The Director General of the World Trade Organization writes: rampant protectionism fears to impact the global economy

Reference News Network reported on May 13th that the Financial Times website published an article on May 8th titled "Protectionism makes everyone poorer under global shocks", written by World Trade Organization Director General Ngozi Okonjo Iwira. The main content is as follows:

The war in Iran led to a shortage of energy, food and fertilizer supplies, which led to a question: will the world's response follow the same path of the early COVID-19 pandemic? At that time, some governments turned to self-protection by implementing export bans and restrictions to ensure domestic vaccine supply. Although these measures were later relaxed, the initial response resulted in poor countries being placed at the bottom of the queue, causing serious consequences.

Similar situations also occurred after the outbreak of the Ukrainian war, disrupting the fertilizer and food markets. In the first two months of the conflict, monitoring by the WTO Secretariat showed that members implemented 53 trade measures, of which nearly three-quarters were restrictive measures. The export ban and restrictions on major commodities (mainly grain, fertilizers, and fuel) have tightened global supply and pushed up prices.

The response measures for the current disruption of shipping in the Strait of Hormuz seem less restrictive. This is a significant transformation. WTO members have once again implemented numerous measures to address supply constraints in energy and related products, fertilizers, and food. Of the approximately 78 measures introduced so far, slightly over 70% are beneficial to trade. These measures include increasing global supply (especially oil, natural gas, and refined oil), while lifting certain export restrictions and simplifying customs procedures.

This more balanced approach indicates that countries are learning from the lessons of previous shocks. In many cases, governments combine trade measures with policies such as fuel subsidies, tax adjustments, and targeted transfer payments to alleviate inflationary pressures on households. Such policies can alleviate domestic impact without excessively restricting global supply. However, restrictive measures account for about 30%, which is still a high proportion.

Faced with repeated shocks and interruptions, the global supply chain has shown adaptability. During the COVID-19 pandemic, the attack on Red Sea shipping and the early disruption of shipping in the Black Sea, the value chain was adjusted by finding alternative routes and suppliers. The initial response to the situation in the Strait of Hormuz suggests that similar patterns may emerge as companies change shipping routes and diversify procurement to maintain trade flows.

In an interconnected system, policy choices in a region can be quickly transmitted to various markets, amplifying fluctuations far from the source. To address these risks, a more forward-looking approach is needed to make global trade more resilient.

This makes cooperation between governments, international organizations, and the private sector crucial. The COVID-19 pandemic shows that the cooperation between vaccine manufacturers, logistics enterprises and WTO, IMF, World Bank, WHO and other institutions can improve transparency, ease bottlenecks and support the gradual lifting of restrictions.

Dealing with future shocks requires the same coordination habits. This includes timely sharing of information, restraining the use of trade restrictions, and engaging more closely with companies engaged in global trade transportation, financing, and insurance.

The opposite of the habit of coordination is the cyclical restrictive measures, which will make the situation of all countries worse.