2020 was one of the most disruptive years in recent memory for global trade and the rules-based multilateral trading system. The COVID-19 pandemic triggered a sharp contraction in global merchandise trade growth which was already slowing due to escalating trade tensions among major trading powers. It disrupted global supply chains, provoking calls for nearshoring.
The International Civil Aviation Organization (ICAO) reports a 60% decline in international air passenger traffic over the course of 2020, while the International Monetary Fund (IMF) does not expect a return to pre-COVID-19 travel receipt volumes until 2023. Tourism-dependent economies, like many of those in the Caribbean, are among the most negatively impacted by the COVID-19 shock.
COVID-19 also delayed the scheduled trade policy reviews of some World Trade Organization (WTO) members, as well as postponed key events on the global trade calendar, in particular the WTO’s Twelfth Ministerial Conference (MC12) and Fifteenth Quadrennial Conference of the United Nations Conference on Trade and Development (UNCTAD XV).
Despite these harrowing events, there were some bright spots for trade in 2020 such as the ‘marked’ reduction in WTO members’ new restrictive measures on goods trade and the conclusion of some important free trade agreements (FTAs).
In this first ‘SRC Trading Thoughts’ article for 2021, I argue that while a cloud of uncertainty lingers, there are some rays of sunlight which make me cautiously optimistic that 2021 could be a comeback year for global trade in several aspects.
COVID-19 uncertainty continues but hope is around the corner
The spectre of COVID-19, of course, continues to loom large on the global economy. Two weeks into 2021, COVID-19 cases have once again spiked in top cities across the world, and in some Caribbean states which have hitherto managed the crisis well. Global COVID-19 deaths now top 2 million persons. New COVID-19 strains, which have been identified in the United Kingdom, South Africa and Brazil, are appearing in other countries. Vaccine roll-out, even in developed countries, has been slower than anticipated, and compounded by vaccine scepticism fuelled by disinformation campaigns and conspiracy theories.
Legitimate concerns, as recently expressed by CARICOM, also abound over whether developing countries will have access to an approved vaccine in a timely manner and whether a proposed amendment to the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) could be the answer. The three major vaccines (Pfizer-BioNtech, Moderna and Oxford-AstraZeneca), which have been approved by governments, so far evince some light at the end of the tunnel once roll-out improves. As noted in a recent WTO paper, trade policy can facilitate more expeditious dissemination of the vaccine worldwide.
Trade agreement bright spots
African countries officially started trading under the historic African Continental Free Trade Agreement (AfCFTA) on January 1, 2021. Although full implementation of the AfCFTA is expected to take several years, this continent-wide agreement is anticipated to be a boon to the continent’s development.
The Regional Comprehensive Economic Partnership (RCEP), signed on 15 Dec. 2020 by 15 Asia-Pacific countries, is another positive development on the trade front from 2020. Additionally, on 24 Dec., the UK-EU Trade and Cooperation Agreement was finally agreed before the Brexit transition period deadline, averting a ‘no-deal’ Brexit. Therefore, 1 Jan. marked the commencement of a new era for UK-EU trade and political relations, although there are some kinks to be worked out which have led to some border delays.
Turning to the Caribbean, with the UK now out of the EU once and for all, the UK-CARIFORUM Economic Partnership Agreement (UK-CARIFORUM EPA), which rolls over the provisions of the EU-CARIFORUM EPA, now governs UK-CARIFORUM trade. There has also been a concerted effort by the UK to deepen and expand both trade and investment ties with the Caribbean region through the appointment of a new special trade envoy last year. The UK-CARIFORUM EPA could be an impetus for the region to expand the depth and scope of its trade with the UK outside of traditional goods exports and travel trade.
Another key development from 2020 which spills into this year is that a final text of the post-Cotonou Agreement between the Organisation of Africa, Caribbean and Pacific States (OACPS) and the EU has been agreed and expected to be signed in Samoa later this year. While this is not a trade agreement as trade between the constituent OACPS regions and the EU is governed by the various EPAs, it is the overarching agreement setting the framework for OACPS-EU relations, which of course is germane to their economic and commercial relations. According to a recent Devex exclusive, although a few EU member states have expressed concerns over some of the provisions, the majority of parties support the deal and consider the negotiations complete.
UNCTAD XV – a Caribbean voice on the global trade and development agenda
If all goes well, Barbados will make history on 2-8 Oct. this year when it becomes the first Caribbean country and small island developing state (SIDS) to host an UNCTAD quadrennial conference. The conference, originally scheduled for April 2020, had to be rescheduled due to the COVID-19 pandemic. Hosting this conference affords Barbados the opportunity to shape UNCTAD’s trade and development agenda for the next four years, bringing a critical small state voice to global trade issues. A critical issue likely to be raised is the need for consideration of vulnerability in assessing eligibility for special and differential treatment, the blue economy and access to concessional financing in general.
WTO – a new dawn?
Perhaps where I am most hoping for some breakthrough is in the WTO, beset by its stalled multilateral negotiations function and now defunct Appellate Body. The COVID-19 pandemic reiterated the important role that a multilateral approach through the WTO plays in the management of a pandemic which not only impacts trade, but one in which trade could facilitate equitable vaccine distribution. Through its monitoring function, the WTO has played a pivotal role in promoting transparency of governments’ trade responses to the crisis, while acting as a forum of discussion for governments in managing the global trade response to the pandemic. The WTO’s COVID-19 portal is also a valuable resource for policy makers and researchers grappling with finding the right policy responses to mitigate the pandemic.
Undoubtedly, domestic considerations, such as controlling the COVID-19 outbreak and shoring up the economy, will be front of mind for the Biden/Harris administration. US criticisms of some aspects of the WTO, in particular the functioning of its Appellate Body, have extended across several administrations. It is also unclear where incoming US President Joe Biden stands on some WTO issues, such as the US’ current objection to the appointment of Dr. Ngozi Okonjo-Iweala as the next WTO director general. However, his public expression of support for the organisation and multilateralism, more broadly, which contrasts starkly with his predecessor, hopefully means that the undermining of the WTO by one of its founding members, as occurred during the last administration, will be a thing of the past.
In recent key note remarks, Biden’s nominee for US Trade Representative (USTR), Katherine Tai, intimated that China will remain a trade policy priority for the US. We may have to wait until the USTR releases its report on the president’s trade agenda, expected sometime in February, to see where WTO issues rank on Biden’s policy agenda.
Last December, WTO members missed their deadline for concluding negotiations on an agreement to curb harmful fisheries subsidies, a topic also germane to the Caribbean. With luck and political will, this agreement will be concluded or close to conclusion in time for MC12. Joint statement initiative negotiations in areas such as investment facilitation for development and e-commerce may also hold some promise for a significant outcome in time for the ministerial.
One may say I am overly optimistic. Certainly, if there is one thing 2020 has reinforced to us is that the crystal balls we trade analysts use are not all-seeing. That being said, there are some things that make me cautiously hopeful that 2021 could be the comeback year for trade we all want.
Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade researcher with The Shridath Ramphal Centre for International Trade Law, Policy & Services of The University of the West Indies, Cave Hill. Learn more about the SRC here: www.shridathramphalcentre.com.