 Leaders and Trade Ministers of 15 Asia-Pacific nations take photos after signing the RCEP on Nov 15, 2020. (photo: EPA) |
Despite a global trend toward trade liberalization and the removal of trade barriers under Free Trade Agreements, this year some developed countries have increased trade protection measures to protect domestic production. Global trade declined sharply as economies closed down to control local COVID-19 outbreaks. But global trade is now recovering.
Positive signs
WTO Chief Economist Robert Koopman said two years after the US-China tariff war began, global trade is operating smoothly through big supply networks. Many companies have strengthened their foreign production instead of withdrawing from the market.
Signs of global economic recovery have become more visible at year end, when many export-based economies in Asia have reported strong members. South Korea said its production has rebounded since November, due to export growth to the US and the EU.
China's manufacturing purchasing managers' index (PMI) was 54.9 in November, its highest in a decade. Japan’s manufacturing PMI has also rebounded to its level before the pandemic.
The Regional Comprehensive Economic Partnership (RCEP) was signed on November 15, 2020, between ASEAN and 5 partners (South Korea, China, Japan, Australia, and New Zealand) after 8 years of negotiation. RCEP opens the world’s biggest free trade area of 2.2 billion people, 30% of the global population, with a GDP of 26,2 trillion USD, one-third of the global GDP, and 28% of global trade.
RCEP is seen as a driving force for economic integration and multilateral trade in a time of global trade recession.
Global trade liberalization continues
Early this year when the COVID-19 pandemic began, the WTO predicted that global trade could shrink 32% this year, worse than the Great Recession of 2008. But the reality has been less awful. The WTO is now forecasting a 9.2% decline in the volume of world trade in 2020.
International companies have developed new business models and found new locations for production and goods distribution. Countries have diversified foreign investment channels and enhanced localization and regionalization to minimize risks and protect supply chains.
Experts say the COVID-19 pandemic, and the US-China dispute, to a certain extent, have encouraged the relocation of factories to take advantage of costs, labor, and logistics.
The COVID-19 pandemic will continue to impact the global economy. To restore global trade, countries should work together, reject protectionism, and embrace global integration.