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Both the World Trade Organisation (WTO) and the United Nations Conference on Trade and Development (UNCTAD) are forecasting dramatic falls inboth global trade and investment, which parallel predicted falls in economic growth resulting from shutdowns and disruptions to global production chains that began in March 2020.
UNCTAD has published a new series of figures on merchandise trade for the 2020 first quarter that show a decrease of 3%compared with the first qurter of 2019, as trade slowed in March, but predict a much larger fall of 27% in the second quarter (UNCTAD 2020d: 22-3) WTO statistics published in April noted that trade was already slowing from January to December 2019, reflecting low growth before the pandemic began. The WTO best case forecast scenario for 2020 predicts that merchandise trade will decline by 13%, and the worst case scenario a decline of 32%. Services trade is more difficult to measure and predict, but the WTO notes that transport, tourism, education and other traded services could be severely affected. The falls in merchandise trade are worse than during the global financial crisis of 2008-09 and could be the worst since the 1930s Depression (WTO 2020: 1-2). The UNCTAD predicts falls of 30 - 40% in foreign direct investment in 2020-21 (UNCTAD 2020a:1).
The pandemic has prompted a more public debate about the flaws in the 'one-size-fits-all' neoliberal trade policy, pursued by successive Australian governments, which aims to achieve not only zero tariffs but also zero other barriers to all trade and investment. This policy demands that each country should specialise in its most cost-competitive exports, import everything else at the lowest possible prices, have no active industry policies and minimise government regulation and expenditure. The policy maximises low cost global production chains for corporations, but can result in a race to the bottom rather than improving labour rights and environmental standards. It has left many economies with a narrow manufacturing base, unable to produce essential medical products and with scarce public health resources to deal with the pandemic.
Critics of neoliberal policy point to the limitations of the basic assumptions of early nineteenth century neoclassical comparative advantage theory, most of which do not apply to real world 21st century economies (Dunkley 2004: 18-62; Stanford 2015: 304-11). Historical...