From UPSC perspective, the following things are important :
Prelims level : Not much
Mains level : Paper 3- Global trade in the post-COVID-19 world
Past experiences suggest there is hope for global trade recovery in the post-COVID-19 world.
Impact of pandemic on the global and Indian economy
- In the last year, the devastating impact of COVID-19 pandemic has shrunk the world economy by 4.4% and global trade by 5.3%.
- Job losses in the world have been estimated to be to the tune of 75 million.
- India’s GDP contracted by 7.3% according to the National Statistical Office.
- About 10 million jobs were lost in India according to the Centre for Monitoring Indian Economy Pvt. Ltd.
- Around the world, countries have responded to pandemic-induced shortages with protectionist reactions and nationalist aspirations.
- Such a response has the potential to disrupt complex cross-border supply chains.
How economic shocks in the past laid foundation for institutional changes
- The Second World War was responsible for the creation of the Bretton Woods Institutions such as World Bank and International Monetary Fund (IMF) and International Trade Organisation (ITO) were created to help rebuild the shattered post-war economy.
- The General Agreement on Tariffs and Trade (GATT) was negotiated in 1947 as a means to reducing barriers to international trade.
- The oil shocks of the 1970s led to the establishment of the International Energy Agency (IEA) in 1974 and went on to create awareness on the need for global energy security.
- The financial crisis of 2008 led to the G20 Leaders Summit, an elevation from the G20 Finance Ministers forum in 1999.
- Increase in global trade: As a result of these developments global trade increased from a mere $60.80 billion in 1950 to $2,049 billion in 1980; $6,452 billion in 2000; $19,014 billion in 2019.
Changes in the global trade in post-Covid world
- Financial buffers due to stimulus package: Stimulus packages and forced savings in several countries in the last year have created financial buffers.
- Resilient supply chain: Global supply chains are expected to be resilient to help revive manufacturing with lower production costs, induce investments and promote technology transfers.
- Anti-dumping measures at WTO: In a post COVID-19 world, members of the World Trade Organization are expected to make rules to discipline errant nations that are known to dumping goods and erecting trade barriers through multilateral rules.
- Deeper economic integration through trade arrangements: Mutually beneficial trade arrangements that seek deeper economic integration will be entered into at the bilateral and regional levels.
- Dominance of technology: Countries that harness technology are expected to dominate international trade in future with a transformational impact on the global economy.
- Businesses will aim to harness data for innovation to remain ahead of the curve in a post-COVID-19 world.
Way forward for India
- The projections of the International Monetary Fund for India’s economic growth ahead are positive and in line with the general trends world-wide.
- Focus on value-added manufacturing: Building an ecosystem that incentivises value-added manufacturing and technology-induced finished products should form a part of our long-term strategy.
- Production Linked Incentive Scheme (PLI) schemes, if carefully nurtured, could lead the industry on that path.
- Support MSMEs: Supporting MSMEs with cheaper input costs, including raw material and intermediate goods would help sustain them with job creation at the local level.
- Developing a synergistic relationship between the big industry and MSMEs is at the core of a successful Atmanirbhar Bharat.
- Skill upgradation: Skills upgradation to global standards should form a part of India’s strategy in a post-COVID-19 world.
The patterns in the past leave much hope for optimism for global trade in the post-COVID-19 crisis in the collective belief that international trade is vital for development and prosperity.