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The Covid-19 pandemic has exposed the inherent weaknesses of the hyper-globalised world.
UNCTAD’s Trade and Development Report 2020, From Global Pandemic to Prosperity for All: Avoiding Another Lost Decade , suggests that the hard push towards ‘free trade’, which is continuing even during the pandemic, has deepened inequalities at all levels and fractured the spirit of multilateralism leading to a growing trust deficit in multilateral organisations like the WTO.
Global economy
As a result of the pandemic, the global economy will contract this year by over 4 per cent, with an estimated swing of 6.8 percentage points leaving a shortfall in global output by the year’s end of over $6 trillion.
The world economy will be “90% economy”, that is, smaller than before but much more fragile, more unequal and more vulnerable to future shocks. The world will experience a “K”-shaped recovery, with a “V-shaped” recovery for the wealthy and a struggle for everyone else. Our estimates show that the V-shaped recovery may not bring back the world economy to the 2019 level of growth.
The developed world will contract by 5.8 per cent this year and experience a growth recovery of 3.1 per cent in 2021, failing to fully recover the lost growth.
The developing countries will more than recover the lost growth but mainly on account of China. India is expected to grow by 3.9 per cent in 2021 from a negative growth of 5.9 per cent.
The Covid-19 pandemic has provided a second chance to recover better. What the world needs now is an enhanced role of state in terms of commitment to full employment and social protection. It is also the perfect time to revive multilateralism in a way that it recovers its trust deficit.
UNCTAD proposes a temporary “Peace Clause” in the WTO and in the FTAs (free trade agreements) on pandemic-related government actions which will enable countries to quickly adopt and use emergency measures to overcome intellectual property, data, and informational barriers.
Negotiations launched in Doha in 2001, officially the ‘Doha Development Agenda’, represented an attempt to rebalance the trading system in important respects.
Moving forward, concluding the Doha Round and delivering on the Doha Development Agenda in the WTO would be a way to restore trust in the trading system with a commitment to special and differential treatment as a prerequisite for ensuring a fair outcome.
Digital rules
Industry 4.0 has created new challenges for the developing countries. To bridge the digital divide, policy space will be needed. New issues, such as the digital rules which are being negotiated by a group of countries under Joint Statement Initiative can severely limit this policy space.
Therefore, these rules should not be multilateralised until developing countries fully understand their development implications.
It is important to revive multilateralism in its true spirit so that trade globalisation and the nation-state do not become competitors but mutually reinforce themselves.
The Senior Economic Affairs Officer, Division on Globalisation and Development Strategies, UNCTAD.
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