CAPE TOWN - Global trade has been more resilient during the Covid-19 pandemic than the 2008-09 global financial crisis, says the WTO in its latest World Trade Report 2021 – effectively the annual report card on the state of world trade, multilateral cooperation and global trading system.
During the crisis, global trade touched US$4.8 trillion while during the pandemic it reached US$6.2 trillion (roughly R1.1 trillion), despite the economic, health and social impacts, especially disruptions in supply chain.
In 2020, says the Report, the value of global trade in goods and services fell by 9.6%, while global GDP fell by 3.3%, in the most severe recession since World War II.
Global economic output is projected to recover by 5.3% in 2021 - partly due to the robust recovery in merchandise trade, set to rise by 8% in 2021, albeit trade in services continues to remain depressed.
The report explores the relationship between global trade and economic resilience, which WTO defines “as the ability of a system, including households, firms, and governments, to prevent and prepare for, cope with and recover from shocks.”
Despite lockdowns, retrenchments, rise in poverty and inequality, and devastating health consequences, goods continued to flow across borders, and many economies are gradually beginning to recover.
“The global trading system,” maintains Dr Ngozi Okonjo-Iweala, Director-General of WTO, “has been a source of flexibility, diversification and strength during the pandemic, helping countries cope by facilitating access to critical medical supplies, food and consumer goods, and by supporting their economic recovery. Once shocks begin to stabilize or dissipate, trade can accelerate economic recovery both in imports and exports.”
For Africa, the importance of a trade and investment-led recovery cannot be overstated. At the recent Intra-African Trade Fair 2021 in Durban, organised by the AU and Afreximbank, there was an inflated buzz about the African Continental Free Trade Agreement (AfCFTA), in the words of President Cyril Ramaphosa “unlocking Africa’s economic potential, enabling greater cross-border trading and developing industrial capacity which will take advantage of the continent’s natural wealth.”
At best, AfCFTA is a work in progress faced with huge structural, legal, tariff and resource challenges, as manifested by the woeful level of Intra-Africa trade.
The UN Economic Commission for Africa estimates that the continent, for instance, imports 94% of its pharmaceutical and medicine needs at an annual cost of US$16bn.
Ramaphosa’s clarion call that “trade is built on a bedrock of investment” puts down a marker for the fourth South Africa Investment Conference scheduled in Johannesburg in March 2022. With South African GDP growth projected to revert to pre-pandemic norm at 1.7% over the next three years, following the 6.4% contraction in 2020 and the projected rebound of 5.1% in 2021, Ramaphosa is putting much weight on increased trade and the role of AfCFTA to leverage exports, in addition to fiscal and structural reforms.
South African exports, says WTO, showed resilience during the pandemic peak in 2020 totalling US$85.83bn – declining by 5%, while imports declined by a whopping 22% to US$84.1bn, leaving a trade surplus of US$1.8bn.
The EU and China were by far the largest export and import partners. However, trade in commercial services, both exports and imports declined worryingly by 50% to US$7.24bn and by 38% to US$9.6bn in 2020 respectively.
Economic recovery in Africa will depend on access to vaccines and their timely roll out. WHO data released last week shows that only 27% of health workers in Africa have been fully vaccinated against Covid-19, leaving the bulk of the workforce against the pandemic unprotected. As vaccine supply picks up, 330m doses from the COVAX Facility to date, addressing uptake bottlenecks and accelerating rollout become more critical.
Ramaphosa’s assertion that “AfCFTA will provide new export opportunities for ‘Made in Africa’ products and enable member countries to trade with each other without tariffs or other hindrances,” is an aspiration too far even for his erstwhile trade scion, Wamkele Mene, the Uitenhage-born secretary general of AfCFTA.
“Unless African countries,” warns WTO, “harmonize their regulatory frameworks and fully commit to an integrated market, the continent will continue to be marginalized with regard to dynamic global markets and will continue to encounter difficulties. For AfCFTA to fly, digital infrastructure, both to undergird the financial and logistical trade of analogue goods, and to support tradeable digital services, urgently needs to be prioritized.”
“Made in Africa”, admirable as it is, cannot be a panacea and is often a double-edged sword dependent on intra-African investment and tariff-free access to markets. Many countries, after initially imposing export restrictions to preserve domestic supplies and promote “made-at-home” solutions, ended up reversing them.
The COP26 ‘Glasgow Climate Pact’ and initiatives to comply with the 205 Net Zero carbon emission ambition of the Paris Agreement have shifted focus on climate change and natural disasters. Trade can contribute to increased environmental risks, including deforestation, intensive farming and climate change. But it can also mitigate the risk of climate change by facilitating the adoption and deployment of environmental goods, services and technologies, including clean and renewable energy.
The total economic cost caused by natural disasters between 1980-2020 amounted to US$3.6 trillion. Some 26m people fall into poverty every year because of natural hazards, including floods, pest invasions and droughts.
Nothing better exemplified technology’s role in re-inventing and “Covid-proofing” many aspects of global trade than the explosion of e-commerce.
With stores closing and people staying indoors, says WTO, consumers embraced online shopping on a massive scale. The growth of global e-commerce retail sales accelerated during the pandemic from US3,354bn in 2019 to US$4,280 in 2020.
Here Africa, with the world’s highest adoption of mobile money services and mobile contracts with a $2bn global value of daily transactions, is in a pole position to leverage its first mover advantage!
Parker is an economist and writer based in London
Cape Times