The Great Trade Collapse (?) · 2020-04-28 · Co-Director, Centre of Trade and Economic...
Transcript of The Great Trade Collapse (?) · 2020-04-28 · Co-Director, Centre of Trade and Economic...
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RICHARD BALDWIN
Professor, International Economics,
Co-Director, Centre of Trade and
Economic Integration, The Graduate
Institute
SIMON EVENETT
Professor, International Trade and Economic
Development, University of St. Gallen
ROBERT KOOPMAN
Chief Economist and Director,
Economic Research and Statistics
Division, World Trade Organization
ANABEL GONZALEZ
Nonresident senior fellow, Peterson Institute for
International Economics
The Great Trade Collapse (?)24 April 2020, 16:30 - 17:30
WEBINAR
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The Great Trade Collapse (?)24 April 2020, 16:30 - 17:30
WEBINAR
ROBERT KOOPMAN
Chief Economist and Director, Economic Research and
Statistics Division, World Trade Organization
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The Great Trade Collapse?Bob Koopman
Chief Economist, WTO andAdjunct Professor, the Graduate Institute
April 24, 2020Most of the material in this presentation is taken from the WTO’s Trade
Forecast of April 8, 2020 (found here https://www.wto.org/english/news_e/pres20_e/pr855_e.htm) and
particularly the background document on methodology (found here https://www.wto.org/english/news_e/pres20_e/methodpr855_e.pdf) and authored byEddy Bekkers, Alexander Keck, Robert Koopman and Coleman
Nee.
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WTO EXPECTS SIGNIFICANT DECLINE IN GLOBAL TRADE FOR 2020 AND POTENTIAL FOR SLOW RECOVERY IN 2021
Chart 1 - World merchandise trade volume, 2000-2022 Index, 2015=100
Source: WTO Secretariat.
Chart 1: World merchandise trade volume, 2000-2022Index, 2015=100
Source: WTO Secretariat.
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Merchandise trade Optimistic scenario Pessimistic scenario
Trend 1990-2008 Trend 2011-2018
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Trade and Growth Relationship Has Changed Overtime: But for understandable reasons.
Recent relationship between trade and economic growth, 1990-2020(% change and ratio)
Sources: WTO Secretariat for merchandise trade volume, consensus estimates for real GDP at market exchange rates.
1.5
2.42.82.93.0
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1.71.6
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-0.2
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World trade volume growth (left) Higher elasticity scenario (left)
World GDP growth (left) Ratio of trade growth to GDP growth (right)
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Global average tariff around 8%, so trade cost increase equali to about 40% tariff hike in global average
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MITIGATING RISKS OF FUTURE PANDEMCS/CRISES?• Firms, Households, and Governments will need to evaluate risk vs. efficiency
trade offs:
• Risks for firms – inventories (from “just in time” to larger inventories for critical parts), supply chains (diversification), production (automation and digitization). It’s a risk vs. efficiency calculation for them.
• Governments – how to manage for demand spikes above average supply? Build and manage emergency stockpiles in ways that taxpayers/citizens can afford/accept = role for trade, flexible domestic production and/or international “insurance” agreements. Tracking and tracing. Uncertainty as to requirements of next pandemic/crisis (climate?) Again, risk vs. efficiency trade off.
• Households – remote work, privacy, ability to social distance and earn income, get critical services (education, health care, etc), and access/purchase necessary products while isolated.
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The Great Trade Collapse (?)24 April 2020, 16:30 - 17:30
WEBINAR
SIMON EVENETT
Professor, International Trade and Economic Development,
University of St. Gallen
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What trade distortions as trade slumps?
Lessons from the Global Financial Crisis
CTEI Webinar, Geneva, 24 April 2020
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Composition of trade distortions this year differs significantly
from 2009 and 2010
24/04/20 13
0%
10%
20%
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40%
50%
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90%
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2009 2010 2019 2020
Import tariff Export incentives Subsidies to import-competing firms Contingent trade protection Export limits Public procurement Rest
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2009 crisis response: Not the 1930s response.
More than a third of world trade affected
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0.9%
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Import tariff increases Subsidies to importcompeting firms
Export measures All trade distortions
PE
RC
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Any new protectionism will add to a significant installed base of
trade distortions
20/’04/20 15
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The Great Trade Collapse (?)24 April 2020, 16:30 - 17:30
WEBINAR
ANABEL GONZALEZ
Nonresident senior fellow, Peterson Institute for International
Economics
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THE GREAT TRADE COLLAPSETrade policies to fight, recover and rebuild
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CTEI, 24 April 2020
Anabel González
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ESTIMATED IMPACT OF COVID-19
ON GROWTH
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ESTIMATED IMPACT OF COVID-19
ON TRADE
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World merchandise trade volume, 2000-2022Index, 2015=100
Trade volume change 2019-2020 (%)
-13% Optimistic scenario
-32% Pessimistic scenario
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ESTIMATED IMPACT OF COVID-19
ON FDI
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Downward pressure of -30 to -40% expected during 2020-2021
Source: UNCTAD, 2020
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ESTIMATED IMPACT OF COVID-19
ON POVERTY
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49 million people will be pushed into
extreme poverty
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WHAT ROLE FOR TRADE POLICY
TO HELP FIGHT COVID-19?
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POLICY OUTCOME: Improved timely access to sufficient and affordable critical supplies
• Export restrictions hurt people in importing countries
• But they also hurt exporting countries:
• Increase prices• Discourage investment• Invite retaliation
• Past experience: 2007-08 food export restrictions increased prices and volatility
80 countries have imposed export restrictions. Way to go?
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WHAT ROLE FOR TRADE POLICY TO HELP
FIGHT COVID-19?
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Trade policy objectives Trade policy instruments & actions
• Reduce time and cost to trade
• Reduce trade policy uncertainty
• Reduce time and cost to entry into market
• Incentivize capacity expansion and increased production
• Facilitate cross-border movement of critical services and digital knowledge
• Reduce/eliminate tariffs on health and hygiene products
• Expedite customs inspection and release of goods (green lanes)
• Expand access to technical standards and expedite conformity assessment procedures
• Promote investment, including through subsidies and other arrangements
• Refrain from ”Buy National” policies• Allow temporary movement of health professionals• Share knowledge via e-health and foster other
digital interactions• Ensure intellectual property regimes allow access to
new technologies, vaccines and drugs for all
POLICY OUTCOME: Improved timely access to sufficient and affordable critical supplies
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• Keep supply chains moving
• … and trade lanes open
• Keep trade finance flowing
• Enable FDIexpansion
• Support MSMEsin trade
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WHAT ROLE FOR TRADE POLICY
TO HELP RECOVER?
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WHAT ROLE FOR TRADE POLICY TO HELP
REBUILD THE FUTURE?
Areas where new/revised disciplines will
become even more pressing:
• Digital trade
• Subsidies
• Stockpiling
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THE IMPERATIVE OF GLOBAL
TRADE COOPERATION
WHY?
• Avoid politically appealing but self-defeating trade policies
• Facilitate reversal of damaging measures
• Enhance trade frameworks for managing crisis
• Address dramatic changes brought about by COVID-19 (and old problems)
HOW?
• If global cooperation is impossible, willing countries should step up
– New Zealand-Singapore open plurilateral initiative to ensure free flow of essential goods
– Joint statement on open and predictable trade in agri-food products
WHAT?
• Standstill and rollback of current export bans and restrictions on new measures
• Agreement on health-related products (tariffs, non-tariff barriers, market entry)
• Common framework on cross-border moment of health professionals
• Collective understanding on access to new vaccines and drugs
WHERE?
• WTO is the natural forum … but things need to change
– Starting with increased transparency and improved operating practices
WHEN?
• COVID-19 does not allow for the waste of time
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FINAL COMMENT
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International collaboration on trade has unraveled to the detriment of prosperity. Now is the chance to seize on the crisis to sow the seeds for renewed global trade cooperation
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RICHARD BALDWIN
Professor, International Economics, Co-Director, Centre of
Trade and Economic Integration, The Graduate Institute
The Great Trade Collapse (?)24 April 2020, 16:30 - 17:30
WEBINAR
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THE GREATER TRADE COLLAPSE?
LEARNINGS FROM THE 2008-09 COLLAPSE
Richard Baldwin
Graduate Institute, Geneva
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Outline of talk
1. The 2008-2009 “Great Trade Collapse”The Great Trade Collapse: Causes, Consequences and Prospects, A VoxEU.org Publication, 27 November 2009. https://voxeu.org/epubs/cepr-reports/great-trade-collapse-causes-consequences-and-prospects, Baldwin, Richard (ed.)
2. Why this one is different
3. Supply-chain contagion & re-contagion waves
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The Great Trade Collapse: Historical perspective
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Sudden & synchronised (Lehman Bros 2008 Q3)
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All goods sectors were hit
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Commodities were hit harder (price v volume)
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This time is different
As in 2008-09 mostly demand side
New elements:
1. Supply & demand
2. Hit all the biggest traders/manuf within 2 months
3. Manufacturing more integrated
The Greater Trade Collapse of 2020, Richard Baldwin 07 April 2020 https://voxeu.org/article/greater-trade-collapse-2020
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Recession: unavoidable public health measure (in rich nations)
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Containment policies = Unusual recession
Keeping the lights on: Economic medicine for a medical shock, Baldwin 13 March 2020https://voxeu.org/article/how-should-we-think-about-containing-covid-19-economic-crisis
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This a WAY far from over
Simple maths
𝛽 =infectious contacts per period
1. 𝑛𝑒𝑤 𝑐𝑎𝑠𝑒𝑠 = 𝛽 𝐼𝑆
𝑁
2. 𝑛𝑒𝑤 𝑟𝑒𝑐𝑜𝑣𝑒𝑟𝑖𝑒𝑠 = 𝛾𝐼
3. Top of infections when ‘new cases’ = ‘new recoveries’
𝑆
𝑁=𝛾
𝛽≡
1
𝑅04. R0 from 2 to 3?
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This a WAY far from over
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Illustration of medical and supply-chain contagion and reinfection
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1. Higher ‘exposure’ to imported inputs
2. Asynchronous supply shocks
Difference to 2008-09
Source: https://voxeu.org/article/covid-concussion-and-supply-chain-contagion-waves (calculations by Rebecca Freeman
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End –thanks for listening