DEPUTY DIRECTOR-GENERAL YONOV FREDERICK AGAH

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DDG Agah noted that the outlook for global trade is now a bit brighter than a few months ago.

WTO economists now estimate that global merchandise trade will shrink by just over 9% this year. While this is historically bad, it is better than the most optimistic outlook outlined in the WTO's annual trade forecast issued earlier in the year (decline of 13 to 32%). Recent data suggest global trade in intermediate goods has fallen less sharply than trade in final goods – implying that value chains now account for a higher share of world merchandise trade than they used to.

He said the WTO continues to monitor members' pandemic-related trade policies. Trade-facilitating policies have outnumbered trade-restricting measures by nearly two to one. Many trade restrictions introduced earlier in the crisis have been rolled back.

DDG Agah acknowledged that some trade policy measures taken in response to the COVID-19 pandemic have exposed vulnerabilities in global supply chains. This is inherent to economic interdependence and added further impetus to the debate over on-shoring and near-shoring. If the earlier emphasis was on creating lean, efficient supply chains, there is now greater examination of resilience and sustainability to reduce the risks of disruption.

He expressed the view that equating domestic production with supply resilience is erroneous for a number of reasons.

First, concentrating industry at home might make it less vulnerable to external disruptions, but domestic supplies would become more vulnerable to internal disruptions, for example from a natural disaster. 

Second, if domestic production costs more than imports, the constraint remains - except that it will be about affordability instead of availability.

Finally, economies with the ability to do so may try to increase domestic manufacturing capacity for certain supplies. However, there are constraints on their capacity to do this. Profitability is one.  Opportunity costs are another. Resources diverted to replicating what was previously done elsewhere will not be available for potentially more productive activities. Taken far enough, this would make for a poorer economy overall.

DDG Agah noted that even the most advanced economies rely on their trading partners for certain medical goods, agricultural products and other intermediate goods. Trade has been instrumental in accessing essential medical supplies, drugs and - when it becomes available - trade will also enable access to the vaccine against COVID-19.

He advised that the COVID-19 related crisis has highlighted the critical need for governments to work not only with each other but with the business sector and wider civil society. Trade policy decisions, as well as other economic policy choices, will matter in stimulating job creation and growth. Hence, they will determine the economic recovery's pace.

He also emphasised the importance of open and predictable markets to foster a strong and inclusive recovery for all countries, and called for a strong recommitment to international cooperation. More trade, not less, will be necessary to achieve objectives in the areas of public health, peace and security, environmental sustainability, and the economy. Closing off markets would only make countries more vulnerable, but also less prosperous.

DDG Agah noted that the impact of the COVID-19 pandemic also provides an opportunity for the trading system to emerge stronger from this crisis and better-equipped to respond to the aspirations of all members by bringing ongoing reform efforts to fruition, in the shape of new agreements and renewed cooperation.

He noted that at the WTO, several members have put forward ideas which would reduce incentives to restrict trade in future crises. Other initiatives with respect to digital trade, investment facilitation and growing concerns over the environment (fisheries) could come to fruition in the coming month.

He concluded by stating that the urgent challenge before WTO members is to respond to the trade aspects of the pandemic to assist in the global economic recovery. The trading system alone cannot solve the problems facing the world. Nonetheless, it can assist in providing solutions as trade remains a catalyst for growth, productivity and economic opportunities. The WTO was created to facilitate international cooperation, transparency and rules-based frameworks for international trade.

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