What Would Fight the Great Recession in Global Trade?

By Cleo Feymonville

On Tuesday April 21, 2020, SME Europe hosted a Webinar titled “What Would Fight the Great Recession in Global Trade” in order to discuss the COVID-19 crisis and its impact on global trade, as well as the possible actions that could be taken in order to reduce the impact on the European economy. 

The Webinar showcased high-level speakers such as Domagoj Ivan Milosevic MP, Member of the Croatian Parliament; Stefan Rouenhoff MdB, Member of the German Bundestag, Committee on Economy & Energy, Committee on EU Affairs; Iuliu Winker MEP, INTA Committee; Sean Kelly MEP, ITRE & INTA Committee; Ian Talbot, CEO Chambers Ireland, Deputy President EUROCHAMBRES and Anna Stellinger, Head of EU and International Affairs, Confederation of Swedish Enterprise.

Tudor Petru Fabian, Coordinator of the Working Group on Trade SME Europe of the EPP, moderated the highly interesting discussion that highlights the structural problems brought forward by the pandemic. 

Domagoj Milosevic opened his welcome speech by addressing the question whether the COVID-19 pandemic could become the nail in the coffin for the global economy and trade as we know it due to disruption of international supply and demand chains. As he stated, this crisis should be a wake-up call for the economy. We need to make changes and learn from this pandemic, such as ensuring that global trade remains competitive and fair to European players and their SMEs. This includes a focus European production, Research & Development and know-how. 

Stefan Rouenhoff MdB stressed on the importance of the European internal market to fight the COVID-19 crisis in trade. He explained that while a protectionist approach, the emergency measure such as trade barriers that are now taken by several states, could be justified to some extent, it is however vital to think in European terms.

After this crisis he suggested two pathways in global trade. The focus in trade will place strategic emphasis on regional value chains as well as on the enlargement of global trade agreements. In order to overcome shortages caused by this crisis but, also to be ready for any drawbacks in the future, a more integrated European internal market approach is needed.

Iuliu Winkler MEP clarified that this is only the beginning and that we are at a very early stage to declare whether the COVID-19 crisis will become the next Great Recession. He offered 5 solutions in order to fight the impact the COVID-19 crisis has on trade. First, as already stated by previous panellist, free and open trade is key: “There is no space for protectionism”. Second, we need a rule based trading system, such as the WTO, to ensure a smooth functioning. Third, to fight back this pandemic, we need a better functioning of the internal market, which is only given if there is strong support for SMEs also beyond this crisis, as they are the backbone of the European economy. Fourth, the EU trade agenda needs to be updated to reflect COVID-19 priorities. Fifth, it is vital to protect the strategic sectors of the European economy while maintaining WTO compatible standards.

Sean Kelly MEP continued the debate by stating that the fight can only be won with a coordinated European response, which includes boosting the economy through focusing on internal SME production in order to diversify European supply in the long-run (to be less dependent on supply from other states) and to strengthen the internal single market, which has been underestimated for a long time. Having protectionism and trade barriers are against our European values: “We need to have free trade and solidarity.”

He shifted the focus by also stressing the opportunities revealed by the crisis, such as the value of connectivity and digitalization. 

Only the future will show whether the EU will get out of this crisis stronger.

Ian Talbot, CEO of Chambers Ireland and Deputy President of EUROCHAMBRES intervened explaining that global trade cannot be used as a weapon in favour of protectionism; we must keep trade flows open and strengthen supply chains. He believes that the WTO is an important player to achieve and advance these goals. 

Moreover, the EU should be interested to become more independent in the future. 

A more programmatic focus should lie on EU trade and locally among Member States. For this reason, internal strategic supply chains need to be developed to boost local businesses and SMEs, a highly valuable asset to the European economy.

Anna Stellinger of the Confederation of Swedish Enterprise highlighted that this crisis is global and, therefore, it also needs global solutions. A well-functioning EU internal market is needed and one should refrain from protectionism. We see a huge economic impact of the COVID-19 crisis on trade. Imports are missing, shortages, value chains are breaking down, export bans, … nonetheless, she highly stressed the importance of avoiding trade barriers. According to Stellinger, the answer to the question “What Would Fight the Great Recession in Global Trade” is simple: we need to creatively use our innovative trade toolbox at our disposal. 

While it is still ‘early days’ in the 🏨😷💶📉crisis, these were some of the 🔑 lessons:
👉 there is a general lack of predictability, with considerable implications for the #economy, particularly #SMEs – we thus seek clear, targeted, transparent and proportional policy measures❗️
👉 a positive 🇪🇺 response would need to see the consolidation of the single market, collective action on strategic sectors and most importantly a coordinated EU27 position
👉 #Trade flows 🚢🚚 need to be kept going, as commerce can be a strong ally in tackling the negative impact of the crisis
👉 Global 🌍 crisis = global 🌏🌎 solutions