By Volkan Sezgin

“Trade diplomacy should be based more on digital trade activities, and trade agreements should increase the use of digital means and seek ways to boost bilateral trade using digital technologies blockchain and AI.” GDL member Volkan Sezgin pitched at the Falling Walls Lab.

The COVID-19 pandemic will be remembered for its human cost, disruption to the global economies and various trade restrictions. The outbreak pushed some economies into recession while others were financial difficulties due to the continuous fight against the pandemic. The Economist, for instance, found that the outbreak could have particularly detrimental effects on the economies of developing countries.  As the health crisis unfolded, some economists have argued that trade policies can be part of the solution or part of the problem (Baldwin and Eiichi, 2020; Bown, 2020; Gonzalez, 2020; Evenett, 2020; Mattoo and Ruta, 2020).

The effects of the pandemic on global trade relations seem complex. In the early phase of the pandemic, most developed and emerging market economies strived to protect their economies by applying different types of trade restrictions, travel bans, border closures, export and import bans, limitations on trade conferences and fairs, application of curfews for seamen and traders, among others.

Export bans to protect domestic markets have caused local prices to increase and limit the supply of personal protective equipment (PPE), such as masks, gowns gloves.

Major concern announced by World Trade Organization (WTO) was that these restrictions can be contagious: country applying a trade restriction on goods originating from other countries can trigger those countries to do the same, exacerbating the initial shock and leading to further price escalation – a “multiplier effect” as documented in the 2007-2008 food price crisis.

In short, traditional trade diplomacy, which can be defined as negotiating and promoting trade and investments mostly through face-to-face interactions, almost stopped functioning during the outbreak. Oldschool commercial diplomacy was barely successful in removing disruptions in global supply and value chains, and it could not offset shortages of goods PPEs, particularly in the early stage of the pandemic.

At the same time, the pandemic paved the way for restructuring oldfashioned, non-digital trade diplomacy, as digital trade accelerated mostly due to outbreak-related limitations.

Trade agreements, which lie the heart of commercial diplomacy, should focus more on involving digital technologies. For example, countries can increase their usage of digital technologies blockchain and Artificial Intelligence (AI) eas customs and trade operations. We know that some custom authorities already started applying blockchain technologies. At this juncture, new technologies into modern-age trade agreements may level up global trade.

It might be a good time to consider organizing more digital (remote) trade activities, such as trade fairs and conferences. Traders can easily meet with peers and attend trade organiations through digital channels, which would reduce time and money spent on international travel and pompous events. Negotiations on trade deals can also be held through digital channels. E-commerce and digital trading can be encouraged by local governments through incentives, such as financial support to firms/start-ups which engage in e-commerce.

In addition, an urgent umbrella agreement can help health-related intellectual property rights (IPR) – particularly causing unfair vaccine distribution. This can be realied updating WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which could allow an easy circulation of health materials when in need. Also, it would be advisable for the WTO to initiate another legal arrangement to international health investments and thereby reduce the detrimental effects of any pandemics. 

We are aware that it is rather early to evaluate the real impacts of the outbreak on international trade. Yet whether or not the COVID-19 pandemic is over soon, rapid digitalisation requires the reformation of oldfashioned non-digital trade diplomacy nd it is obvious that countries which miss the digitaliation train will lose out.

Many achievements can be accomplished by breaking the walls of oldschool, non-digital trade diplomacy. Commercial diplomacy can save lives, accelerate and ease customs practices, solve IPR issues, save time and money foster e-commerce activities. We should turn the challenge posed by the pandemic into an opportunity to speed up this transformation.

About the author:

Volkan Sezgin is an economic expert and advisor at the US Mission in Turkey and has been specialising in the economic field for all of his life. He holds not only a bachelor’s degree but also a master’s degree in science and technology policy studies from the Middle East Technical University as well as a master’s degree and a PhD in economics from the University of Rome Tor Vergata.

Published on January 20, 2022.

Photo credit: Mark Beckmann