Governments around the world will turn increasingly protectionist in the near term as they try to limit the economic damage from the coronavirus pandemic, a trade expert said on Thursday.
COVID-19 has already spread to more than 180 countries and territories and caused some countries to restrict exports of medical supplies — that’s a decision that could spill into other areas such as food products, said Deborah Elms, executive director at consultancy Asian Trade Centre.
“There is a much bigger wave of protectionism in the near term that we should expect, that is not just in medical supplies … but it will also start to affect food,” she told CNBC’s “Capital Connection.”
“As countries get nervous about food stocks and food supply, food security, they’re going to stop allowing the export or restrict the import of food products,” she added.
Global economic activity, including trade, is at risk of grinding to a halt as countries implement social distancing and quarantine measures of varying degrees to fend off the spread of the coronavirus disease, formally referred to as COVID-19.
The World Trade Organization on Wednesday said global trade — which was already slowing in 2019 due to the U.S.-China tariff fight — is projected to plummet by 13% to 32% this year. A recovery is expected in 2021, but that depends on the duration of the outbreak and the effectiveness of policies to combat the virus impact, according to the WTO.
As governments seek to protect their economies, they will likely focus on saving their “favored” industries — another way that increased protectionism can play out, said Elms.
“As the economic distress increases, the response by many governments will be to assist favored industries, favored sectors or sectors where they’re particularly concerned about catastrophe, especially in jobs. And they will respond, most likely, by pursuing protectionism,” she explained.
“But for each individual country, that’s the solution that makes sense — so restrict trade, focus domestically, keep your own people as employed as you can and then don’t worry about anyone else,” she added. “But, of course, the net result is everyone else is worse off.”