Trade policy: fleshing out the COVID-19 response
The G20’s collective trade policy response to COVID-19 has signalled fresh tactics to global crises, but a lack of clarity of what its promises entail could hinder progress
Actions speak louder than words. Yet, when faced with a crisis, many policymakers have few qualms about abandoning the commercial level playing field. For sure, there are some voices within government – often found in finance and trade ministries – that warn of the perils of turning inwards and the need for multilateral trade rules.
However, invocations to resist protectionism are honoured more in the breach than in the observance. Yes, not many countries have resorted to 1930s-style tariff increases, but there is much more to protectionism than taxing imports.
Such as it is, the G20’s collective trade policy response to the COVID-19 crisis has differed from its response to the global financial crisis a decade ago. Then, G20 members were aligned sufficiently that they publicly eschewed protectionism. Beneath their statements lay a subtle understanding of what this protectionist pledge actually meant – and it was less far-reaching than many observers realised.
In addition, this pledge was to be monitored by the World Trade Organization. This well-intentioned move to hold G20 governments to account became a matryoshka doll – as more G20 trade ministries and their diplomats starved the WTO of information, and its G20 monitoring reports diminished in content and impact. Even before the shift to populist politics, senior trade officials from free trade–leaning G20 members warned that highlighting the protectionist pledge set the G20 up for failure.
A new approach
Rather than dwell on the downside, in fact, burying that legacy allows for a new G20 approach. Elements can be found in the Extraordinary G20 Leaders’ Statement on COVID-19 in March 2020. In their attempt to “address international trade disruptions” leaders stated: “We commit to continue working together to facilitate international trade and coordinate responses in ways that avoid unnecessary interference with international traffic and trade. Emergency measures aimed at protecting health will be targeted, proportionate, transparent and temporary.”
By May, G20 trade ministers had committed, in the annex to their statement, to “ensure that any emergency trade measures designed to tackle COVID-19, including export restrictions on vital medical supplies and equipment and other essential goods and services, … are targeted, proportionate, transparent, temporary, reflect our interest in protecting the most vulnerable, do not create unnecessary barriers to trade or disruption to global supply chains and are consistent with WTO rules”. They pledged to “refrain from introducing export restrictions on agricultural products, including on products purchased for non-commercial humanitarian purposes, and avoid unnecessary food stockpiling, without prejudice to domestic food security, consistent with national requirements”.
Definition required
There appears, however, to be no understanding of what “targeted”, “proportionate”, “transparency” and “temporary” mean in practice. G20 leaders should task their trade ministers with translating these key terms into an operational mandate over the next 12 months.
Moreover, G20 trade ministers should devise a process that encourages governments to unwind the export curbs on medical goods and food that have been put in place during the pandemic. According to the Global Trade Alert–World Bank–European University Institute monitoring initiative, governments have imposed 186 export controls on medical goods and medicines this year. By the time G20 leaders meet in November 2020, at least 108 will still be in place. Matters are slightly better in the food sector: 49 export curbs were put in place and 23 will remain when G20 leaders meet. Still, there are many trade restraints to be unwound and G20 trade ministers should be told to figure out how to pull this off.
It speaks volumes about governments’ commitments to transparency, worldwide and within the G20, that this tripartite monitoring initiative collected twice as much information on trade policy changes in the sensitive medical goods and foods sectors than the Geneva-based international organisations. To fix this, G20 leaders should ask the WTO to publish credible information on emergency measures without seeking ‘verification’ from national capitals. This step will give the WTO a much-needed shot in the arm – and would signal the trust the G20 is placing in the next WTO director-general.
The commercial fallout from the COVID-19 pandemic also requires attention, a matter barely mentioned in the G20 trade statement from May. G20 leaders should instruct their trade ministers to execute a work programme that encourages the adoption of economic policy support measures that limit distortions to global commerce. There are already worrying examples of firms seeking commercial advantage from pandemic-era support measures. An active, effective state need not be a mercantilist one.
