The post COVID-19 world: Economic nationalism triumphant?
The new coronavirus has travelled far and fast, infecting more than 8.7 million people and killing more than 460,000. One after another, economies have gone into lockdown to slow down the spread of the disease. The combined supply and demand shocks have ravaged the world economy with the most severe downturn since the Great Depression; anticipated drops to international trade and investment flows of 30% and 40%, respectively; and unemployment spikes in many countries. The pandemic has cost lives and livelihoods and has erased the chances of returning to the status quo ante, but it has also brought little clarity regarding what kind of international order it will usher in. Is the future one of de-globalization, decoupling, and reshoring of economic activity?
The pandemic hit an already wounded multilateral trading system. The chances that the World Trade Organisation (WTO) can deliver a multilateral round of trade negotiations to slash tariffs across the board and update the trade and investment rulebook are nil. But the WTO has also lost its central role as arbiter of trade disputes among its members.
Mireya Solís outlines in her recent article that COVID-19’s impact on the international trading system is twofold. It has reinforced existing trends such as the deceleration and now drop in the volume of international trade, the rise of economic security as governments expand their toolkit to restrict trade and investment flows, and it has laid bare the fallout in U.S.-China relations.
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