The World is in Need of Strong Trade Champions

Context: The World Trade Organisation (WTO) says that global trade has hit a record low and recovery is likely to be L rather than U-shaped. But COVID alone is not to blame. De-globalization trends must be fought too.

Issues with Declining Global Trade: 

• WTO’s Observations: 

• • • Good Trade Barometer of the WTO: which offers real-time data on merchandise sales across borders, had hit a low of 84.5.
      • On par with the low of the 2008-09 financial crisis.
    • Contracted Forecast: The WTO had forecast that world trade in goods would contract by 13-32% this calendar year.
• L-Shaped recovery: rather than an expected V-shaped is most likely.

• • • The international movement of goods and people will likely stay restricted until a way out of the current crisis is found.
• Rising “Beggar-thy-neighbor” mercantilist instincts: fueled by nationalistic rhetoric in large part of the world.

• De-globalization: 

• The United States, once a stout supporter of globalization, has moved away from its economic rationale.
• Import tariffs are either used as bargaining chips for market access or shaped by considerations that end up picking specific winners and losers within the US.
• Tit-for-tat Tariff War with China: The overall cost of which would have exceeded any benefits it may have got.
• Neglect of the WTO: which has more or less in limbo and marred with broken dispute resolution mechanism.

Way Forward: 

• Rescue WTO: Since adherence to the rules of a multilateral trading system is critical to the smooth flow of stuff across borders.
• Trade as a win-win idea: should be encouraged, which is not limited to the rationale of increasing exports and decreasing imports.
• Economic Integration leading to Peace: For, E.g. Economic integration after World War II was meant to act as a guarantor of global peace and stability.