With the spotlight on the Sino-US tariff war, a worrying trade policy dynamic implicating many countries has been overlooked.
With the twists and turns of the Sino-US bilateral tariff war garnering headlines, another far-reaching trade policy development in 2019 has not received the attention it deserves. In a nutshell, momentum behind market-opening reforms has waned significantly, in particular in the large emerging markets. This development limits the gains that exports and foreign investment can bring to national economies at all stages of development. As experts and officials gather in Washington, D.C. for the IMF-World Bank Annual Meetings, they should dwell on what this under-reported dynamic means for the trajectory of the world economy.
For the first time in seven years, according to data collected by the Global Trade Alert team, worldwide there has been a sharp fall in the total number of commercial policy reforms implemented that open markets and reduce favouritism towards local firms. Compared to the first ten months of 2018, the number of new trade, investment and other commercial reforms is down 25% this year (see figure below). Moreover, of the 270 reforms recorded this year, 16 have already lapsed.
Governments have become more reluctant to open up local markets to foreign traders and investors. The total number of initiatives implemented that cut import taxes is down 39 this year when compared to the same period in 2018. Meanwhile, such are the fears about the downside of multinational companies and the like that the number of foreign direct investment (FDI) reforms introduced this year is half that witnessed over the same period last year. Lastly, government steps to boost exports, a major but often overlooked feature of some nations’ commercial policy response to the crisis, are being reversed at a much slower rate this year.