The global side of virus recovery

As countries throughout the world move towards the relaxation of measures imposed to curb the spread of the coronavirus, expectations abound for speedy economic recovery to mitigate human suffering, which is already being compared to that of the 1929 Great Depression.

For many, and especially countries of the Global South, Covid-19 will exacerbate already intolerable levels of inequality, poverty, and unemployment.

This underscores the need for the urgent return to economic functionality. And while no one can predict the future in precise terms for each country, it is nevertheless reasonable to estimate a measure of social and political instability in some jurisdictions, which will divert attention from the economic reconstruction exercise.

Apart from the G20 Action Plan in Response to the Covid-19 Pandemic and the United Nations (UN) Covid-19 Response and Recovery Multi-Partner Trust Fund – a UN inter-agency finance mechanism launched by Secretary-General António Guterres, to support low and middle-income countries to deal with the health and development crisis caused by the Covid-19 outbreak – there is little joint coordinated responses by the larger international community.

Of course, each government is obliged to evolve its own recovery plan in accordance with its specific national circumstances. But insofar as developing countries are concerned, existing global imbalances in areas such as international trade, access to markets and financing for development, migration and the movement of labour will hamper the response.

For the post Covid-19 world to resemble, even remotely, a modicum of equity, the very system of global governance will need robust engagement in order to produce the required action and change.

Consider the thorny issue of migration and the movement of labour. The developed north is content with receiving skilled workers – trained at the cost of the developing world – and capital from the developing world. It is however resentful of unskilled and vulnerable workers from the developing south.

It seems obvious that the socio-economic effects of Covid-19 will exacerbate the trend of migration from poorer to rich countries. Nothing short of a global approach to the issue will be sufficient to handle its immanent dynamics and conflicts in host countries.

Yet another issue is the Economic Partnership Agreements between the European Union and the African continent, which have removed tariffs on EU products destined for the African continent to the long-term detriment of local industry.

For its part, the G20 Action Plan contains some useful ideas on issues which governments cannot but address in the future. For example, the plan calls for “the right investments, including in quality infrastructure … so that we are better prepared for and able to weather future crises”.

Perhaps the elephant in the room is that the G20 Action Plan commits to “work together to deliver a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment and to keep our markets open”.

Correct as this broad statement is, the reality is nonetheless sobering. Trade wars between the world’s two largest economies – the United States and China – continue with no end in sight, even as the world economy is in the doldrums.

Last week, the US Department of Commerce expanded its black list of Chinese entities restricted from access to US technology and other items. It added an additional 24 Chinese companies and universities to the black list on the grounds that they have ties with the Chinese armed forces and human rights violations in the Chinese autonomous region of Xinjiang.

China has announced its intention to repay the US with its own currency and threatened to retaliate by placing US companies on what Beijing refers to as an “unreliable entity list”, which would negatively impact on the companies’ sales in China.

China’s foreign minister, Wang Yi, observed that the US is increasingly pushing relations between both countries to a “new Cold War”.

As political beings of different persuasions, we have views about both the US and China and, more specifically, the ensuing trade wars. But it is the impact of the trade wars on the world economy, its prospects for recovery from the effects of the Covid-19 pandemic and the potential of these trade wars to upset world peace that must be the primary concern to all, especially citizens of the developing world.

In a 2018 paper, US-China Trade War and Its Global Impacts, Dan Steinbock of the Difference Group wrote: “In the worst case, these conflicts may escalate into a ‘decoupling’ of both economies and cause lasting global recession and new geopolitical confrontation.”

Whether such a “decoupling” is in fact possible remains to be seen. But what Steinbock says about the factors that impel the US merits some reflection: “The evolving global scenarios of US-China trade and technology conflicts are the outcome of an ever more anxious America forsaking its multilateral cooperative stances for primacy doctrines.”

He also decried the Trump administration’s reliance on “new campaign finance, and ‘big money’, which poses significant risks not only to US-China relations, but also to American democracy and existing international order”.

The trade wars are unlikely to come to an end in the foreseeable future. The US remains China’s largest export destination with a trade deficit of $345.6 billion (about R5.9 trillion) for the year ending 2019. The technology sector – one of the sites of the trade battles – accounts for much of the deficit. In 2018 alone, the US imported $186.5-billion worth of computers and electronics from China while only exporting $17.9 billion worth of the same products to China.

Add to this the Chinese government’s “Made in China 2025” policy which aims to graduate China into a technology-intensive economy and the potential geopolitical advantage from Beijing’s “Belt and Road Initiative”, and the US’ anxiety becomes starker.

All this presents the world with enormous challenges in the post-Covid-19 recovery phase. Finicky market sentiments will add to the woes. As a result, in some far-flung corner of the world, a factory struggling to get back on its feet may collapse and its workers join the mass army of the unemployed. To compound matters for the worker, the instinct to robotise production is more likely to be pursued with vigour in the post-Covid-19 era.

Mukoni Ratshitanga.

• Ratshitanga is a consultant, social and political commentator. (mukoni@interlinked.co.za)

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