As the global economy is buffeted by the fallout from the COVID-19 crisis, predictions of what it means for the future abound. Some argue that the regulation of global trade, including its institutions, requires a paradigm shift. Others contend that change must be carefully measured and neither disregard the benevolent intentions of liberalized trade, nor abandon hard-earned benefits. As a country that depends on international trade for our prosperity, the stakes for Canada are alarmingly high.

In April, the World Trade Organization (WTO) reported that "World merchandise trade is set to plummet by between 13 and 32% in 2020 due to the COVID-19 pandemic." By late April, some 76 countries had put in place 118 measures to restrict exports of various medical products and many countries had restricted the export of agricultural and food products despite no evidence of imminent food shortages.

Canada and its trading partners face the same challenges: returning their citizens to work, restoring levels of production, enabling the building and distributing of inventories (likely in surplus), and determining when and what controls must be placed on exports in the national interest. These conditions will inevitably distort competition in favour of certain sectors or producers, foreign and domestic.

At the same time, governments are spending enormous sums to help citizens cope with loss of income resulting from lockdowns and still more funds will be needed to stimulate the economy once lockdowns are lifted, much of which in the form of government subsidies. Addressing these impacts will lead producers to petition governments for trade remedy relief under domestic laws rooted in international treaties to which Canada is a party. How all of this exceptional support will be phased out will also be subject to intense international attention.

Although some decry what they perceive to be a lack of response by international organizations, we have in fact witnessed a measure of international cooperation. In recent weeks, the G20 agreed to work "to ensure the flow of vital medical supplies, critical agricultural products, and other goods and services across borders" and "to resolve disruptions to the global supply chains, to support the health and well-being of all people," and is continuing efforts to identify "longer-term actions. to support the multilateral trading system and expedite economic recovery."

Canada, together with Singapore, Australia and others, committed to keeping supply chains open, and several countries recently detailed plans to facilitate the flow of goods and services as well as the essential movement of people. Twenty-four WTO members issued a joint statement to reinforce international cooperation on trade in agriculture and food products, and forty-two member Ministers committed to exercise restraint and to cooperation in connection with international trade generally. And, several governments participated in the Global Pledging Conference to raise funds to develop and deploy effective diagnostics, treatments and a vaccine and ensure they are universally affordable and available. The EU has floated a collaborative effort to phase out the extraordinary emergency funding that governments have deployed in order to minimize distortions to the playing field of international trade.

The disruption of and distortions to the global trading order, writ large, are not yet front of mind. It can be expected that international trade disputes will proliferate if governments do not direct their attention to the horizon and if economies are permitted to recover in a disjointed and non-collaborative manner. But it is far too early to consider writing off the trading system. Indeed, the COVID-19 crisis may even stimulate a process of reform that might have been impossible to achieve in the absence of a major catalytic event. It is true that some important players are not playing central roles, at least at this stage, but others have not been deterred.

So, What Should Canada Do?

Canada should prepare for a landscape of international competition unlike that which preceded the pandemic. As dependent on international trade as ever, we should continue to promote international cooperation and multilateralism. We should continue to focus on reform of the WTO and other international organizations to strengthen them, including improving their responsiveness to a new world trading order. In the interest of Canadians, Canada must play an assertive, leadership role in the multilateral effort to address global problems with global solutions. 

Originally published May 15, 2020.

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