Wednesday, May 18, 2022

A more connected global economy is a double-edged sword, says WTO

In its annual report on the state of global trade, the WTO has observed that the increasing interconnectedness of the world’s economies is a double-edged sword.

While this globalization makes individual countries more vulnerable to short-term shocks, the World Trade Organization says, it allows them to recover much more quickly than before.

Among other things, the report found that global trade in trade has already risen above pre-pandemic levels, after declining sharply in the early months of the coronavirus pandemic. By mid-2022, trade volume will have caught up with the pre-pandemic trend, meaning that the volume of goods bought and sold internationally will be at the same level as economists predicted if a pandemic were to occur. Wouldn’t.

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In the preface to the report, WTO Director-General Dr. Ngozi Okonjo-Iwela said that the global response to the COVID-19 pandemic is an example of both the challenges and the benefits of increased globalisation.

FILE – At Ivato International Airport in Antananarivo, Madagascar, on May 8, 2021, a worker handles boxes of COVID-19 vaccines, which are distributed as part of the COVAX Equitable Immunization Delivery Program.

“The deep interconnections of travel, trade and financial flows that characterized our era allowed the novel coronavirus and its associated economic shocks to spread across the globe in a matter of weeks. Months, even months, before the first pandemics became global. That used to take years too,” she wrote. ,

“Nevertheless, globalization was also central to why this virus was found with vaccines in record time. Scientists were able to share ideas and technology across borders, through public and private funding for research and development.” Supported,” she wrote. “As new vaccines proved safe and effective, supply chains that cut across hundreds of sites in a dozen or more countries came together to provide the specialized inputs and capital goods needed for large-scale vaccine production – all within a year. inside.”

shortage in america

Scott Lincicom, a senior fellow in economic studies at the Cato Institute and frequent author on trade issues, told VOA that the WTO’s analysis is up for scrutiny.

“We’ve seen this drama during the pandemic,” Linsicom said. “Companies that were more domestically oriented didn’t really do better than companies that were more globally diversified.”

In the United States, he said, some of the most significant reductions and increases in prices involve goods that the United States largely produces on its own, such as pickup trucks and food.

“Pickup trucks were in more scarcity than sedans last year, and we import more sedans,” he said. “If you look at food production this year, most of our food production is domestic. But some of the biggest shortages and price increases that we’re seeing are on food.”

stable interconnection

The report also found that the more diverse a country’s trade relations were with the rest of the world, the less likely they were to experience significant economic instability.

Based on data collected by the International Monetary Fund, the authors established that countries with high levels of trade diversification in 2008 were measured as a deviation from average annual GDP over the 10-year period ending in 2018. , very little volatility may be encountered. ,

“Trade allows a country to diversify its sources of demand and supply, thereby reducing country-specific demand and supply shocks,” the report said. “For example, when a country has multiple trading partners, a domestic recession or a recession in any of its trading partners translates into a small demand shock for its producers when trade is more limited.”

‘Reshoring’ production may not be helpful

The report also warns against the temptation of “reshoring”, that is, some countries striving to become self-reliant in key industries.

Especially in the early months of the pandemic, there were calls in many countries, including the United States, to reduce reliance on foreign suppliers for critical medical equipment, personal protective gear and vaccine components.

In another example, former President Donald Trump imposed tariffs on foreign-made steel in an effort to force a return to steel production in the United States, saying that being self-sufficient in the production of the metal was necessary for national security.

FILE - Jose Mata grinds steel pipe at the Borusan Mannesman plant on April 23, 2018 in Baytown, Texas.

FILE – Jose Mata grinds steel pipe at the Borusan Mannesman plant on April 23, 2018 in Baytown, Texas.

Trump’s effort was ultimately unsuccessful, and if the report is correct, it may be a reason for American companies to use steel to be grateful.

The report warned, “Restricting trade and promoting national self-reliance almost inevitably makes national economies less efficient in the long run, as such policies ultimately drive up the prices of goods and services and increase the cost of products, components and services.” restrict access to technologies.”

Lincicom said the ultimate goal of the WTO is to maintain healthy economic relations across borders to prevent countries from resuming production.

“The WTO is responding to a very significant threat from some policymakers, whose knee-jerk response to the pandemic is to employ more protectionism,” he said. “In terms of economics, it’s a bad idea. But at the same time, I think in terms of geopolitics, the more countries turn inward, the more likely there is to be some sort of tension in the future ”

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This article is republished from – Voa News – Read the – original article.

Nation World News Desk
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