The Covid-19 pandemic has had an unprecedented impact on global trade. As governments across the world scrambled to prevent a rapidly unfolding crisis at home, they were swift to impose travel bans, place strict lockdowns, and even introduce export restrictions on food and medical supplies in order to help meet domestic demand. The international flows of products and services have ground almost to a halt, causing massive disruption to global trade. A shortage in some of the worst affected countries of vital PPE equipment, ventilators, sanitizers, and raw materials used to produce end-user products so vital to combating the crisis led to widespread concerns about the effectiveness of global supply chains and more importantly an 'overdependence' on imports from abroad.
Growing trade restrictions
The WTO estimated that 41% of countries and customs territories worldwide introduced export prohibitions, or restrictions as a result of the Covid-19 pandemic. In a swift counter-measure, world leaders pledged in a statement issued during a G20 Extraordinary Virtual Leaders’ Summit hosted by the Saudi G20 Presidency “to ensure the flow of vital medical supplies, critical agricultural products” and “resolve disruptions to the global supply chains”. The meeting, which was chaired by King Salman Bin Abdulaziz Al Saud, was organised with a view to reiterate the G20’s commitment to a free and fair trade and investment environment, and to keep markets open.
For decades we have seen proponents and critics of trade globalisation – each on opposing sides – argue in favour, or against the liberalisation of trade, each with their own reasons. It is a debate that has been raging for decades, particularly in the second half of the last century, which only led the world to embrace open and free trade having learned valuable lessons from the past. Sadly, the crisis facing the world today only serves to remind us of those same lessons.
Why open trade matters
The coronavirus crisis has demonstrated like no other the need for cross-border cooperation, resource sharing and harmonisation of regulations to help countries unite their efforts against the virus. Due to the coronavirus pandemic demand for essential hygiene products and medical equipment has spiked up globally, and well-functioning value chains can help to quickly ramp up production, while mitigating price increases. On the other hand, a lack of international cooperation and imposition of tariffs and other trade barriers risk impeding the urgently required supply of vital goods in parts of the globe.
For example, without the necessary consumables such as face masks, gowns and gloves produced in middle-income countries, major developed economies will struggle to prevent infections, especially among medical staff. On the other hand, a lack of more complex equipment like lifesaving ventilators made primarily by high-income exporters will put more lives at risk in developing economies. The same principle applies to the chemicals manufactured by producers in the GCC and used as intermediary raw materials to produce medical and hygiene equipment that are absolutely crucial to fighting the Covid-19 pandemic.
Market cooperation will be essential
No one ever wins from closed market policies. On the contrary, protectionism always impoverishes a nation, with consumers often paying the highest price. Trade barriers raise prices, reduce market competitiveness, which increases productivity, and leaves a country more dependent on vulnerable and inefficient industries. Instead governments should focus on building bridges and improving their knowhow through knowledge sharing and leveraging inter-firm relations which in turn can help speed up responsiveness to the crisis.
Furthermore, working towards a coordinated action and improving supply chain efficiencies can help contain the disease and build resilience against future crises. Facilitating trade logistics and fast-tracking customs clearance of not only final products but also vital intermediates will also be important. In the face of this deadly pandemic, the world must come together and work effectively towards the same goal – defeat the virus and save lives.
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