Effects of the COVID-19 pandemic on our global economy

Chief Economist and Director of Economic Research Statistics Division at the WTO gives insight on challenges and opportunities the pandemic has put on global trade.

NDSU Challey Institute | Photo Courtesy
Dr. Robert Koopman spoke on the impact of COVID-19.

The NDSU Menard Family Distinguished Speaker Series hosted Robert Koopman, the Chief Economist and Director of the Economic Research Statistics Division at the World Trade Organization.

Dr. Koopman is also an associate professor at the Graduate Institute of Geneva and is a research fellow at the Centre for Economic Policy Research.

The discussion centered around how the COVID-19 pandemic has illustrated both the challenges and opportunities of a highly integrated, globalized world. During the presentation, Koopman shared his views on the various forces at play in the global economy and their potential implications for globalization.

According to Koopman, COVID-19 caused a dramatic shock for macroeconomic and trade outlook. However, even though last year’s economic downturn was hard, it wasn’t the worst the U.S. has experienced.

“In the great financial crisis, trade declined around six times more than GDP declined. In this crisis, trade has only declined around twice as much as the GDP declined, and I would argue that that’s largely because of the liquidity provisions and the extensive fiscal support,” Koopman said.

The pandemic caused travel and transport services to go down 63 percent and 19 percent respectively. Financial services and computer services held up relatively well on the other hand, falling only 2 percent.

Swift policy actions, including $16 trillion in fiscal policy support, and extensive liquidity provision, particularly in advanced economies, are “big drivers for recovery.” The trade of medical goods going up significantly also aids in the recovery process.

“Global collaboration on vaccine production and access is key to end the pandemic,” Koopman said. “Speed and effectiveness of vaccines will determine whether or not the global trade will get better or worse.”

Kooper discussed the possibility of COVID stimulus checks to be the next driver of trade tensions, but there are many indirect positive spillovers to developing – emerging markets.

However, prospects for recovery tend to remain poor since a second wave of COVID infections necessitated new stricter lockdown measures in many countries, and continued tighter restrictions on travel and related services extending into the first quarter of 2021.

Of the restrictive measures that were put on trade, 58 percent of them have been removed. More measures were about facilitating trade, 39 percent of COVID-19 restricted measures have since been removed.

What might a post covid world look like from a global integration perspective?

“I expect us to go back to this long-term growth that was seen from 1865 to present where trade grows 1.4 times faster than income,” Koopman said.

From his global integration perspective, Koopman predicts that more digital cross border trade, diversification in supply chain sourcing, automation of production and supply chain steps, flexible production processes and Green/ Carbon neutral production will be seen.

“Some countries have been using opposition to prevent discussions from moving forward,” Koopman said. “A number of issues were decided to be taken forward by groups of countries rather than everybody, I suspect that will be some part of a future reform.”

Koopman gives students advance to learn more about global trade. “Keep up with the news, take classes that relate to trade, keep up to speed on it by following the political and economic debate.”

Many small and medium sized enterprises export indirectly, rural farmers participate in a domestic value chain where their goods possibly end up in a larger firm that does export, so they may not even realize that 30 percent of their sales ends up going into the international market.

To learn more, visit the recorded presentation on youtube.

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