World Bank

Recent World Bank and OECD forecasts show deeper 2020 economic contraction, need for increased global cooperation

The year 2020 is now forecast to result in the sharpest economic contraction since World War II. This is the first recession in 150 years flowing entirely from a health pandemic. With data collected over the last five and a half months (Dec. 31 – June 13), confirmed COVID-19 cases are more than 7.625 million globally and total deaths are more than 425,000 (with both numbers viewed as significantly understated). The global trend line on new cases continues to rise as of June 13 while the number of reported deaths has declined from its peak and stabilized at a high rate.

The International Monetary Fund’s forecast for 2020 went from affirmative growth at the beginning of the year to a decline of 3.5% in April. A recent report from the World Bank now projects global GDP contraction of 5.2% while a June OECD report shows estimates of global GDP contraction of 6.0% if COVID-19 is limited to a “single-hit” scenario and 7.6% contraction if there is a second wave of COVID-19 cases in 2020. See World Bank, Global Economic Prospects, June 2020 at 4, Table 1.1, Real GDP, https://www.worldbank.org/en/publication/global-economic-prospects; OECD Economic Outlook, June 2020, at 13, Table 1.1, https://www.oecd-ilibrary.org/sites/0d1d1e2e-en/index.html?itemId=/content/publication/0d1d1e2e-en.

The OECD outlook data show for a single pass of COVID-19, declines for the world at 6.0%, the G20 at 5.7%, OECD at 7.5%, the U.S. at 7.3%, the Euro area at 9.1%, Japan at 6.0%, non-OECD at 4.6%, China at 2.6%, India at 3.7%, and Brazil at 7.4%. Id at 13, Table 1.1. The projections if there is a second wave of COVID-19 cases are significantly worse for all countries.

The OECD’s projection for the U.S. is for greater contraction than the recent estimate from the Federal Reserve of 6.5% in 2020. See, e.g., https://www.politico.com/news/2020/06/10/fed-economy-shrink-65-percent-2020-311212.

The World Bank’s estimates for 2020 are similar for some areas and lower for the United States (-6.1%) but shows China growing versus the OECD projected contraction. Here are the data for 2020 for selected countries from the World Bank publication:

United States -6.1%

Euro Area -9.1%

Japan -6.1%

China +1.0%

Indonesia 0.0%

Thailand -6.0%

Russia -6.0%

Turkey -3.8%

Poland -4.2%

Brazil -8.0%

Mexico -7.5%

Argentina -7.3%

Saudi Arabia -3.8%

Iran -5.3%

Egypt +3.0%

India -3.2%

Pakistan -2.6%

Bangladesh +1.6%

Nigeria -3.2%

South Africa -7.1%

Angola -4.0%

The World Bank and OECD also have different levels of trade contraction projected for 2020 in their June publications. The World Bank’s projection is for a contraction of 13.4% (page 4) while the OECD’s projection is for a contraction of 9.5% in 2020 (pae 13). These projections compare to the latest WTO projections of contractions between 13% and 32%. April 8, 2020, WTO press release, Trade set to pluge as COVID-19 pandemic upends global economy, https://www.wto.org/english/news_e/pres20_e/pr855_e.htm.

Foreward to the World Bank’s Global Economic Prospects

The World Bank’s recent report in its foreward by the Bank’s President David Malpass provides a stark summary of the challenges for many emerging markets and developing economies and the efforts of the World Bank in finding solutions. The foreward (pages xiii – xiv) is reproduced below:

Foreword

“The COVID-19 pandemic and the economic shutdown in advanced economies and other parts of the globe have disrupted billions of lives and are jeopardizing decades of development progress.

“This edition of the Global Economic Prospects assesses the impacts of the pandemic and analyzes possible courses and outcomes. It presents clear actions needed by the global community and national policymakers—to limit the harm, recover, and rebuild better and stronger than before.

“The report describes a global economy suffering a devastating blow. Our baseline forecast envisions the deepest global recession since World War II. The report also includes an exhaustive analysis of the outlook for emerging market and developing economies, many of which are now fighting on two fronts—containing the domestic outbreak and its consequences while coping with the economic spillovers from the deep recessions in advanced economies.

“Looking a layer deeper, the report investigates the depth and breadth of the economic and humanitarian storm. The COVID-19 recession is the first since 1870 to be triggered solely by a pandemic. The speed and depth with which it has struck suggests the possibility of a sluggish recovery that may require policymakers to consider additional interventions. For many emerging market and developing countries, however, effective financial support and mitigation measures are particularly hard to achieve because a substantial share of employment is in informal sectors.

“Beyond the staggering economic impacts, the pandemic will also have severe and long-lasting socio-economic impacts that may well weaken long-term growth prospects—the plunge in investment because of elevated uncertainty, the erosion of human capital from the legions of unemployed, and the potential for ruptures of trade and supply linkages.

“The World Bank Group is committed to helping alleviate financing breakdowns from the COVID-19 crisis in ways that work toward a more resilient recovery. Some examples include expanding and increasing the coverage of safety net programs, providing trade finance, and supporting the working capital needs of small and medium-sized enterprises. In the broad COVID-19 response for the poorest nations, World Bank Group resources are being scaled up dramatically and debt service payments by official bilateral creditors were suspended on May 1, with comparable treatment expected by commercial creditors.

“Yet these steps toward financing and liquidity will not be enough. Even before the pandemic, development for people in the world’s poorest countries was slow to raise their incomes, enhance living standards, or narrow inequality. The pandemic and economic shutdown in advanced economies and elsewhere are hitting the poor and vulnerable the hardest – through illnesses, job and income losses, food supply disruptions, school closures and lower remittance flows.

“Thus, policy makers face unprecedented challenges from the health, macroeconomic and social effects of the pandemic. To limit the harm, it is important to secure core public services, maintain a private sector and get money directly to people. This will allow a quicker return to business creation and sustainable development after the pandemic has passed. During this mitigation period, countries should focus on targeted support to households and essential public and private sector services; and remain vigilant to counter potential financial disruptions.

“During the recovery period, countries will need to calibrate the withdrawal of public support and should be attentive to broader development challenges. The Global Economic Prospects report discusses the importance of allowing an orderly allocation of new capital toward sectors that are productive in the new post-pandemic structures that emerge. To succeed in this, countries will need reforms that allow capital and labor to adjust relatively fast—by speeding the resolution of disputes, reducing regulatory barriers, and reforming the costly subsidies, monopolies and protected state-owned enterprises that have slowed development.

“To make future economies more resilient, many countries will need systems that can build and retain more human and physical capital during the recovery—using policies that reflect and encourage the post-pandemic need for new types of jobs, businesses and governance systems.

“Emerging market and developing economies are devoting more public resources to critical health care and support for livelihoods during the shutdown, adding to the urgency of their allowing and attracting more private sector investment. This makes the financing and building of productive infrastructure one of the hardest-to-solve development challenges in the post-pandemic recovery.

“The transparency of all government financial commitments, debt-like instruments and investments is a key step in creating an attractive investment climate and could make substantial progress this year. Faster advances in digital connectivity are also necessary and should get a vital boost from the pandemic, which heightened the value of teleworking capabilities, digital information, and broad connectivity. Digital financial services are playing a transformative role in allowing new entrants into the economy and making it easier for governments to provide rapidly expandable, needs-based cash transfers.

“This edition of the Global Economic Prospects describes a grave near-term outlook. The speed and strength of the recovery will depend on the effectiveness of the support programs governments and the international community put in place now; and, critically, on what policymakers do to respond to the new environment. The World Bank Group is committed to seeking much better outcomes for people in emerging market and developing countries, especially the poor. During the crisis, we call on policymakers to act fast and forcefully: our interventions should be no less powerful than the crisis itself.”

Editorial by Chief Economist to OECD June Economic Outlook

Echoing the challenging times ahead in 2020, the OECD’s Chief Economist Laurence Boon reviews the tightrope that OECD countries face before a vaccine is available. The editorial is reprinted below (pages 7-9)

Editorial

After the lockdown, a tightrope walk toward recovery

The spread of Covid-19 has shaken people’s lives around the globe in an extraordinary way, threatening health, disrupting economic activity, and hurting wellbeing and jobs. Since our last Economic Outlook update, in early March, multiple virus outbreaks evolved into a global pandemic, moving too fast across the globe for most healthcare systems to cope with effectively. To reduce the spread of the virus and buy time to strengthen healthcare systems, governments had to shut down large segments of economic activity. At the time of writing, the pandemic has started to recede in many countries, and activity has begun to pick up. The health, social and economic impact of the outbreak could have been considerably worse without the dedication of healthcare and other essential workers who continued to serve the public, putting their own health at risk in doing so.

Governments and central banks have put in place wide-ranging policies to protect people and businesses from the consequences of the sudden stop in activity. Economic activity has collapsed across the OECD during shutdowns, by as much as 20 to 30% in some countries, an extraordinary shock. Borders have been closed and trade has plummeted. Simultaneously, governments implemented quick, large and innovative support measures to cushion the blow, subsidising workers and firms. Social and financial safety nets were strengthened at record speed. As financial stress surged, central banks took forceful and timely action, deploying an array of conventional and unconventional policies above and beyond those used in the Global Financial Crisis, preventing the health and economic crisis from spilling over into a financial one.

As long as no vaccine or treatment is widely available, policymakers around the world will continue to walk on a tightrope. Physical distancing and testing, tracking, tracing and isolating (TTTI) will be the main instruments to fight the spread of the virus. TTTI is indispensable for economic and social activities to resume. But those sectors affected by border closures and those requiring close personal contact, such as tourism, travel, entertainment, restaurants and accommodation will not resume as before. TTTI may not even be enough to prevent a second outbreak of the virus.

Faced with this extraordinary uncertainty, this Economic Outlook presents two possible scenarios: one where the virus continues to recede and remains under control, and one where a second wave of rapid contagion erupts later in 2020. These scenarios are by no means exhaustive, but they help frame the field of possibilities and sharpen policies to walk such uncharted grounds. Both scenarios are sobering, as economic activity does not and cannot return to normal under these circumstances. By the end of 2021, the loss of income exceeds that of any previous recession over the last 100 years outside wartime, with dire and long-lasting consequences for people, firms and governments.

The pandemic has accelerated the shift from ‘great integration’ to ‘great fragmentation’. Additional trade and investment restrictions have sprung up. Many borders are closed across large regions and will likely remain so, at least in part, as long as sizeable virus outbreaks continue. Economies are diverging, depending on when and to what extent they were hit by the virus, the preparedness of their healthcare system, their sectoral specialisation and their fiscal capacity to address the shock. Emerging-market economies have also been shaken by the crisis. Commodity prices have plummeted. Large capital outflows, plummeting remittances, weaker healthcare systems and a large share of informal workers have threatened their health, economic and social resilience. Everywhere, the lockdown has also exacerbated inequality across workers, with those able to telework generally highly qualified, while the least qualified and youth are often on the front line, unable to work or laid off, with the effects further compounded by unequal access to social protection. Private debt levels are uncomfortably high in some countries, and business failure and bankruptcy risks loom large.

Extraordinary policies will be required to walk the tightrope towards recovery. Even if growth does surge in some sectors, overall activity will remain muted for a while. Governments can provide the safety nets that allow people and firms to adjust, but cannot uphold private sector activity, employment and wages for a prolonged period. Capital and workers from impaired sectors and businesses will have to move towards expanding ones. Such transitions are difficult, and rarely happen fast enough to prevent the number of failing firms from rising and a sustained period of unemployment. Governments will need to adapt support and accompany the transition, allowing fast restructuring processes for firms, with no stigma for entrepreneurs, providing income for workers in between jobs, training for those laid off and transitioning to new jobs, and social protection for the most vulnerable. We have previously called for a rise in public investment in digital and green technologies to promote long-term sustainable growth and lift demand in the short term. This is even more urgent today with economies having been hit so hard.

Today’s recovery policies will shape economic and social prospects in the coming decade. Ultra-accommodative monetary policies and higher public debt are necessary and will be accepted as long as economic activity and inflation are depressed, and unemployment is high. However, debt-financed spending should be well targeted to support the most vulnerable and the investment necessary for a transition to a more robust economy. Public support needs to be transparent and fair. Corporate support from governments must come with transparent rules, with private bond and equity holders taking a loss when government steps in, so that their rewards for taking risks are not excessive. Improving employer-employee relationships should accompany ongoing public support for workers and firms, paving the way for stronger social cohesion and ultimately a stronger and more sustainable recovery.

The recovery will not gain steam without more confidence, which will not fully recover without global cooperation. Confidence needs to be boosted both at the national and international levels. Household saving rates have soared in most OECD countries, with high uncertainty and rising unemployment holding back consumption. Trade disruptions and the associated threats to supply chains also impede the necessary reduction in uncertainty for investment to resume. Global cooperation to tackle the virus with a treatment and vaccine and a broader resumption of multilateral dialogue will be key for reducing doubt and unlock economic momentum. The international community should ensure that when a vaccine or treatment is available it can be distributed rapidly worldwide. Otherwise the threat will stay. Likewise, resuming a constructive dialogue on trade would lift business confidence and the appetite for investment.

Governments must seize this opportunity to engineer a fairer and more sustainable economy, making competition and regulation smarter, modernising government taxes, spending, and social protection. Prosperity comes from dialogue and cooperation. This holds true at the national and global level.”

With a lack of Global Cooperation, the WTO is limited to a monitoring of actions by Members and providing transparency

Many of the challenges facing countries, their companies, workers and citizens are not trade related as reviewed in the World Bank and OECD excerpts provided above. But trade does play a role and for many countries a central role in terms of access to needed medical goods and other items. The WTO, as the GATT before it, offers significant leeway to Members to impose export restraints during health emergencies and in other situations. Where there has been a lack of global planning and preparedness for a pandemic, as has been the case with COVID-19, the world finds itself in a situation where demand for medical goods far exceeds supply for extended periods of time for different countries. The desired trade approach of keeping markets open sounds good and is critical for countries with import needs but is typically ignored by many countries that have production capacity and/or inventories, at least temporarily, as all governments look to protect their own populations first.

The G20 has announced some trade actions they are pursuing to ensure trade remains open, although important issues like limiting export restraints and promoting import liberalization are hortatory in nature reflecting the fact that many G20 members have taken and some maintain export restraints or are not supportive of other than ad hoc liberalization initiatives that are necessarily other than temporary.

Two recent speeches by Deputy Director-General Alan Wolff review what the WTO has been able to do to date in the pandemic (limited to seeking notifications of actions by Members, publishing information on the same, developing a trade forecast), what WTO Members have proposed as potential WTO initiatives (to date proposals have been from mid-sized economies and are open for signature by other Members) and the opportunities and challenges for reform of the WTO moving forward. See DDG Wolff, “The challenges are not over”, June 5, 2020, https://www.wto.org/english/news_e/news20_e/ddgaw_05jun20_e.htm; DDG Wolff, “There can be no permanent retreat from what has been created”, June 10, 2020, https://www.wto.org/english/news_e/news20_e/ddgaw_11jun20_e.htm.

The information collected by the WTO and posted on its website, the information notes on various trade topics affected by the pandemic, the efforts to interact with other multilateral organizations and with the business community are all helpful for Members and their constituents to understand what is happening in the trade environment and how the pandemic is affecting areas of trade, types of Members and so on.

It is also the case that initiatives proposed and actions taken by individual countries to improve the market environment, ensure greater market openness and speed availability of medical goods are helpful even if not embraced by the entirety of the WTO membership.

But there is little doubt that there is not the level of global cooperation nor the leadership from the major players to minimize the global fallout from the pandemic or to maximize the speed of the global recovery.

There is no obvious road ahead to greater cooperation or to the meaningful emergence of leadership by the majors in the remainder of 2020. Let’s hope that observation proves to be incorrect. The costs of failure to better cooperate and for the majors to lead in fact are likely unprecedented and will affect the lives of billions of people.

WTO Director-General Selection Process — 2nd Nomination, Nigeria’s Dr. Ngozi Okonjo-Iweala, received on June 9.

As reviewed in yesterday’s post, Nigeria had announced that it would be nominating Dr. Ngozi Okonjo-Iweala. Nigeria’s nomination was received at the WTO today, June 9. Dr. Okonjo-Iweala has twice served as Nigeria’s Finance Minister and had a two-decade career at the World Bank. Her resume as submitted to the WTO is embedded below.

bio_nga_e

The African Union is reported to be meeting virtually later this week to consider which African candidate it will support for the WTO Director-General (“DG”) position. There are likely at least two other African candidates being considered as reviewed yesterday. See Selecting a new WTO Director-General – “the game is afoot”; Mexico’s Jesus Seade Kuri is the first nominee, https://currentthoughtsontrade.com/2020/06/08/selecting-a-new-wto-director-general-the-game-is-afoot-mexicos-jesus-seade-kuri-is-the-first-nominee/.

Each candidate put forward to date has strengths and possible perceived weaknesses in terms of the DG position, although the qualifications of candidates outlined in the procedures are broad: “In broad terms, candidates should have extensive experience in international relations, encompassing economic, trade and/or political experience; a firm commitment to the work and objectives of the WTO; proven leadership and managerial ability; and demonstrated communications skills.” WT/L/509, para. 9 The procedures, wherein candidates are given time to make themselves known to Members both in Geneva and in capitals and the General Council meeting to give each candidate an opportunity to present their credentials and vision for the WTO provides important opportunities for each candidate to demonstrate his or her qualifications.

Just looking at the biographies provided to the WTO for the first two candidates, I would make the following preliminary comments:

Jesus Seade has a strong trade background and is knowledgeable about the operations of the WTO having served as Mexico’s Ambassador to the GATT and having served as a Deputy Director-General of the GATT and WTO as well as having served as Mexico’s Chief Negotiator for the USMCA in wrapping up negotiations on the recently completed United States-Mexico-Canada Agreement and Under-Secretary for North America. His background also includes time at both the World Bank and the International Monetary Fund. If he has weaknesses, it could be that Mexico is viewed as part of Latin America and outgoing DG Azevedo is from Brazil, another Latin American country. For equally qualified candidates, a factor to be considered would be whether a Mexican candidate following a Brazilian DG would reflect “the diversity of the WTO’s membership in successive appointments to the post of Director-General.” WT/L/509, para 13. Mexico also asserts the status of a developing country. Should Members decide to alternate between developed and developing (as it has on the last four DGs, being from a developing country would weigh against him. It is also the case that his last direct involvement with the WTO goes back several decades, so he might have less familiarity with current WTO Missions and Member capitals than other possible candidates may have.

Dr. Okonjo-Iweala has an impressive resume with senior government positions (Finance Minister) and senior positions at a major international organization, the World Bank. Being from Africa, which has never had a Director-General, could be viewed as an advantage under the geographic diversity factor that can be considered where there are equally qualified candidates. WT/L/509, para. 13. While the sex of a candidate is not a specifically listed factor to be considered, there has not been a female Director-General and so that may be a positive for Dr. Okonjo-Iweala where other candidates are equally qualified but male. As to potential negatives, her background is in finance, not in trade, which could be viewed as a negative. Just as for Mexico, Nigeria is a developing country at the WTO. If the Members decide to rotate between developed and developing, coming from a developing country would be a negative factor. Finally, Dr. Okonjo-Iweala would likely be less well known among Geneva Missions and trade officials in capitals which could also be a negative.

Conclusion

With two nominees in the first two days of the month-long period for nominations, it is unknown how many candidates there will be in total by July 8. The procedures adopted in 2002 encourage nominations from a broad cross-section of Members. “In order to ensure that the best possible candidate is selected to head the WTO at any given time, candidatures representing the diversity of Members across all regions shall be invited in the nominations process.” WT/L/509, para. 13. The first two candidates are obviously very talented individuals with very different career paths. WTO Members will be attempting to determine which candidate would be best able to lead the Organization forward in a period of great challenges. Because there may be very different views as to which direction Members want the organization to go in the future, the road ahead for the selection process is not necessarily a smooth one.

If it turns out to be a crowded field, it is less likely that Members will be comfortable with a truncated timeline for considering the candidates which will require selecting an acting Director-General from the four Deputy Directors-General. To use the Chinese saying, “may we live in interesting times.”

COVID-19 and the G20 Response

With the COVID-19 pandemic ramping up its reach and severity in many parts of the world and with the global economy reeling as a result, there is an understandable hope for a coordinated response from the major countries in the world to minimize the effect of the pandemic, ensure availability of medical supplies and equipment, and chart a path back to growth for all.

In the last week there has been both a virtual Extraordinary Meeting of the G20 leaders (March 26) and a virtual meeting of trade ministers (March 30). Both meetings issued joint communiques intended to express the commitment of the G20 countries to keep markets open, minimize trade restrictions, share information and work to defeat COVID-19. See https://g20.org/en/media/Documents/G20_Extraordinary%20G20%20Leaders%E2%80%99%20Summit_Statement_EN%20(3).pdf; https://www.wto.org/english/news_e/news20_e/dgra_30mar20_e.pdf. The two joint communiques are embedded below. They were followed by a joint meeting of finance ministers today (March 31).

G20_Extraordinary-G20-Leaders’-Summit_Statement_EN-3

G20-Trade-and-Investment-Ministerial-Statement-March-30-2020

However, each of the leaders’ and trade ministers’communiques has been criticized by some analysts for not having specific commitments (e.g., agreeing to a standstill on export restraints or agreeing to temporarily reduce tariffs on certain medical supplies and equipment). Indeed, such concrete actions have been urged by not only various analysts but also by the World Bank. See https://www.worldbank.org/en/news/statement/2020/03/30/statement-by-mari-pangestu-managing-director-for-development-policy-and-partnerships-the-world-bank-at-the-virtual-meeting-of-g20-trade-ministers. The specifics urged by the World Bank at the G20 trade ministers meeting included the following:

“We suggest G20 Trade Ministers decide on concrete actions to mitigate the pandemic and speed up recovery. G20 Members could immediately undertake the following actions whilst advocating parallel action by all World Trade Organization Members.

“Refrain from new export restrictions on critical medical supplies, food or other key products. Where such emergency measures are applied, they should be targeted, transparent, proportionate with the emergency needs, and time-bound.

“Eliminate or reduce tariffs on imports of COVID-19 products, as well as lower or temporarily suspend tariffs and export taxes on food and other basic goods to safeguard household incomes and business activity.

“Ensure that vital products can cross borders safely, by ensuring continuity of border agency clearance for critical supplies and essential transport and logistics.

“Secure continued access to capital and trade financing to medium, small and micro enterprises (MSMEs).”

For some analysts, the failure to provide specific action steps reflects a claimed lack of leadership among the G20 leaders (in particular to a lack of leadership by the U.S.). Those raising concerns compare the communiques to those that came out from the financial crisis in 2008-2009 which contained some specific commitments including a standstill on trade restrictive measures.

Differences between the COVID-19 pandemic and the 2008-2009 financial crisis

While both events, the COVID-19 pandemic and the 2008-2009 financial crisis, can be described as major crisis moments for the global community, there is the very real difference of the COVID-19 pandemic threatening human life directly. WTO commitments have understandable carveouts for Members to address public health crises through deviations from their WTO commitments.

Politically, it is hard to imagine countries suffering major outbreaks of COVID-19 not having an initial primary commitment to address the internal needs of their citizens. This has led to many countries seeking at least temporarily to secure critical medical supplies and equipment to address the surge in illness that has followed the spread of the virus in individual countries. This includes both major developed countries like the members of the EU and major countries like China (in the early stages of the outbreak there). The daily pleas from governors and mayors across the United States for more supplies and equipment show the internal pressures for governments to secure supplies and equipment critical to the short-term needs.

This does not mean that proposals for joint action aren’t meritorious or that some actions by individual countries can be harmful to overall global welfare as well as their own short-term interests. Rather the internal challenges will differ for different countries or territories and may make joint actions at a given point in time less doable. In such situations, individual country actions can be important with joint actions undertaken where possible. For example, in the U.S. and in other countries, there is an effort to ramp up production of critical supplies and equipment. Such individual action can have important positive effects on the global response to COVID-19.

While many countries sent supplies to China back in January-February when China was going through its peak needs and ramping up its production, China has been exporting supplies to various countries as its internal needs recede and external demand ramps up. Press accounts, for example, indicate that the U.S. has procured 10 plane loads of medical supplies from China, the first of which arrived in the last several days in New York.

Similarly, the U.S. has been working with companies in the United States to increase production of medical personal protection equipment and of ventilators as part of its effort to address the surge in demand that is occurring in individual U.S. hot spots. Ramp up of production is also important in light of the global shortage of some of the items during periods of heightened demand. President Trump in a recent press conference indicated that it was likely that as production increased on ventilators in the U.S., there would be excess volume at some point that could be shared with other countries without sufficient supplies.

Thus, individual country actions can have important longer term benefits for other countries around the world.

Actions by the World Bank and International Monetary Fund to Assist Developing and Least Developed Countries Are Supported by G20 Members

G20 members are important players in both the World Bank and the IMF. As reviewed in statements by each organization in yesterday’s trade ministers meeting (World Bank) and today’s finance minister’s meeting (IMF), each organization is taking aggressive actions to provide assistance to developing and least developed countries to help in addressing COVID-19 and the recovery of economies after the pandemic. Such action is possible because of the support of the major economies in those organizations.

For example, the World Bank reviewed the following actions it is taking to respond to COVID-19 at yesterday’s trade ministers meeting:

“The WBG is providing fast, flexible responses to lessen the impact of COVID-19 on developing countries. The $14 billion Fast Track Facility approved on March 17 assists countries and companies in their efforts to prevent, detect, and respond to the rapid spread of COVID-19. We have emergency operations for 60 countries already underway and more to come.

“We are entering into the next phase of our response to further address the broader economic and social impact. The WBG will deploy $160 billion over 15 months to:

“Protect the poor and vulnerable through social safety net programs.
O􀃠er World Bank facilitated procurement to help clients access needed medical supplies and equipment, for no fee, to address the significant disrutption in supply chains.

Support businesses and their employees, especially MSMEs, through IFC trade and credit lines.

Strengthen economic resilience and speed of recovery through budget support and sectoral interventions, including in trade and investment.

“We and the IMF are also calling on all official bilateral creditors to suspend debt payments from IDA countries that request forbearance.”

Similarly, below is the statement by the IMF from today’s finance ministers meeting:

“March 31, 2020

“Washington, DC – International Monetary Fund (IMF) Managing Director Kristalina Georgieva made the following remarks today during an extraordinary conference call of G20 Finance Ministers and Central Bank Governors:

“Thank you to the Saudi G20 presidency for calling this extraordinary meeting.

“Outlook

“‘We welcome the decisive actions many of you have taken to shield people and the economy from COVID-19, that led to a decline in volatility in major financial markets in recent days. Nonetheless we remain very concerned about the negative outlook for global growth in 2020 and in particular about the strain a downturn would have on emerging markets and low- income countries.

“Our forecast of a recovery next year hinges on how we manage to contain the virus and reduce the level of uncertainty.

“Thus, we support an ambitious G20 action plan to strengthen the capacity of health systems to cope with the epidemic; to stabilize the world economy through timely, targeted and coordinated measures; and to pave the way towards recovery.

“IMF reforms

“And we will do our part. In fact, we got a strong mandate last Friday from our governing body, the International Monetary and Financial Committee (IMFC), on reforms to strengthen our crisis response.

“In particular, it endorsed initiatives to:

“· Enhance access to our emergency facilities, as now some 85 countries indicate they rely on them for financial support;

“· Build up our capacity to serve our poorest members; and

“· Help countries experiencing foreign exchange shortages, including possibly by short-term liquidity line.

“We also have good news on IMF resources.

“The U.S. recently approved (https://www.imf.org/en/News/Articles/2020/03/26/pr20109-usa-statement-on-the-unitedstates-congress-move-to-strengthen-the-imfs-resources) the doubling of the New Arrangements to Borrow, and our Executive Board yesterday agreed https://www.imf.org/en/News/Articles/2020/03/31/pr20123-imf-executive-boardapproves-framework-for-new-bilateral-borrowing-agreements) on a new round of bilateral borrowing to secure the IMF’s
$1 trillion lending capacity.

“Debt relief

“Lastly, I would like to direct your attention to the issue of debt of low-income countries.

“Starting with their debt obligations to the IMF, I am pleased to report that our Executive Board last Thursday approved (https://www.imf.org/en/News/Articles/2020/03/27/pr20116-imf-enhances-debt-relief-trust-to-enable-support-foreligible-lic-in-wake-of-covid-19) a reform of the Catastrophe Containment and Relief Trust (CCRT) that allows our poorest member countries to invest in crisis response rather than repay the Fund. I want to thank G20 members who have pledged financial support for the CCRT and call on others to join.

“And I support the G20 to urgently work on further easing the debt burden of our poorest members.

“At a time the world economy is at a standstill, official bilateral creditors could make a major contribution by offering a debt standstill to IDA-eligible countries, as World Bank Group President David Malpass and I proposed
(https://www.imf.org/en/News/Articles/2020/03/25/pr20103-joint-statement-world-bank-group-and-imf-call-to-actionon-debt-of-ida-countries) during our last meeting.

“It will also be important for other creditors to do their part, and I count on the G20 to help build consensus on a way forward for our poorest members.”

https://www.imf.org/en/News/Articles/2020/03/31/pr20124-remarks-md-kristalina-georgieva-conference-call-g20-finance-ministers-central-bank-governors.

Thus, the G20 through their involvement in multilateral organizations like the World Bank and the IMF are taking collective action to address various aspects of the COVID-19 pandemic and global recovery whether or not there are specific G20 actions taken outside of those organizations.

Additional Challenges and Opportunities For G20 Members

  1. access for transport moving goods

One of the unusual challenges flowing from COVID-19 is dealing with concerns about movement of people with the need for the movement of goods across borders. For example, many countries have imposed travel restrictions from certain offshore locations to try and control the spread of COVID-19. Even where there is not an outright ban on entry from certain foreign countries, there may be requirements for mandatory quarantine of people travelling from certain countries. The International Air Transport Association (IATA) has a webpage following measures taken by governments related to COVID-19. As of today, IATA shows 179 measures having been taken by countries around the world. See https://www.iata.org/en/programs/safety/health/diseases/government-measures-related-to-coronavirus/. IATA has urged countries to develop approaches that permit international transport to access countries without staff being quarantined. The consequences for the rapid movement of medical supplies and equipment if transport personnel can’t enter and exit in ways that are acceptable to receiving countries should be obvious. But the solution will potentially differ by each importing country’s risk profile compared to each exporting country’s risk profile. It is unclear what actions G20 countries are taking to address these concerns/needs. Transparency and a task force to identify current and best practices could be helpful in the short term on this critical issue.

2. transparency issues

G20 countries have agreed to support transparency of measures taken to address COVID-19, and the WTO has a webpage which is tracking notices provided by WTO Members. To date relatively few notices have been provided to the WTO (just 18 as of March 31, 2020). See https://www.wto.org/english/tratop_e/covid19_e/covid19_e.htm.

But transparency goes beyond WTO notifications and deals with issues such as transparency on developments in individual countries on the spread of the disease, research into possible vaccines, best practices in reducing the spread of the virus, information on potential medical supplies and equipment and on potential demand among countries (including efforts at expanding production).

While there is seemingly reasonably good information on the spread of the disease in many countries and at least basic information on research ongoing around the world, it is not clear that there is a clearinghouse for information on supplies or on anticipated demand. If not, this could be an area where business associations and governments could work collectively to develop information that could be useful in maximizing availability of products where and when needed, to identify likely bottlenecks in supply and permitting governments to incentivize expanded production. There is also the question of surges in needs for medical personnel that outstrip availability even in developed countries. Transparency on availability of personnel (active, retired, etc.) willing to move intracountry and internationally would be an extraordinarily important data base and could help countries with needs determine ability to handle temporary medical help.

3. Research and Development of Vaccines and Intellectual Property Issues

There are many businesses, government entities and research groups looking for a vaccine for the COVID-19. The greater the exchange of information, the greater the likelihood of an early breakthrough. Many issues arise around any bteakthrough in terms of intellectual property rights, global needs and affordability. How those issues are addressed will be an important part of any longterm global recovery and the human costs that will be incurred going into the future from the virus. A recent Congressional Research Service paper looks at certain possible TRIPs and subsidy issues. While the discussion in the paper isn’t necessarily accurate in terms of WTO implications in all instances, it provides a list of questions that G20 members and the broader global community will need to consider.

CRS-March-30-2020-COVID-10-International-Trade-and-Access-to-Pharmaceutical-Products

Conclusion

COVID-19 is an extraordinary challenge to the global community with the ability to overwhelm health systems in advanced economies in a matter of weeks to say nothing of the potential for harm to less advanced economies.

The G20 has called for coordinated action and stated the objectives of keeping markets open, limiting restrictions on trade, exchanging information and assisting developing and least developed countries. The individual countries who are part of the G20 have also been taking action through the World Bank and IMF to help other countries address challenges from COVID-19.

At the same time, major G20 players — US, EU countries, China — have faced major challenges in their territories which have required a focus on how to address national challenges effectively and quickly. Other countries and territories have also faced various levels of spread of COVID-19 and have focused on actions they have needed to minimize the spread and help their citizens. More countries are likely to be hot spots in the coming months.

The WTO and the GATT before it have recognized that obligations undertaken must have escape clauses when there are emergencies involving human health.

Thus, the art of the possible with COVID-19 may be the articulation of aspirational objectives by leaders or international organizations or by outside analysts, the exchange of information to permit better decisions, and individual or group action where possible within the context of domestic political realities.