NEWS  Going by past experiences and historic ruptures, there is hope for global trade recovery in the post-COVID-19 world.

CONTEXT

• Last year, countries around the world responded to COVID-19 pandemic-induced shortages with protectionist reactions and nationalist aspirations. This resulted in disruption of complex cross-border supply chains around the world.
  • The world economy shrunk by 4.4% and global trade by 5.3%, while job losses have been estimated to be to the tune of 75 million.

ANALYSING TRENDS IN PAST

• Going by past experiences, it is evident that historic ruptures often generate and accelerate new global links that lay foundations for institutional changes, seeking enduring cooperation among nations.
• The Second World War created multilateral institutions like- the United Nations, the Bretton Woods Institutions such as World Bank and International Monetary Fund (IMF) and International Trade Organisation (ITO).
  • These institutions in turn helped to rebuild the shattered post-war economy.
  • The General Agreement on Tariffs and Trade (GATT) was negotiated in 1947 as a means to reduce barriers to international trade.
• The oil shocks of the 1970s led to the establishment of the International Energy Agency (IEA) in 1974 to manage oil supply disruptions and went on to create awareness on the need for global energy security.
• The financial crisis of 2008 led to the G20 Leaders Summit, an elevation from the G20 Finance Ministers forum in 1999, in a bid to take cooperation beyond the G7 in a global quest to control inflation due to fiscal expansion.
• These developments had a consequential impact on global trade.
  • Global trade expanded with a steep rise from a mere $60.80 billion in 1950 to $2,049 billion in 1980; $6,452 billion in 2000; $19,014 billion in 2019. 

FUTURE PROSPECTS

• The above patterns leave much hope for optimism for global trade in the post-COVID-19 crisis as:
• Stimulus packages and forced savings in several countries in the last year have created financial buffers.
• Global supply chains that have remained dormant for long are expected to be resilient to help revive manufacturing with lower production costs, induce investments and promote technology transfers.
• It is expected that on a post COVID-19 world, members of the World Trade Organization would stitch trade facilitating rules, and will take collective resolve to discipline errant nations that are known to dumping goods and erecting trade barriers through multilateral rules.
• It is also hoped that there may be mutually beneficial trade arrangements that seek deeper economic integration at the bilateral and regional levels to create win-win situations for all stakeholders.

DATA FOR ECONOMIC GROWTH

• It is expected that the countries with technology will dominate international trade in future with a transformational impact on the global economy.
  • Just as the steam engine in the 19th century and computing power in the 20th century, data will be the main driver of economic growth in the 21st century.

CONCERNS

• • The businesses will aim to harness data for innovation in order to remain ahead in a post-COVID-19 world.
  • But the increasing use of data and automation will come at the cost of following set of problems:
    • Automation will make nations vulnerable to job losses.
    • Rapid growth in e-commerce and the virtual world will demand entirely new skills from the workforce.
  • Hence, the upcoming economic policies need to focus on:
    • stronger safety nets for workers;

• income protection,

• skill training,

• health care and educational support for families.

INDIA’S OUTLOOK

• India’s challenges during the COVID-19 pandemic have been no different from those faced by other countries as:
  • its GDP contracted by 7.3% according to the National Statistical Office;
  • about 10 million jobs were lost according to the Centre for Monitoring Indian Economy Pvt. Ltd;
  • trade remained subdued at $493 billion.
• However, the projections of the International Monetary Fund for India’s economic growth ahead are positive and in line with the general trends world-wide.

CONCLUSION

• Building an ecosystem that incentivises value-added manufacturing and technology-induced finished products should form a part of our long-term strategy.
• Plug and play manufacturing units under Production Linked Incentive Scheme (PLI) schemes, if carefully nurtured, could lead the industry on that path.
• Beyond the timely stimulus packages for micro, small and medium enterprises (MSMEs), supporting them with cheaper input costs, including raw material and intermediate goods would help sustain them with job creation at the local level.
• Developing a synergistic relationship between the big industry and MSMEs is at the core of a successful Atmanirbhar Bharat; hence the former should be encouraged to move into technology space and finished products, while the latter feeds them with locally made inputs at competitive prices.
• Skills upgradation to global standards should form a part of India’s strategy in a post-COVID-19 world.

Reference:

1. https://www.thehindu.com/opinion/op-ed/unpacking-the-resiliency-of-global-trade-yet-again/article35845220.ece