilitation Agreement and of international best practices in the development of standards and their use in regulations. Participants emphasized the importance of making further strides towards increased growth, prosperity, and stability through regional connectivity. In this regard, participants welcomed the attendance of Pakistan and Afghanistan at this meeting as an important opportunity to promote increased connectivity and trade between Central Asia and South Asia. They further appreciated Afghanistan and Pakistan’s interest in renegotiating the Afghanistan-Pakistan Transit Trade Agreement (APTTA).
The participants decided that the next meeting of the U.S. – Central Asia TIFA Council would take place in 2022 in the Central Asia region.
Director-General urges WTO members to deliver concrete results this year
WTO Director-General Ngozi Okonjo-Iweala was speaking at an informal General Council meeting on 30 March. She called on members to deliver concrete results that promote the WTO’s founding objectives: using trade to improve the living standards of ordinary people, creating better jobs, and contributing to sustainable development.
The meeting was called by General Council Chair Ambassador Dacio Castillo (Honduras) to initiate a process of consultations on the nature of the prospective outcome document for the Twelfth Ministerial Conference (MC12), which will take place in Geneva the week of 29 November.
He described the options in front of members, based on the documents that emerged from earlier Ministerial Conferences: a consensus Ministerial Declaration, a summary issued under the conference chair’s own responsibility, and a “hybrid” document containing elements of the two.
Members “may wish to start thinking about what type of outcome document we might realistically envisage for MC12, including its structure and elements,” the General Council Chair added, announcing he would begin consultations on these issues with interested delegations. He cautioned that this process should not divert attention from ongoing substantive negotiations.
With only seven working months until MC12, DG Okonjo-Iweala called on members to “create a recipe for success upfront,” starting with “two or three or four concrete deliverables” in areas such as fisheries and agreeing on work programmes for other items where differences remain.
She noted that MC12 would come at the end of a series of international policy discussions aimed at “examining the lessons from this pandemic and trying to put the framework for tackling the next.” If trade ministers emerge at the end of the year “with no agreement, no contributions to the meaningful issues that are being faced by the world today, nothing to add in terms of a framework for tackling the next pandemic, it will not look good.”
DG Okonjo-Iweala also said that she plans to convene an event in mid-April to discuss ramping up COVID-19 vaccine production and how the WTO can contribute to a more rapid and equitable distribution of vaccines.
The event will include all regional member groups, representatives from vaccine manufacturers from developing and developed countries, civil society groups working on access to medicine, and other relevant stakeholders.
She stressed that the event would help advance global discussions on access to vaccines. She expressed hope both for increased vaccine manufacturing in the short- to medium-term, and a longer-term framework agreement that would provide for automatic access to vaccines and other medical products for developing countries in future health crises, including a way forward on the TRIPS waiver proposal many of them support.