30 OCT,2023 | MEDC
The global economy continues to recover from the pandemic, the Ukraine crisis, and rising inflationary scenarios everywhere. The ongoing conflict in the Middle East has added a new dimension to this picture. In retrospect, remarkable economic resilience has been witnessed, all over the world, and especially in India. Despite war-disrupted energy and food markets and an unprecedented monetary tightening to combat record high (and sticky) inflation, economic activity has not stalled anywhere. Growth may be slow and uneven, with widening divergences, but it is still occurring everywhere.
In this scenario, the need of the hour is to strengthen supply chains all over the world, particularly in Asia. Unless trade resilience is enhanced, the chances of a global economic recovery remain slim. That may necessitate revitalizing the existing international economic corridors or setting up new ones. The increasing significance of cross-country connectivity in enhancing trade, investment and regional cooperation should not be underestimated. Through the recent setting up of the India – Middle East – Europe economic corridor, India has done well in this regard. No doubt, there are simmering geopolitical tensions in this region, but some way out will need to be found.
It is imperative to understand that trade facilitation is now more crucial than ever before, and it merits a new and broader approach to supply chain dynamics. The complementary role of physical connectivity, including transportation infrastructure and international regulations, and trade facilitation, including tariff structures and border customs procedures needs to be understood. While the importance of each of them in boosting global trade is undeniable, the connection between them in policy discussions is not always appreciated. That needs to change.
Today the global economy is limping rather than sprinting. Barriers to trade facilitation are playing a key role in it. The sooner they are dismantled, the better for economic growth everywhere. But the near-term outlook remains bright. The likelihood of a soft landing for the global economy (including labor markets) has increased. Simultaneously, important divergences are appearing, leaving economic activity in some regions much below their pre-pandemic projections. The slowdown is more pronounced in advanced economies, rather than their emerging market counterparts which have proved remarkably resilient, with the notable exception of China.
Economies across Asia are seeking to enhance trade within and outside their region. That will enable them to further domestic socioeconomic objectives. However, that will necessitate a lot of internal and external coordination to develop suitable trade infrastructure, including regulation. A unified and coordinated approach is necessary for effective trade and transport facilitation. It will also require bilateral coordination, especially for countries sharing borders, to ensure synchronized growth and avoid supply chain disruptions.
Technology matters and the adoption of paperless trade practices should be encouraged. Covid-19 highlighted the importance of adopting digital trade practices at all levels. Embracing globally accepted frameworks on cross-border paperless trade can address supply chain issues and promote resilient, sustainable, and inclusive economic growth. We do not have the luxury of time. The sooner trade resilience is enhanced, the better it will be for the global economy.
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