DEPUTY DIRECTOR-GENERAL ALAN WM. WOLFF

The remarks were delivered on his behalf by WTO Accessions Division Director Maika Oshikawa.

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Mme. Moderator, Ms. Karima Bounemra Ben Soltane, Director of the Institute of Development and Economic Planning (IDEP),
Distinguished fellow panelists,
Participants of the webinar,

I would like to thank the African Institute for Economic Development and Planning (IEPD) for hosting this important and timely discussion today given the scale of the impact COVID-19 around the world, without sparing Africa.

With the arrival of the COVID-19 pandemic, the world succumbed to a global health crisis with 3.1 million people infected worldwide and close to 250 thousand deaths as of 4 May 2020.  In Africa, despite a late arrival, the virus has spread rapidly with over 27,000 cases confirmed across the continent, while the limited testing capacity may suggest an even higher number of infections.

All countries, without exception, developed and less developed, are struggling to cope with the socio-economic consequences of the pandemic. It has disrupted normal economic activities throughout the world.  The Trade Forecast published by the WTO last month estimates that world trade is expected to fall by between 13% and 32% in 2020.  Much depends on the duration of the pandemic, including an expected second wave. The decline will likely exceed the one brought on by the global financial crisis of 2008-09.

African countries will bear a substantial burden due to the crisis. Suppressed global demand for goods and services, coupled with huge disruptions in regional and global supply chains, reduced income from tourism and a decline in inflows of remittances, will exacerbate African countries' fragile economic systems, poor infrastructures and relatively weak health systems.  As of 1 May, trade-restrictive measures this year have proliferated.  82 jurisdictions have imposed 132 export restrictions on medical supplies and medicines and 22 jurisdictions have imposed 31 export control measures on food.  This according to reporting by the Global Trade Alert, in cooperation with the World Bank and the European University Institute.  The restrictions would make it harder for African countries to secure essential goods during this crisis, although problems of debt burdens, a fall-off in revenues and limited foreign exchange availability are the more fundamental problems.   

Against this background, I would like to focus my intervention on three main points: first, to provide a brief overview of the trade and economic impact of the pandemic on the African continent; second, on the role of WTO in a global response to the COVID-19 pandemic; and, lastly, to offer some reflections on short- and medium-term responses for economic recovery post-COVID-19.

COVID-19 Pandemic: Trade and the Economic Impact on Africa

The continent has engaged in a number of efforts to contain the pandemic, both at the national level and with a collective response within the African Union.  The African Union promptly developed, jointly with the Africa's Centre for Disease Control (CDC), a Joint Continental Strategy for COVID-19 Outbreak, and appointed Special Envoys to mobilise support.  Nevertheless, no nation or continent has been spared.  It is already evident that the disruptions caused by the pandemic (and the restrictive measures that have been introduced to combat it) will have a dramatic adverse impact on Africa.

First, the pandemic will result in negative economic growth. The IMF, in its latest Regional Economic Outlook for Africa, noted that the pandemic may substantially reverse the region’s development and policy gains. According to the World Bank, in Sub-Saharan Africa alone, growth is forecast to fall from 2.4% in 2019 to -2.1 to -5.1% in 2020. Output is expected to contract by 1.6 % in 2020. This will be the first recession in the region over 25 years.      

Second, disruptions in global supply chains have a negative impact on Africa's participation in global markets. Global exports and imports of African countries are projected to drop by at least 35% from the level reached in 2019, with a loss in value estimated at around USD 270 billion.

Third, due to the current plunge of oil prices, the largest disruption to trade will be for commodity-sensitive economies, with Algeria, Angola, Cameroon, Chad, Equatorial Guinea, Gabon, Ghana, Nigeria, and the Republic of the Congo among the most affected. Although global stocks of cereals are robust, global prices for key food commodities, such as rice and wheat, can have a serious adverse impact on African countries especially for Net Food Importing Developing Countries (NFIDCs). If the COVID-19 outbreak were to last until the end of 2020 or beyond, the evolution of the prices of these products will deserve close attention.

Fourth, based on the World Bank's latest Africa Pulse report published in April 2020, the COVID-19 crisis has the potential to spark a food security crisis in Africa, with agricultural production potentially contracting between 2.6% in an optimistic scenario and up to 7% if there are trade blockages. Food imports would decline substantially (as much as 25% or as little as 13%) due to a combination of higher transaction costs and reduced domestic demand. Currency depreciation of importing countries is expected to be a major contributing factor.

Fifth, another major impact is on services sectors such as tourism and travel industry, with the widespread application of travel restrictions, the closing of borders and social distancing. IATA estimates the economic contribution of the air transport industry in Africa at USD 55.8 billion, supporting 6.2 million jobs and contributing 2.6% of GDP.      Under the average scenario, the tourism and travel sector in Africa could lose at least USD 50 billion due to the pandemic and at least 2 million direct and indirect jobs.

Lastly, in terms of financing, African economies have persistently faced current account imbalances which are mainly driven by trade deficits. As domestic revenue mobilization remains low in Africa, many African countries rely heavily on foreign sources of financing of their current deficits. These include FDI, portfolio investment, remittances, official development assistance, and external debt. However, the anticipated contraction or slowdown in origin countries could lead to a decline of revenue. The knock-on effects for the African public sector could be severe, in terms of reduced tax revenues and limitations on access to hard currency. African governments will face rising deficits and increased pressure on currencies. In the absence of significant fiscal stimulus packages, the combined impact of these economic, fiscal, and monetary challenges could greatly reduce Africa’s GDP growth in 2020. 

COVID-19: Response by the WTO

COVID-19 has attacked the world’s peoples and the global economy as if it were extra-terrestrial.  No national governments or international organizations were fully prepared to respond to the pandemic as the danger of the virus was not sufficiently appreciated. The multilateral trading system, created as the GATT nearly 75 years ago, did not have a packaged, ready-made, off-the-shelf response to a pandemic. 

Multilateral financial institutions were set up to respond to economic turmoil regardless of the cause, and credit became more available relatively quickly.  The Bretton Woods institutions provided rapid responses in addressing Africa's immediate needs and challenges.  These include: the temporary suspension of debt payments to IDA and LDCs – up $57 billion for Africa(1) ; the extension of emergency assistance during April to Sub-Saharan Africa amounted to USD8.3 billion. The World Bank has deployed USD55 billion for Africa to help countries protect the poor and the vulnerable, support businesses, and bolster economic recovery.(2)

A coordinated response for the conduct of international trade was addressed by G20 leaders on 26 March, followed by a declaration by G20 trade ministers on 30 March.  The G20 countries committed themselves to using measures that would be “targeted, proportionate, transparent, and temporary”.  The leaders emphasized “the importance of transparency in the current environment and [committed] to notify the WTO of any trade related measures taken”.

The trade ministers further agreed to assure “that emergency measures . . .  do not create unnecessary barriers to trade or disruption to global supply chains and are consistent with WTO rules.”  The level of conformity with these commitments has so far been mixed.  However, notifications have increased, providing greater transparency on the measures which consists of both trade liberalizing and restricting.   

Transparency and Analysis

On 24 March, WTO Director-General Roberto Azevêdo asked all WTO Members to submit information to the WTO Secretariat about recent trade and trade-related measures in response to the coronavirus outbreak.   Providing additional transparency is the first operational multilateral response to the pandemic.  These notifications may be viewed on the WTO website, which has a specific webpage dedicated to “COVID-19 and World Trade”, updated on a daily basis.  As of 30 April 2020, the website lists 103 measures, notified by 38 Members, including 5 from Africa.(3)

In addition to the notification efforts by Members, the Director-General established a cross-divisional WTO COVID-19 Task Force.  Apart from the Trade Forecast issued on 8 April 2020, the WTO has issued several reports, including a report on trade in medical products critical for the global response to the pandemic, tracing trade flows for products such as personal protective products, hospital and laboratory supplies, medicines and medical technology while providing information on applicable tariffs.  Another report was just issued on the treatment of medical products in regional trade agreements, examining the extent to which medical products are traded among preferential partners and the difference in liberalization rates within and outside these trade agreements.

Collaboration with other International Organisations and Partners

As no single national government or multilateral institution can alone combat the global pandemic, the WTO has engaged in a series of outreach activities and collaborative actions to combat the effects of the pandemic and lay the foundation for effective economic recovery after the crisis.  The following have been issued in collaboration with the WTO, with:

  • WHO and FAO, calling on governments to minimize the impact of COVID-19 related border restrictions on trade in food (31 March 2020);
  • ICC, calling for engaging in more dialogue with business to maximise the effectiveness of public policies to mitigate the economic damage from the COVID-19 pandemics (2 April 2020);
  • WCO, working together to facilitate trade in essential goods such as medical supplies, food and energy (6 April 2020);
  • WHO, underlining support for efforts to ensure the normal cross-border to vital medical supplies and other goods and services (20 April 2020); and
  • IMF, calling on governments to lift export and other trade restrictions on key medical supplies and food (24 April 2020).

Member Initiatives

In parallel to these joint statements which stress upon the importance of multilaterally coordinated responses to the pandemic-related crises, the WTO provides a platform to translate these pledges into coordinated actions among Members. 

  • On 15 April 2020, Singapore and New Zealand entered into a formal bilateral agreement to keep their markets open for medical supplies and equipment.  The two countries have circulated their agreement to all WTO Members as the initiative is open to all Members and observers.  The declaration includes coverage of tariff elimination, export restrictions, non-tariff barriers, facilitation of trade in essential goods, and logistics.     
  • On 22 April 2020, 49 countries(4) led by Canada — representing 63% of global exports of food and agriculture products and 55% of global imports — pledged to support open and predictable trade in food and agricultural products.  In particular, they committed, inter alia, not to disrupt the global food supply chain or impose food export restrictions; that they would  ensure that the responses to COVID-19 remain consistent with the G20 agreed guidance, that is targeted, proportionate, transparent and temporary; and that they would exercise restraint in establishing domestic food stocks of agricultural products that are traditionally exported. This initiative is also open to any WTO Members to join.
  • More recently, on 5 May 2020, a joint ministerial statement was issued by 42 Ministers responsible for the WTO.  They have pledged to lift export restrictions imposed in response to the crisis as soon as possible, encouraging the WTO to work on concrete actions to foster the cross-border flows of medical supplies, services and equipment, and to preserve agriculture supply chains and enhance food security.  The signatories, supported by most mid-level countries including five from Africa(5) , pledge not to impose export restrictions on food.   

These declarations are very much in line with the position stated by the African and LDC Groups which have called on the major WTO exporters to resist introducing new trade restrictive measures that might significantly affect African countries and LDCs as net importers, or their ability to ensure access to these medical supplies and food stuffs on reasonable and affordable terms.(6)   Both the  African and LDC Groups called on the WTO to reduce the impact of the COVID-19 outbreak on the global economy, and especially on smaller and more vulnerable economies.

The WTO will hold a special session of the General Council on 15 May 2020 to discuss COVID-19 trade-related measures. The WTO building will reopen on 11 May 2020 for a phased-in re-occupancy of Secretariat staff after eight weeks of closure.   We are scaling up IT technology to enable greater Member engagement, including through a virtual platform.  I expect more activities and more initiatives will emerge in the coming weeks as Members seek to minimize disruptions to trade flows, both in goods and services, and then as greater attention is given to economic recovery in post COVID-19.  Trade will have a critical role to play in the recovery, not least in Africa.

Economic recovery: Near term and mid-term response

There is widespread recognition of the need to move expeditiously to tackle the health and economic harms caused by the pandemic, to avoid the unfolding of a deeper, systemic crisis. 

In the short term:

  1. Clearly, the immediate focus of African countries is to contain the spread of the virus, to save lives as well as to limit the economic damage.  
  2. National trade policy responses should focus on facilitating imports of food and medical supplies, including by simplifying customs procedures for their entry as well as waiving applicable customs duties. Cross-border trade should not be hampered especially for landlocked African countries. I would like to recall the WTO Trade Facilitation Agreement (TFA) and how the implementation of its measures can help move essential goods faster across borders.
  3. The WTO will continue to monitor trade restrictive and trade facilitating measures, with a view to Members’ choosing to limit trade-restrictive measures to the extent possible.  In this context, it is important for Africa to voice the specific challenges and concerns which the continent has encountered, and to make specific and realistic proposals for consideration by the entire WTO membership. 
  4. All should continue to support the mobilization efforts of the international community, whether from G20 countries, the World Bank, the IMF and other international organization partners — for the WTO, particularly with respect to assuring a restoration of trade finance.  Broad efforts are critical to equip African countries to respond to the crisis through a combination of emergency fiscal and monetary policy actions.  There is a need to ensure that fiscal policy results to the extent possible in a safety net, especially targeting workers in the informal sector, which accounts for over 85% of workers in Africa.

In the medium term:

  1. The AfCFTA should drive the post-pandemic economic recovery.  The WTO remains fully committed to supporting Africa’s continued economic integration, growth and development, through the participation of African Members in the WTO, including by supporting accessions of African countries not current Members of the WTO,(7) and facilitating coherence and complementarities in the AfCFTA and the WTO.
  2. African countries need to deepen their reforms to improve transparency, reduce trade costs, enhance competitiveness and make the continent more attractive to foreign investors, particularly in the non-extractive sectors. 
  3. Economic growth and sustainable development on the African continent will be greatly assisted through increased intra-African trade as well as trade with the rest of the world.  Intra-African trade currently stands only around 17% of total trade.  Increased intra-regional trade can complement and enhance a more diversified participation in global value chains to increase resilience from future challenges.
  4. Despite the chaotic uncoordinated initial responses, the COVID-19 pandemic crisis should prompt a desire and need for more multilateralism, not less, including making improvements in the global trading system.  Not to be forgotten is the need for WTO Reform discussions to begin the planning for the future of the trading system.  With the African continent which is expected to account for a quarter of the world population by 2050, the future of the system will need to draw strength from the aspirations, dynamism and energy of this growing continent.

Thank you.  I look forward to our discussion.  

Notes:

  1. Official creditors have mobilized up to $57 billion for Africa in 2020 alone—including upwards of $18 billion from the IMF and the World Bank each—to provide front-line health services, support the poor and vulnerable, and keep economies afloat in the face of the worst global economic downturn since the 1930s. Private creditor support this year could amount to an estimated $13 billion. back to text
  2. In addition, the African Development Bank (AfDB) set up the COVID-19 Response Facility to assist regional member countries in fighting the pandemic, with a US$10 billion virus response plan to governments and the private sector, a US$3 billion Fight COVID-19 Social Bond and a US$2 million grant for the WHO for its efforts on the continent.  The African Export-Import Bank (AFREXIM) created a US$ 3 billion Pandemic Trade Impact Mitigation Facility (PATIMFA), etc.   back to text
  3. Egypt, Kenya, Mauritius, Namibia and South Africa, back to text
  4. The only African country which is part of the statement is Malawi. back to text
  5. Benin, Kenya, Madagascar, Mauritius and Nigeria. back to text
  6. The statement made by the African Coordinator at the Informal Heads of Delegation meeting on 17 April. back to text
  7. Algeria, Comoros, Equatorial Guinea, Ethiopia, Libya, Sao Tome and Principe, Somalia, South Sudan and Sudan. back to text

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