Stephen Jacobi, NZIBF Executive Director, speaks to the Confederation of Indian Industry Partnership Summit in New Delhi about The Future of Multilateralism.
TRADE AND THE VIRUS: UNITED WE STAND
Photo: First, do no harm – attributed to Hippocrates, 460-370 BC
Economies need to fight the Covid-19 virus by standing together.
Desperate times call for desperate measures, but not stupid ones. The world faces an unprecedented challenge to human health and to economic vitality. Many economies including New Zealand are now resorting to extraordinary measures to check the spread of the virus, treat sufferers and deploy massive economic stimulus. That is as it should be. Borders need to close to travelers for a time. But some economies are resorting to protectionism. That will make the fight against the virus even more complicated and is likely to delay the recovery once there is light at the end of the tunnel.
Protectionism – what’s new ?
Unfortunately, protectionism is nothing new and has been rising steadily since the Global Financial Crisis, and particularly over the last three years. Economic openness had been fragile before the crisis struck and it seems that the virus has accelerated the trend.
Fifty governments are now limiting access to the essential tools to fight the pandemic, imposing export restrictions on medical equipment and drugs. Many more are maintaining tariffs on even the most basic protective items such as soap and disinfectant.
The Global Trade Alert team at the University of St. Gallen have pointed out that at least 16 export bans have been imposed since the beginning of this month alone. Now, as Prof Simon Evenett says “beggar-thy-neighbour means sicken-thy-neighbour”.
What can be done ?
Trade and open markets are crucial to getting through this global challenge, helping life-saving medical supplies to get to where they are needed most. By contrast, going it alone is a recipe for disaster. Commentators at ECIPE (European Centre for International Political Economy) have called for economies to “get rid of the restrictions and tariffs that delay the purchase of medical equipment and make them more expensive”. They are right. We need a lifting of export bans and a stand-still on new tariffs and elimination on these products as soon as possible – and for markets for other goods and services to stay open too, even as countries may be tempted to throw up barriers elsewhere in response to the difficult period that undoubtedly lies ahead. We believe that economies in the Asia-Pacific should show global leadership here, staying true to our shared values of “equal partnership, shared responsibility, mutual respect, common interest and common benefit” as APEC Economic Leaders put it in their Bogor Declaration in 1994.
Getting the engines started again
While we are in the midst of the struggle right now, thought will need to turn to how to restart the engines of trade and investment as soon as possible. Forecasts are for a serious global recession, at least in the short term. We will need the right tools to keep economies and communities going in the meanwhile, and ready to crank up again when the moment is right. Protectionism is bad medicine. First to hand instead should be openness and co-operation. Bodies such as APEC and the WTO, where countries can come together to lay the groundwork for coordinated global action, will be crucial to get things moving quickly. New Zealand has a leadership role to play here as Chair of the WTO General Council and Chair of APEC in 2021. We need to get back to the habit of mutually beneficial international co-operation.
For now, the world and its people are hurting. We wish all our readers the best of health and happiness wherever it can be found in these viral times. Kia kaha ! (Be strong!)
This post was prepared by Stephen Jacobi and Stephanie Honey of the NZ International Business Forum.
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