Aid-for-Trade Stocktaking Event 2021, high-level plenary session
23 March 2021
Director General Okonjo-Iweala,
Distinguished heads of agencies,
Distinguished delegates,
Ladies and gentlemen,
It is a little more than a year since COVID-19 took the world by surprise. For some, this has been a lost year. For me, it is foremost a year of loss.
Millions of people have lost their lives. Millions more have lost their loved ones, their jobs, their income or savings, or even their hopes for a better life. We all lost the freedom to move or gather as we wish. We lost our means to show affection through a kiss, a hug or a handshake. And as a mother and grandmother, I can confess to you how sorely I miss those moments.
We all, in one way or another, have lost something. It is in this common loss that we recognize each other. And in this shared vulnerability lies the will and the strength to build a recovery that leads to a better place.
The world is USD 6 trillion poorer than we expected it to be today. To reignite the world economy and leave COVID-19 behind, we need trade.
I know I am speaking to the converted. I don’t need to convince anyone here about the power of trade. But we need to make sure that we can make trade the engine for a more inclusive and greener world.
To make sure this happens, we need Aid for Trade.
Trade, a constant engine of growth, contracted sharply, especially in the initial phase of the crisis. More than 140 export restrictions were applied to prevent shortages of essential goods. Trade then started recovering.
But by the end of 2020, we still had a 9% contraction, and the recovery is uneven across countries and sectors. While trade in goods recovered faster than expected, trade in services is still in a dire state. The survival of the travel, aviation and tourism industry is a challenge never experienced before. This touches the lifeline of millions of people, especially in developing countries.
We all agree that trade also plays an important role for scaling up vaccine production and distribution. This requires easing vaccine-related supply bottlenecks, lowering regulatory hurdles and facilitating trade.
But the challenge does certainly not end here.
Today’s world is radically different than a year ago. Therefore, we must ensure that our nations are ready to adapt to and prosper in the new landscape.
Let me put forward five points:
First: The capacity to fund and implement rescue and recovery measures are highly unequal across countries. A developed country, on average, spends around one-thousand, four hundred (1,400 dollars) US dollars per capita on direct fiscal stimulus. This is almost 80 times more than what LDCs can afford, or nearly 20 times the capacity of other developing countries. This will stimulate recovery in the rich world, but inequality across countries is likely to rise. With inequality being the source of many tensions, we all should be concerned.
To avoid a growing gap, we need to facilitate access to finance so that countries can react and rebuild faster.
We must take action on the debt front. As many countries with fewer resources are highly indebted, we need debt relief and not only debt rescheduling. We must avoid that their resources are primarily used for debt servicing and repayment instead of rescuing their economies and their livelihoods.
Foreign direct investment - a critical source of finance for many developing countries - declined by 42% in 2020. And the outlook for this year does not look good, except for FDI in technology and healthcare sectors. For encouraging international private sector investment, investment promotion and facilitation are key. And it should be directed towards sustainable development sectors to support the long-term recovery.
Second: To ensure access to critical goods, we need to keep goods flowing across borders. Trade showed its effectiveness to move goods from where they could be produced to where they were needed.
The trade restricting measures implemented at the beginning of the crisis have shown not to be a solution. Most nations are too small to cater efficiently to their needs without trade. This is why most countries have resorted to lift these restrictions.
And we need trade because it is a powerful engine for job and income creation, and it is a critical source for foreign exchange.
Third: We need to ensure that the digital economy fosters development rather than fostering divides. The internet has been a blessing for dealing with the crisis, and changed fundamentally the way we interact, consume and produce.
For instance, as businesses and consumers “went digital” during the pandemic, the share of e-commerce in global retail trade increased from 14% in 2019 to 17% in 2020.
But at the same time, the digital divide has also deepened, and threatens an unequal recovery. We thus need to support developing countries in building the required digital skills, infrastructure and regulatory framework so that they are not only consumers but also producers of the digital economy.
Four: Despite the steep decline in CO2 emissions during the first lockdown and an estimated 7% reduction for 2020, we are far from reaching the targets set in the Paris Agreement. Climate change remains our biggest threat. The tropics, the home of the developing world, are and will be the most affected.
We need to support these nations to strengthen their trade-climate readiness so that they can participate and benefit from global trade tomorrow.
This implies adapting production methods, identifying new comparative advantages, and investing and diversifying their economies, while building respective value chains. It also means to climate-proof their activities against adverse conditions.
But these measures do not come for free: They require funding, but currently only 3% of Aid for Trade disbursements are allocated for Climate Action (SDG 13). We also need adjustments in the way we function. Including in the area of trade. We must ensure that our trading system is supportive of a green transformation, while at the same guarantee that the most vulnerable amongst us are not left behind.
Five: and this is not an afterthought: We need gender sensitive response policies as the socio-economic impact of the pandemic is not gender neutral.
Women have been particularly hit hard. Often, they were the first to lose their jobs, they had less access to social protection and access to finance to enable their businesses survive. They also faced a disproportionate burden of care work, and many girls were taken out of school to help at home. This will have a lasting impact for our aspiration of a gender equal world.
Therefore, I am calling on policymakers and institutions to design and implement support measures that take the differentiated gender impacts into account, and support women specifically.
Ladies and gentlemen,
We need a recovery which leads to a world that realizes our aspirations: A future which is more inclusive and greener.
The asymmetries of the current system in terms of access to vaccines, gender, impact of climate change, etc. are no longer acceptable. We need our multilateral forces to address these issues and find solutions. And trade has to play its part.
Today we can demonstrate our united front and commitment to rebuild, including through Aid for Trade. The post COVID-19 world is still somewhat far away but we cannot lose another day without working on the recovery.
And with our joint determination, our will to find common solutions and invest in multilateralism, we can make a valuable contribution. Let’s not miss this opportunity.
