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With trade acting as a conduit between production and consumption, a post-Covid trade order must be built upon the principles of sustainability to curb the negative impacts on the ecosystem. Over the last 50 years, there has been an unprecedented rise in the share of international trade in global economic activity. Several factors have played an important role in ushering this dominance of trade-emergence of global value chains (GVCs), rising income levels and demand across the world. Yet, international trade, in a post-pandemic world, is faced with a few major challenges.
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Firstly, economic activity, with a significant share attributed to trade, has disturbed the ecology-society-economy equilibrium. Rapid population growth, rising per capita income levels, urbanisation and changes in lifestyles have been responsible for an unparalleled rise in global consumption levels. This has led to an incremental land-use change, characterised by the conversion of forest areas into agricultural and industrial lands in Brazil, Southeast Asia, and several other parts of the world.
With most of the consumption demand being met by production in foreign countries, trade has contributed to global biodiversity loss and accounted for around 30 per cent of global threats to species. These factors have attributed to the emergence of zoonoses like Covid-19.
Secondly, at an institutional level, the WTO itself has been facing a host of problems. The dispute settlement mechanism is in limbo and it has led to a growing trend towards unilateralism and protectionism, which can undo the benefits of globalisation.
The next Director-General of the WTO is faced with a major task of ensuring its relevance in a changed technological, economic, and political world order. Although discussions on the WTO reforms have been brewing for some time, the pandemic has added to its urgency. Concerns have been raised over the ability of the WTO to ensure that international trade does not jeopardise social, economic, and environmental development.
A post-pandemic international trade order must, therefore, be built upon the principles of sustainability. All economic activities serve the society so that it evolves within a safe operating space of the planet. This implies that economies and societies are seen as embedded parts of the biosphere. With trade acting as a conduit between production and consumption, a post-Covid trade order must curb the negative impacts on the ecosystem. After all, the inextricable link between the health of the ecosystem and human health is evident from this pandemic.
Environment sustainability and trade policies, especially agricultural trade, must be aligned with each other. This must be promoted through the valuation of natural capital and determination of comparative advantage based on such valuations. Additionally, trade practices must also promote labour rights and gender inclusivity.
The pandemic has also revealed the vulnerabilities of the existing trade order with over-dependence on China or any other single country as a major production hub. Future trade policies must focus on diversification of export destinations and countries of import origins. While this is an opportunity for many developing countries, like India, to increase their importance in GVCs, organisations like the WTO must ensure that these countries do not flout labour and environment norms to enhance the competitiveness of their industries. Although a lenient standards regime may lead to gains in the short run, in the long run, when unprecedented shocks such as pandemics, which are likely to become more common, affect the global economy, the fault-lines in their socio-economic system will leave them vulnerable. Adhering to environmental, labour, and social security standards can go a long way in not only safeguarding an economy from the spread of zoonotic diseases, and but also in preventing social inequality and unemployment that usually accompanies these shocks.
Sustainability must also be promoted as a corporate strategy. Firms can generate a ′shared value′ between the organisation and the society from which they derive their natural, human and social capital. This can create a new ′competitive advantage′ for firms as it would imply that they adhere to social and environmental standards required for international trade, and also reap benefits in the form of higher labour productivity, environment-friendly products and processes, and greater social cohesion. Furthermore, it would also ensure that these companies have access to a wider range of international markets.