High Level Plenary - Remarks As Delivered
March 23, 2021
My fellow speakers, we are so lucky to be together with Ngozi, as she has just taken the helm at the World Trade Organization. And because you and I have worked together for many years, I am sure, like me, you are just as thrilled to see so many women now at the head table. But I also want to recognize men who stand up for women, like my very dear friend David Malpass, who upholds the tradition of having a strong presence of women in leadership positions at the Bank.
We are at a critical juncture. We have lived through the worst recession in peacetime since the Great Depression. And finally, we see the outlook for the global economy improving. It is thanks to unprecedented actions by governments to support households, workers, businesses, and trade. And thanks to spectacular success in vaccine development and to our ability to adapt with masks, with social distancing, with testing, and with contact tracing. But these prospects for recovery are both uncertain and uneven. Uncertain because I do fear a great divergence following last year's great lock down--divergence within countries and between those that are doing well and those that are falling behind.
What we know on the basis of data is that advanced economies and a relatively small number of emerging markets are set to recover faster from the pandemic and that some emerging economies and almost all low-income countries are at risk of weak growth. They have less access to vaccines, less access to global capital markets, less fiscal policy space. And to put it in terms of data: emerging and developing countries, excluding China, are projected by 2020 to have cumulative per capita income losses as high as 22% versus 13% in advanced economies.
In other words, even as we go into the next year much worse off than before the pandemic, we also forecast that only half of the countries that were narrowing their income gaps relative to advanced economies will continue to do so over 2021 to 2022. And vulnerable people have been hit especially hard, such as low skilled, informal workers, young, and women.
So in that context, Ngozi, I could not be more grateful that you have put the topic of “Aid for Trade” at the center of our discussion today. And I will highlight three areas for action and the critical importance of trade in each of them.
First, let me echo what you and Dr. Tedros said. We need collective efforts to end the health crisis. It is so very simple. In 2021 and possibly also in 2022, vaccine policy is going to be the most important economic policy because we cannot defeat the pandemic anywhere to the fullest until we defeat it everywhere. What is the alternative? It is the risk of new mutations, threatening progress. This must translate into a focus on scaling up production and distribution, especially in low-income countries through Covax; through what David Malpass is doing at the Bank; and through rapidly reallocating excess vaccines from surplus to deficit countries. The economic and development arguments for coordinated action are overwhelming.
As I have said before, faster progress in ending the health crisis is going to translate into raising global income cumulatively by US$9 trillion from 2020 to 2025. And this $9 trillion is split 60-40 between emerging markets and developing countries and advanced economies. And as Ngozi so clearly stated, trade barriers to access vaccines and treatment work against our common interests. Unleashing the full power of trade to fight the pandemic is a moral necessity and it is an economic necessity. It is the best value for money we can think of this year.
Second, we are going to be all much better off if we leverage trade to drive growth. To secure a durable exit from the economic crisis, countries should maintain support to households and firms to avoid economic scars like long-term unemployment or fractured supply chains.
We also want to stress that as the recovery takes hold, governments should lay the foundation for growth anchored in medium-term fiscal sustainability. You’ve heard me say “keep the receipts but spend”. Well, I'm now saying you cannot withdraw support. Think about what is next and how to reduce costs in the future.
Now, what does it mean in terms of domestic policies? Raising domestic revenues, making public spending more efficient, and improving the business environment. And it extends to global policies, such as reenergizing, reopening trade across borders to help boost the recovery. We saw a 9.6% decline in global trade in 2020. We are now projecting trade volumes to grow by 8.5% in 2021 and by 6.5% in 2021. Step up on the pedal. Make it even better.
And to accelerate that growth in trade, policymakers can act at a national level. For example, reducing import tariffs, simplifying customs procedures, cutting export duties. David Malpass is a very strong proponent of anything that leads to more transparency, and to injecting more momentum in growth.
And these measures can be complemented by international efforts to address the reform of the global trade system.
We always say, “Go, go, Ngozi!” so we can see measures to resolve existing tensions to bring new momentum for trade. Particularly important is the powerful impact that trade openness can have in reducing poverty and promoting inclusive growth. A rebound in trade, if it is managed well, can lift growth and living standards in the developing world, just as it did it over the past four decades when we experienced 11-fold expansion of global trade.
And we know trade increases job opportunities, trade increases access for poor households to affordable goods and services in your continent. In fact, in Africa, a study shows that workers in export-oriented firms earn 16% more than workers in a non-export-oriented rivals. And another one shows that trade tends to reduce gender bias in wages.
Now that we know women are severely hit, let's embrace trade so we can have progress also on the role of women in our economies. So, let me let me just finish by saying it is the time to double down so trade can be, again, the engine of growth and opportunities it has been for so, so long.
Let me move to my third point. Trade will be at the heart of efforts to build forward toward a greener, more inclusive, and digital recovery. We are going to experience structural shift to the new climate economy. It will depend on the exchange of goods and services. We will lift it up with new technologies that reduce the cost, for example, of renewable energy and bring expertise needed to design cooler buildings or to shift agriculture to drought, heat and food resilience, and flood resilient crops.
And as advanced economies invest in the green transition, we have a huge responsibility that poor countries also can do so that they can make similar investments, especially in the job-rich climate adaptation measures. And I again want to praise the Bank for leading climate adaptation at the heart of climate action in the developing world.
We also want all countries to benefit from the shift to the digital economy—through investing in the infrastructure and skills needed for e-government, e-commerce, and digital services. Our research shows that expanding internet access in sub‑Saharan Africa by 10% could increase real per capita GDP growth 4%.
But we must recognize that not everyone will benefit from these structural shifts to a green and digital economy. Just as not everyone has benefited from globalization of the past decades.
So, there is an important role for domestic policies—social safety nets such as unemployment insurance can provide workers affected by import competition or technology changes a chance to retool on their own. And social safety ropes can help people climb back up—think of job training and job search assistance programs.
So, what does it mean for us at the Fund? We were on the frontline providing advice to countries to move swiftly to policies that are justified. At this time of the pandemic-induced crisis, we sought to support workers, support businesses. And I take pride at the speed with which the Fund shifted 180 degrees on what we advise to governments. We were very proud to see that. That also led to much more access to capital for emerging markets. And for those who had no access, we were there. We lent to 52 low-income countries, and we provided buffers in commodity-dependent economies through our flexible credit lines—in total our financing has reached over $107 billion.
And we are now prepared to do more by focusing on the opportunity for Special Drawing Rights to lift up the reserves of countries. Of course, it is for our shareholders to decide, but I am quite excited that support is being built up in that regard.
So, let me go straight to a very, very simple point. We have a chance to transform our economies. We have a chance to make them smart, green, and more equitable, that is not to be missed. And we have tried to play a hugely important role in that regard.
And Ngozi, one of my favorite proverbs from the days I was a Humanitarian Commissioner and we traveled to Africa is, “If you wish to move mountains tomorrow, you must start by lifting stones today.”
So let me finish with my very best wishes to you and to the WTO in lifting stones and moving mountains, because we need reformed trade to succeed in this aspiration for a better world, for all, but especially for the most vulnerable people in countries. Thank you.