The early months of the COVID-19 pandemic were witness to the spectacle of allies in the global arena jostling with one another for masks by diverting consignments of the suddenly-prized product and restricting exports of the same. This scramble served to remind the world at large that each nation has to fend for itself, crunch time.
When a vaccine—or, most likely, multiple vaccines—against the novel coronavirus is developed, will it be made available at affordable prices to all? This will be a test of major and aspiring global powers' stated commitment to protecting human rights and welfare.
The multilateral trading system was under strain from the US-China trade war. The differential in controlling the pandemic has exacerbated it. If there were any illusions that the trade war is only about the bilateral trade deficit, they have been dispelled. The technological gap between the world's largest two economies has narrowed—so much so that the rising power leads the established power in a number of tech domains. This has forced a bipartisan rethink in the lone superpower over continuing with the existing trade regime that was once touted as a win-win for all but which is now deemed to be ill-equipped to deal with "unfair" trade practices, including "forced technology transfer" and "theft" of intellectual property.
From the perspective of the vast majority of people living in developing and least developed countries, most of which have no global or regional power ambitions, the trade regime was never structured to serve their basic livelihood interests. Having to concede too much policy space, disproportionate to their level of development, while still facing restricted market access in products of immense interest to them galvanized these countries into attempting to rectify World Trade Organization (WTO) agreements in line with their development needs through the Doha Development Agenda. The fairness, or otherwise, of trade rules lies in the eyes of the beholder—or, in this context, the trade participant in question. Suppose the US and China reach a modus vivendi. For most of the world, that will not make the trading system any fairer, as long as they are denied the policy levers available to, and utilized by, the now-developed countries, the East Asian tigers and China during their industrialization phases. Remember, a section of developed countries had no hesitation in expressing their scepticism about the relevance of the Doha Round in the declaration of the Nairobi Ministerial Conference of the WTO in 2015. Most people had not heard of Mr Trump back then.
Do the above arguments smack of protectionism? Well, protectionism lies in the experiences and the mind of the exporter or the importer, or the trade partners or geopolitical rivals squaring off. The US accuses China of forcing US companies investing in China to share their technology with local firms. China dismisses the accusation as a politically motivated charge. An idea deemed protectionist or otherwise at a point in time could be considered the opposite at another. Voices have long been raised over the hazards of dependence on imports for critical items, such as staple food. Developing countries' demands for a special safeguard mechanism that allows them to protect their agriculture from price falls and import surges and for a wider berth for public stockholding for food security are a bone of contention in WTO negotiations. Those who oppose these demands as protectionist are now, nevertheless, alarmed by the extent of their dependence on imported medicines and active pharmaceutical ingredients originating in a single country. They call for achieving self-reliance in medical goods, or at least reducing dependence on such imports. There is only a fine line between arguing for self-reliance in medicines and self-reliance in food.
Apparently, self-reliance is no longer a taboo. There are also calls for diversifying supply chains. Existing supply chains are heavily shaped by cost and market access considerations. Apparently, efficiency is not everything. This would imply that, in certain circumstances, the trade-off between efficiency and strategic or national interests becomes binding. But this should not mean only a narrow set of countries has the right to decide what those circumstances are. These strategic/national interests could be geostrategic interests in the case of a hegemon or its challenger, or simple food security for a landlocked country that has been blockaded at least four times.
There are prominent economists based in the rich world who argue that globalization has gone too far, causing hardships to the person on the street in rich and poor countries alike. Some of their policy prescriptions, even while advocating a restoration of policy space to make globalization work, are delivered, perhaps unconsciously, with an ideological tinge. Harvard economist Dani Rodrik recommends that countries be allowed to uphold national standards in labour markets, finance, taxation and other areas, and to do so by raising barriers at the border if necessary, “when international trade and finance demonstrably threaten domestic practices enjoying democratic support”. In The Globalization Paradox, he proposes that the WTO's Agreement on Safeguards be expanded in scope and converted into an Agreement on Developmental and Social Safeguards, which would provide members, developed and developing alike, the option of opt-outs from WTO obligations even for reasons other than competitive threat to domestic industry. There is a caveat, though: the raising of barriers at the border to uphold national standards should be deemed legitimate only if “democratic process” has been followed. Rodrik argues that authoritarian regimes must not count on getting the same benefits/preferences in the multilateral trading regime, and that such regimes must meet stricter requirements to exercise opt-outs (an argument he also makes in another book, One Economics Many Recipes). The Achilles' heel of this argument lies in the difficulty—nay, impossibility—of determining whether the domestic practices under threat “enjoy democratic support”, not to mention ascertaining whether a regime is authoritarian or not. It will be a value judgement—nothing more or less. And the World Governance Indicators are no final arbiter. As I have argued elsewhere, "It is somewhat paradoxical that in attempting to suggest a way to expand and preserve domestic policy space under a multilateral economic system so that nations can uphold their national standards in virtually any area, Rodrik tends to prescribe multilateral harmonization, as it were, of standards in democracy."
Written by Paras Kharel and published as opinion in lead in South Asia Watch on Trade, Economics and Environment (SAWTEE)'s Trade, Climate Change and Development Monitor (August 2020).
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