tralac’s Daily News selection
tralac’s Special Edition Newsletter on COVID-19 was posted today: explore nine articles, touching on various trade policy issues and sectors (pdf)
Explore tralac’s COVID-19 Resources Page
Explore the IMF’s Special Series on COVID-19
WTO analysis posted today: Trade set to plunge as COVID-19 pandemic upends global economy
World trade is expected to fall by between 13% and 32% in 2020 as the COVID 19 pandemic disrupts normal economic activity and life around the world, according to a new analysis by the WTO. The wide range of possibilities for the predicted decline is explained by the unprecedented nature of this health crisis and the uncertainty around its precise economic impact. But WTO economists believe the decline will likely exceed the trade slump brought on by the global financial crisis of 2008‑09 (Chart 1). Estimates of the expected recovery in 2021 are equally uncertain, with outcomes depending largely on the duration of the outbreak and the effectiveness of the policy responses.
Future trade performance as summarized in Table 1 is thus best understood in terms of two distinct scenarios: (i) a relatively optimistic scenario, with a sharp drop in trade followed by a recovery starting in the second half of 2020, and (ii) a more pessimistic scenario with a steeper initial decline and a more prolonged and incomplete recovery. These should be viewed as explorations of different possible trajectories for the crisis rather than specific predictions of future developments. Actual outcomes could easily be outside of this range, either on the upside or the downside.
Services trade may be the component of world trade most directly affected by COVID-19 through the imposition of transport and travel restrictions and the closure of many retail and hospitality establishments. Services are not included in the WTO’s merchandise trade forecast, but most trade in goods would be impossible without them (e.g. transport). Unlike goods, there are no inventories of services to be drawn down today and restocked at a later stage. As a result, declines in services trade during the pandemic may be lost forever. Services are also interconnected, with air transport enabling an ecosystem of other cultural, sporting and recreational activities. However, some services may benefit from the crisis. This is true of information technology services, demand for which has boomed as companies try to enable employees to work from home and people socialise remotely. [UNCTAD: International trade in services, 2019 Quarter 4 (pdf)]
World Bank analysis posted today: pdf Trade responses to the COVID-19 crisis in Africa (277 KB)
Countries in Africa should strive to maintain trade flows during the crisis to secure access to medical goods and services, and food and other essential items such as farm inputs. This requires keeping borders open to the largest extent possible and avoiding measures such as export bans or taxes. Countries should take action to reduce taxes and duties on trade, to streamline trade procedures and to support transport and logistics services in maintaining cross-border and international value chains. By joining together, countries in Africa can implement coordinated trade measures that result in better responses to the crisis. Joint actions include bilateral cooperation on border management, joint information campaigns, coordinated purchasing of medical equipment, partnering on repurposing production to produce medical goods, and management of health specialists to deal with emerging hotspots on the continent. Development partners should support coordinated actions by regional institutions through analysis, technical assistance and perhaps operational projects. Identifying the appropriate level (sub-national, national, regional, continental) for interventions and the most effective institutions, in terms of relevance and capacity, to manage coordinated actions will be essential. There are a range of areas where coordination on trade and COVID-19 in Africa would support a superior response relative to countries acting alone, including coordinating:
To enhance management of border crossings during the crisis. As with the Ebola outbreak, strong coordination between governments and officials at the local level can allow for borders to remain open for trade while instituting effective measures to contain the spread of infectious diseases. Governments can share strategies and coordinate measures for border management and virus containment. For example, in the Ebola crisis the Government of Rwanda shared with counterparts in the DRC the design of automated washing stations which allowed for much faster procurement of these mechanisms in the DRC.
Establishing COVID-19 “container clinics” along Africa’s transport corridors. COVID-19 has spread through the largest nodes in the global transport network. One of the lessons from the HIV/AIDS epidemic in Africa was that it spread along the main transport corridors. In response, the World Bank and other partners designed corridor-centric interventions targeting drivers (e.g. AbidjanLagos Corridor Organization in West Africa) – including setting up container clinics – as they are prone to become critical vectors of transmission. [The authors: Paul Brenton, Vicky Chemutai]
Domestic, interstate and international travel have proven to be one of the main ways the COVID-19 virus is spreading among communities, nations and globally. There is therefore a need to limit travelling and freight movements to the absolutely essential only. The objectives of these guidelines are to:
Limit the spread of COVID-19 through transport across borders
Facilitate the implementation of transport related national COVID19 measures in cross border transportation
Facilitate interstate flow of essential goods such as fuel, food, medicines and agricultural inputs
Limit unnecessary and mass movement of passengers across borders, and
Balance, align, harmonise and coordinate COVID-19 response measures with the requirements for trade and transport facilitation.
Southern Africa Business Council: pdf Communique on responses to COVID-19 (77 KB)
The Directors of National Private Sector Apex Body and Regional Business Body Associations in the SADC region held an online meeting on 1 April 2020 to discuss and exchange notes on the regional and national preparedness and responses to the outbreak of Coronavirus disease (COVID-19) in the SADC region and to recommend government and private sector interventions at national and regional level to minimize economic impact during the Covid-19 emergency and support the quick recovery of businesses post the Covid-19 emergency. Recommendations on cross-border logistics:
Utilize rail as a preferred transport solution to minimize human contact and quarantine dwell time during the movement of regional cargo.
Facilitate easy visa clearance for truck drivers moving essential cargo across the region.
Prioritize clearance of essential cargo freight at border posts and protection of drivers.
Introduce duty free facilities for importation of COVID-19 related equipment and materials.
Waiver storage fees for bonded products held indefinitely during the period of lock down.
Essential border stations shall remain open to facilitate the movement of cargo subject to the customs laws and guidelines.
Customs warehouses and facilities must remain open to enable clearance of cargo subject to the customs guidelines.
Customs at regional level to urgently create interface between neighboring/corridor countries to reduce paperwork delays at entry points and reduce driver idle time at borders.
Stringent measures taken by a corridor country should be informed in advance to neighboring/corridor countries for contingency and pre alert measures to be provided to service providers (freight forwarders and transporters).
Urge principles of shipping businesses to consider waiving demurrage costs.
Globally, the livelihoods of some 65.5 million people are dependent on the aviation industry, including sectors such as travel and tourism. Among these are 2.7 million airlines jobs. In a scenario of severe travel restrictions lasting for three months, IATA research calculates that 25 million jobs in aviation and related sectors are endangered across the world: 11.2 million jobs in Asia-Pacific, 5.6 million jobs in Europe, 2.9 million jobs in Latin America, 2.0 million jobs in North America, 2.0 million jobs in Africa, and 0.9 million jobs in the Middle East. In the same scenario, airlines are expected to see full year passenger revenues fall by $252bn (-44%) in 2020 compared to 2019. The second quarter is the most critical with demand falling 70% at its worst point, and airlines burning through $61bn in cash.
Stefan Dercon: Ebola-era lessons for the private sector (IFC Insights)
From my experience with the Ebola crisis in Sierra Leone and Liberia, I saw how important it is to collect data to discover how the crisis is working through the economy, and then respond quickly and flexibly to that data. For example, in Sierra Leone, we saw the farmers were not really affected in the way many had predicted, and agricultural markets remained intact while the urban sector was more strongly affected. This real-time data produced better responses from the public sector but also from the private sector, showing where opportunities were. Avoiding the “grand gesture” in favor of a tailored action informed by data is key. We can do this now, better than often is assumed, because of new ways of collecting information—including telephone surveys, mobile phone data, and other digital data. The message to the private sector is to document locally in developing countries how the value chains are affected and where the biggest bottlenecks are, and respond by changing your focus as you go.
Under normal circumstances competition is needed in markets to keep prices low, but with the COVID-19 crisis wreaking havoc on markets the world over, collaboration has taken precedence. The pandemic’s sweeping economic impact has left governments balancing between defending competition, so prices do not become prohibitive, and granting exemptions to competition rules to ensure the survival of entire economic sectors. UNCTAD recommends that governments take five key actions to protect competition in the markets during the COVID-19 crisis:
Ensure equal conditions between companies for a level playing field that remains relevant even in a crisis period
Temporarily allow cooperation arrangements necessary to ensure the supply and distribution of affordable products to all consumers to prevent a shortage of essential products
Closely monitor markets of essential products such as disinfectants, masks and gels to ensure their availability, if necessary, through temporary prices caps to protect the health of consumers during the pandemic
Vigorously enforce competition law against companies that take advantage of the crisis by creating cartels or abusing their market power, and
Adapt competition procedures and deadlines to the extraordinary circumstances created by the pandemic. [UNCTAD: Firmer action needed to better protect consumers]