Structure of the report

A. Introduction

B. Why economic resilience matters

C. The role of trade in economic resilience

D. The role of international cooperation

in building economic resilience

E. Conclusion
 External contributions
Opinion pieces Boxes

Chad P. Bown Patrick Gaulé Alison Gillwald

Leila Baghdadi Tabitha Kiriti-Nganga

Stephane Hallegatte Ellen ‘t Hoen Sebnem Kalemli-Özcan

Boopen Seetanah Verena Jaime de Melo

Tandrayen-Ragoobur

Susan Lund Mami Mizutori Ralph Ossa

 Economic resilience and trade

Importance of Role of Role of

economic resilience international trade international cooperation
 Economic resilience and trade

Importance of Role of Role of

economic resilience international trade international cooperation
 Economy is increasingly exposed to risks and shocks
causing significant economic impacts

Natural
Domestic economic
activities

Technological and
operational
Risks cascading Shocks demand / supply / uncertainty

Socio-economic

International trade
 Trade impacts of shocks remain heterogenous

6,500 Global COVID-

financial 19 crisis
Type of shock(s) crisis
6,000

Type of channel(s)
5,500
Sector(s)

Global trade (US billions)

5,000
Initial conditions
4,500
Policy response(s)
- Economic - Social 4,000
- Infrastructure - Health
- Energy - Trade
- Environmental - … 3,500

3,000
Imports Exports
2,500

Trade costs 2,000

2005 2007 2009 2011 2013 2015 2017 2019 2021
Q1 Q1
 Trade policy responses are rarely fully trade restrictive

248

• (Temporary) trade protectionist measures

- Trade remedy
- Local content
- Import restriction
136 - Customs procedures
- Export restriction
- …
74
53 • Trade opening measures
- Customs procedures exemption
- Digital customs procedures
- VAT exemption
In force Phased-out In force Phased-out
Trade-facilitating Trade-restrictive
- Tariff rebate and reduction
- …
Number of COVID-19-related measures (mid-June 2021)
Economic resilience is a dynamic concept

Economic activity

P reparing C oping R ecovering

shock occurrence
 Economic resilience and trade

Importance of Role of Role of

economic resilience international trade international cooperation
 On the one hand, trade can contribute to the spread
of shocks…

• Pandemics can spread through trade of live animals, travel, and tourism
• Permanent restrictions to travel are costly though and illicit trade in livestock and
wildlife cause most problems
• Volatility of trade costs such as swings in transport costs and trade
policies can make trade a source of shocks
• Stable and predictable trade policies crucial to limit the role of trade in spread of
shocks
• Trade is responsible for a small share of greenhouse gas emissions
through transportation, although trade is also part of the solution for
climate change
• Diffusion of green technologies
• Trade facilitates the adaptation to climate change related shocks
 But on the other hand, trade can also help to
prepare for, cope with, and recover from shocks

• Trade’s role in preparing for shocks

• Trade expands the resources available to prepare for shocks
• Trade facilitates efficient supply of weather forecast services, insurance,
telecommunications, logistics, health services

• Trade’s role in coping with shocks

• Trade plays a critical role in the quick provision of essential goods during crises
such as the pandemic
• Trade promotes specialization and knowledge spillovers, speeding up development
of products required during crises such as vaccines

• Trade’s role in recovering from shocks

• Through trade countries can benefit from sustained foreign demand on the export
side and the availability of intermediate inputs on the import side
 Trade linkages help to accelerate GDP growth
during the first year of the COVID-19 pandemic
5

0
0 10 20 30 40 50 60 70
GDP growth in 2020 (%)

-5

-10

-15
Share of trade with countries having a low number of COVID-19 cases (%)
 The role of trade in economic resilience

• Empirical research suggests that beneficial coping effect dominates

harmful spreading effect of trade as measured by macroeconomic
stability:
• Increase in trade openness in the last 50 years has reduced macroeconomic
volatility in most countries

• Crucial role of diversification

• Trade allows countries to diversify sources of supply and demand, thereby
reducing exposure to country-specific shocks
• Diversification is associated with reduced volatility

• Diversification has increased in the past decades, but change is slow

 Trade diversification reduces macroeconomic volatility

14

12

10
Volatility, 2018

0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
Diversification index, 2008

High-income Middle-income Low-income

 Product and geographical export diversification
has increased in recent years
Product export diversification Geographical export diversification

0.9 0.8
Diversification index, 2018

Diversification index, 2018

0.7 0.6

0.5 0.4

0.3 0.2

0.1 0
0.1 0.3 0.5 0.7 0.9 0 0.2 0.4 0.6 0.8
Diversification index, 2003 Diversification index, 2003

High-income Middle-income Low-income High-income Middle-income Low-income

 Economic resilience and trade

Importance of Role of Role of

economic resilience international trade international cooperation
 More resilience requires more (trade) cooperation

Unilateral action(s)
Economic resilience

Open markets

Inclusiveness Predictability

Cooperation
Recovery Preparation

Positive spillovers Negative spillovers

Coherence Transparency
Suboptimal achievement Risk of cross-retaliation
Coordination
Income and welfare loss

Coping
Natural disasters increasingly addressed in RTAs

Number of regional trade agreements (RTAs)

with natural disasters provisions

Cooperation 51

Exemptions 42

Multilateral
Disaster management 21

Plurilateral
Compensation losses 5

Regional
Emergency trade facilitation 4
International cooperation
The WTO actively contributes to economic resilience …

• Trade barriers reduction

• Streamlined customs procedures

• Policy transparency and predictability

Multilateral

• Capacity building
Plurilateral

• Collaboration with other international

Regional
and regional organizations
International cooperation
… but the WTO could further enhance economic resilience

• Enhancing transparency mechanisms

• Clarifying appropriate use of export

restrictions on critical products

• Greater coordination of public procurement

Multilateral policies for critical goods and services

• Advancing work e-commerce, MSMEs and

Plurilateral
women's economic empowerment

Regional • Strengthening existing cooperation with

International cooperation international and regional cooperation
More information…

https://www.wto.org/english/res_e/publications_e/wtr21_e.htm