In the Face of a Pandemic, the World Turns to Trade

Toronto Global Forum: Greatly affected by the coronavirus pandemic, international trade can play a key role in the economic recovery, but must overcome obstacles, such as protectionism and commercial disputes, especially between United States and China.

“International cooperation is the only tool to face the situation, threatened by nationalism, import substitution, protectionism and populist policies of several countries”. Credit: UNCTAD

By Emilio Godoy
MEXICO, Oct 29 2020 – Greatly affected by the coronavirus pandemic, international trade can play a key role in the economic recovery, but it must overcome obstacles, such as protectionism and commercial disputes, especially between the United States and China.

This became clear during the virtual debates at the Toronto Global Forum “Forging a Resilient Economy,” organized by the non-governmental International Economic Forum of the Americas, based in Paris, from Monday, 26th to Wednesday, 28th.

During the last plenary session of the Forum, dedicated to analyzing the condition of international trade in times of global uncertainty, on Wednesday 28th, the Argentinean José Luis Manzano, Integra Capital private investment fund’s founder and president, stressed that the negative global context persists in the last quarter of a year marked by the pandemic.

He pointed out that there has been an incipient economic recovery, which comes from the reactivation that occurred in the middle of the year in the United States and Europe, now threatened by the increase in covid-19 infections, which in the case of Europe has already produced a withdrawal of activities.

“At this moment we are halfway through the pandemic, which means we still have another year of retreat. This will impact trade, economic growth, investment. The pandemic found regions and companies in different situations,” said Manzano.

Focusing on Canada’s position in the world, the Forum, which brought together Canadian officials and business and civil society organization representatives from several countries, also addressed issues such as financial services, future of work, the role of women in the economy, the digital ecosystem, innovation and investment.

Participants also discussed resilient infrastructure, education, health, cyber security, sustainability, agriculture and food.

The appearance of the coronavirus in December in China and its rapid global expansion in the weeks that followed led to domestic confinement and the curbing of non-essential economic activities, especially in sectors such as transportation, retail and tourism, which in turn led to a decrease in energy consumption.

Governments have responded to this with different packages of measures to deal with the aftermath of the crisis, such as reduced income due to the fall in international oil prices, in the case of exporting countries, which is contrasted with a reduction in the energy bill for oil importers.

 

The covid-19 pandemic has unleashed a wave of social and economic effects around the world, and to face them, governments have responded with different policies. Among the hardest hit in the developing South are informal workers, like the shoe polisher in the picture, in Mexico City. Credit: Emilio Godoy

 

Rachel Bendayan, Parliamentary Secretary for Small Business, Export Promotion and International Trade, and Mairead Lavery, President and CEO of Canada’s export promotion agency (EDC), agreed that trade is key the to economic recovery.

“The pandemic should not be an excuse for protectionism, for placing barriers to free trade, or for leading countries to become more protectionist. We need a stable and predictable system,” Bendayan said during his participation in the Forum.

For his part, Lavery said that international trade has positive effects on investment, employment and prosperity.

“We need to ensure that all Canadians have access to the benefits of trade. We need to rebuild trust. The response in different countries is different and we have to analyze how they affect consumption, customers, the supply chain,” she said.

In his opinion, “the recovery will depend on the health situation in the world, it’s the predominant factor, and depending on the economic sector and the country concerned” and that opens an opportunity to adapt to electronic commerce and digitization of international processes.

Canada, the United States and Mexico make up one of the largest trading blocks in the world, the Mexico, the United States and Canada Agreement (T-MEC), which came into force last July and replaces the North American Free Trade Agreement, which has been in force since 1994.

But the trade disputes led by the right-wing government of Donald Trump, which is seeking re-election in the November 3rd presidential poll, cast a shadow over the initial steps of the agreement.

The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) projects that the largest contractions in the region’s exports would be to the United States (32 percent) and within the region itself (28 percent).

In contrast, China, the region’s second largest trading partner and a country that keeps the coronavirus under control, increased its gross domestic product (GDP) by 4.9 percent year-on-year during the third quarter of 2020, although it is still too early to predict whether the Asian giant can be the global powerhouse, as it was after the financial crisis of 2008.

Manzano stated that international cooperation is the only tool to face the situation, threatened by nationalism, import substitution, protectionism and populist policies of several countries.

“There are two things that intersect with international trade and investment: the pandemic and frictions between the United States and China,” he said.

For this reason, he said, “we need to be prepared to continue injecting money into monetary and fiscal policies, educating SMEs to work in the digital world, without forgetting the environmental impact. The recovery packages will offer opportunities for sustainability”.

The Argentine investor insisted that there must be government support for salaries, digital training, bringing value chains closer to producing countries, and government backing for the transformation of small and medium enterprises.

During the 75th General Assembly of the United Nations (UN), Costa Rica’s president, Carlos Alvarado, presented in September the proposal to create the “Fund to Relieve the Economy covid-19”, an international solidarity effort in the face of the economic recession caused by the pandemic and an instrument to promote a sustainable recovery.

In addition, Mexico is promoting an UN Extraordinary General Assembly in 2021 to agree on the necessary actions for economic recovery and to reduce the social impact of the current crisis, in the post-pandemic phase.

In a session on global manufacturing and the future of globalization, Christiana Riley, executive director for the Americas at the German Deutsche Bank and member of its Board of Directors, indicated that the differences in income between countries are “structural” and need government intervention at the domestic and international levels.

“The private sector can finance much of what is needed to meet the Sustainable Development Goals (SDGs). Governments and financial institutions can be intermediaries between sources of capital and sustainable projects,” she said.

 

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