Category Archives: Policy Brief

Ewa Björling, Andreas Hatzigeorgiou, Magnus Lodefalk & Fredrik Sjöholm on ‘COVID-19 and the Consequences for Free Trade’. GLO Policy Brief No. 3.

GLO Policy Brief No. 3 – Special theme: COVID-19 and policy implications

COVID-19 and the Consequences for Free Trade

by
Ewa Björling, Andreas Hatzigeorgiou, Magnus Lodefalk & Fredrik Sjöholm

The response to the COVID-19 pandemic has disrupted global trade, investment and value chains. There is a risk that newly imposed barriers to international trade and mobility will become permanent. Research shows that veiled protectionism in the wake of the COVID-19 pandemic would be associated with greater risks and impede the economic recovery needed to avoid a new economic depression. We argue that failing to reboot free trade and to restore global value chains could aggravate an already difficult and delicate situation in regard to global economic development and poverty reduction. In order to reboot globalization, however, there needs to be a new approach. Simply going over old ground would be insufficient.
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  • Ewa Björling, MD, Associate Professor of Virology, Sweden’s Minister for Trade 2007-2014.
  • Andreas Hatzigeorgiou, PhD, CEO of the Stockholm Chamber of Commerce.
  • Magnus Lodefalk, PhD, Associate Professor of Economics, Örebro University; Ratio Institute, Sweden; and Fellow of the Global Labor Organization.
  • Fredrik Sjöholm, PhD, Professor of International Economics, Lund University, and the Research Institute of Industrial Economics, Sweden.

What we should know

  • Restrictions and lockdowns to address the COVID-19 pandemic have disrupted international markets and global value chains. The travel and trade restrictions imposed by many countries are extreme and unusual both in nature and their implementation, wreaking havoc on global trade and investment flows. These restrictions have been adopted despite lack of evidence of their effectiveness. Some measures go against the guidance by the World Health Organization (WHO) and the World Trade Organization (WTO).
  • Protectionism and anti-globalization tides have been rising already before the COVID-19 pandemic, with Brexit and the China-U.S. trade war, as two examples. The policy response to the pandemic now risks to make the situation worse and constitutes a major disruption to global trade, investment and value chains. Early economic indicators suggest that this disruption is severely hurting growth and employment (Gopinath 2020).
  • Global poverty and inequality are grounds for justifiable concerns. Research suggests that failing to ensure free and predictable markets would be associated with significant risks to poverty and inequality.
  • Many policies to combat the coronavirus pandemic are actually causing both short-term problems for fighting the pandemic, as well as risks in regard to economic recovery, employment, development and poverty reduction over the medium and long term (Evenett 2020, Hoekman et al 2020, Zimmermann et al. 2020).
  • Difficulties in getting supplies of medical equipment have triggered an increased interest in de-globalizing value chains (Miroudot 2020). Already before the pandemic, companies and countries were considering a regionalization or even a nationalization of global value chains. This due to a more adverse trade policy environment, rising wages in manufacturing strongholds and technological advances, e.g., in automation.

The state of free trade in the wake of COVID-19

  • Unilaterally imposing high travel and trade barriers creates uncertainty for exporters and importers of goods and services, as well as for foreign investors. Research indicates that uncertainty about the stability of the rules of the game has a major negative impact on trade and investment, beyond the barriers imposed by the rules themselves (see, e.g., Handley and Limao 2013).
  • Temporary policies risk becoming permanent. They could become precedents for trade barriers and unilateralism in the future.
  • Asymmetric timing for when countries reopen and assymetric epidemiological strategies, pose real risks of triggering protectionism (Bown 2020). For example, when one country is back to full production and shipping, countries that still have not reopened their economies will likely face rising pressure to ‘protect’ domestic businesses.
  • Less-developed countries are more exposed to the risks associated with a failure to reboot and revitalize international trade, investment and value chains. They often face additional difficulties in handling the pandemic itself because of their relatively weaker health care systems. Existing and new trade barriers, such as export restrictions on medical products and food, will exacerbate this situation (Hoekman et al. 2020). Moreover, capital is now fleeing from poor to richer countries. The poorest and most debt-ridden countries can thus be hit twice in the form of the pandemic, and globalization in reverse.

A reboot and a new approach to globalization is needed

  • In the short term, a coordinated approach among the major economies on measures to address both the pandemic and its economic consequences are needed. A first step should be to tear down the border and trade barriers put up in the wake of the pandemic (Stellinger et al 2020).
  • In the short to medium term, it is necessary to formulate a strategy to reduce the risks from asymmetric timing in reopening and from differences in the fight against the pandemic.
  • A head-on measure would be to introduce a new free trade and investment agreement that abolish all tariffs and other barriers to trade and investment in pharmaceuticals, medical devices, and other equipment used to prevent or combat pandemics (Bown 2020b, Stellinger et al 2020).
  • Business leaders should act to encourage more resilient and sustainable global value chains, for example by having more suppliers, warehouses and using modern technology to monitor the chains and their resilience in real time (Miroudot 2020). This would be a win-win for the climate and for economic growth.
  • Governments must refrain from top-down attempts to address current and future difficulties of getting supplies by reshoring production of various goods and services (Stellinger et al. 2020). There is ample research on the harmfulness of import-substitution policies.
  • In the longer term, countries need to safeguard both global health and prosperity through common strategies and commitments, concrete measures for future crises and mechanisms for consultations. New and even more serious pandemics cannot be excluded. Countries will have to be able to act quickly, in a coordinated fashion and in a transparent way.
  • A new approach is needed to reboot and revitalize globalization, with the aim to design a system which reduces the risk of both pandemics and protectionism.
  • Mechanisms for applying and enforcing stringent requirements on countries to live up to standards and obligations put in place to minimize the risk of pandemics should be evaluated.
  • The concept of sustainability within the global trading system could be extended to encompass not only environmental and social aspects, but also aspects that more clearly impact public health and epidemiological risks. Increased cross-institutional links between bodies such as the WHO and the WTO should also be created to promote knowledge exchange and technical assistance.

The policy response to the COVID-19 pandemic has disrupted international markets. However, simply restoring free trade would mean ignoring massive human suffering caused by the COVID-19 pandemic. A new approach is needed to reboot and revitalize globalization, with the aim to design a system which reduces the risk of both pandemics and protectionism. Leaders and policymakers must make concerted efforts to: carefully lift restrictions on travel and trade while protecting health; commit to liberalize essential trade  for fighting pandemics; address how to deal with calls for protecting domestic industries in the presence of asymmetric economic reopening; and sustain international yet resilient value chains. The aim should be to develop the international trading system to both reduce the risks of pandemics and protectionism.
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References

Bown, C. (2020a). “COVID-19 could bring down the trading system: How to stop protectionism from running amok.”, Foreign Affairs, May/June 2020.

Bown, C. (2020b). “How the G20 can strengthen access to vital medical supplies in the fight against COVID-19.”, Trade and Investment Policy Watch, Peterson Institute for International Economics.

Evenett, S. (2020). “Sickening your neighbor: Export restraints on medical supplies during a pandemic.”, VoxEU, CEPR.

Gopinath, G (2020). “The Great Lockdown: Worst economic downturn since the Great Depression.”, IMF.

Handley, K. and N Limao (2013). “Does policy uncertainty reduce economic activity? Insights and evidence from large trade reforms.”, VoxEU, CEPR.

Hoekman, B.M., Fiorini, M. and A. Yildirim (2020). “Export restrictions: a negative-sum policy response to the COVID-19 crisis.”, EUI RSCAS Working Paper 2020/23.

Miroudot, S. (2020). “Resilience versus robustness in global value chains: Some policy implications.” in Baldwin, R.E. and S.J. Evenett (eds.) (2020). COVID-19 and trade policy: Why turning inward won’t work. VoxEU.org eBook, CEPR Press.

Stellinger, A., Berglund, I. and H. Isakson (2020). “How trade can fight the pandemic and contribute to global health.” in Baldwin, R.E. and S.J. Evenett (eds.) (2020). COVID-19 and trade policy: Why turning inward won’t work. VoxEU.org eBook, CEPR Press.

Zimmermann, K.F., Karabulut, G., Bilgin, M.H. and A.C. Doker (2020). “Inter-country distancing, globalization and the coronavirus pandemic“, The World Economy, OPEN ACCESS, forthcoming. PREPUBLICATION VERSION

NOTE: The opinions expressed here are those of the author and not of the GLO, which has no institutional position.

More from the GLO Coronavirus Cluster

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Azita Berar on ‘Youth Policies: time to change the policy narratives!’. GLO Policy Brief No. 2.

Azita Berar is Director Policy of the Global Labor Organization (GLO), and Senior Fellow, Graduate Institute of International and Development Studies, Geneva.

GLO Policy Brief No. 2 – Theme 4. Youth Employment


Youth Policies: time to change the policy narratives!

by Azita Berar

Recent waves of unrelenting protests, in major cities around the world, express shared grievances and demands for change,  even if each has its specificities. Anger against inequalities, social injustice and corruption, and loss of trust in institutions and their leadership rekindle demands for decent job opportunities, access to quality public services, democratic participation and reform of institutions. For most observers, these protests look like a resurgence of the stalled “Arab spring”  uprisings, of the “indignados” outbursts, or of the “occupy movement” of the early years of the current decade. Then and now, multiple social-economic groups  took part in the protests. But, then and now, youth, who have particularly experienced the downward spiral in economic and social opportunities, are at the forefront of mobilizations demanding systemic changes.
The outbreaks, whatever the immediate reason that sparked each, are a reminder that the predicaments of youth transitions, in work, society and polity, brought to the fore by the 2008 global financial crisis, remain unresolved.
Reviewing the policy responses put in place in this decade, we argue for a change in the  prevailing policy narratives around youth at the national and global levels. In particular,  we advocate for: a) recognizing the structural nature of the crisis that calls for a systemic response, and b) undoing the present compartmentalization of policy responses and c) dissociating the security and development discourses whose merger prevents and disorients the search for effective solutions.
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What we should know

  • The 2008 global financial and economic crisis, and the recession that it triggered, generated an unprecedented  impact on youth in labour markets, characterized then as  the “scarred generation” or “lost generation”.[1] Attention to youth employment heightened again during the Arab uprisings, which started in Tunisia in 2010 and then spread to several countries in the Middle East and North Africa.[2] Emphasis was laid first and foremost on the scale and length of youth unemployment” hitting newcomers to labour markets starting their transition from school to work. More sophisticated diagnoses applying a range of unconventional indicators of quality of jobs, revealed a more profound and pervasive youth employment crisis than that expressed in open unemployment. The lack of “decent work” was brought out. Emphasis was  laid on the millions of young women and men who have  jobs  that are unstable, temporary,  low-paid, do not give access to social protection and most importantly do not  allow for upward social mobility.
  • The latest global indicators show that youth continue to be disproportionately represented  among the informal workers,  the working poor, and the low paid workers.[3] Together with the new SDG indicator for youth who are neither in employment, education nor training (NEET), these trends monitored over a decade bring out a gradual and  steady structural deterioration in the terms and conditions of youth integration in labour markets.
  • This crisis is affecting not only the most disadvantaged or low skilled but also tertiary education graduates. It is no surprise therefore, that the Future of work is looked at with angst, including by the most educated generation of youth that the world has ever had.[4]
  • The global reach of the current youth employment crisis is unprecedented. Hardly any country in the world, across regions and levels of income, is left immune to one manifestation or another  of the predicament. The issue is of concern as much to countries where youth represent more than half of the total population as to those where ageing is advanced (Japan, Italy). It touches post-industrial disaffected cities in the Global North as much as rural and informal economies in the Global South.
  • Policy response to the 2008 crisis, short-lived coordinated macro-economic stimulation measures at the global level,[5] followed by a longer entrenched period of austerity measures, did not address issues at the core of the youth employment crisis. At best, it stabilized the situation in some countries, preventing further aggravation of the crisis and alleviating  some of the burden for the most vulnerable groups. Available studies however show that even the best did not attain the needed scale and impact.
  • Numerous youth initiatives were also launched in the current decade, by governments, including some in partnership with the private sector, and by  regional and international organizations. Reviews show that large gaps persist however, between policy announcements and actions and between  actual investments and the scale of the challenge at hand. Most actions focus on the most vulnerable and at times, on the most vocal. Few systematic and transparent evaluations are carried out of the effectiveness of implemented policies and programmes.

Time to change the policy narratives

  • Aside from the effectiveness of and accountability for different approaches and initiatives, we argue that the predominant policy narratives either misdiagnose the nature of the crises in youth transitions, or are incoherent and compartmentalized.  And sometimes, they  defeat the purpose they want to serve and add to layers of discrimination and polarization of and amongst youth. Three points are made in this regard.
  • First , the crisis has become structural. While low or negative growth episodes affect youth employment, observations since 2008, clearly confirm that the phenomenon is not only conjunctural. Fluctuations in indicators can not be explained by cycles of boom and bust and policy response to the recessions alone. The new waves of disruptive technological transformations associated with Industry 4.0 do not provide the explanation either,  since they did not yet produce a massive impact in developing economies.
  • The crisis is within the global economic model that is not delivering on social and intergenerational upward mobility. Youth are particularly exposed as new and latecomers into the labour market under highly competitive and polarizing forces. At the start of their multiple transitions in society,  youth feel most deeply the widening gap between aspirations and opportunities open to them. Their interface with the labour markets in particular shapes other transitions in the society and their vision of the institutions.
  • Recognizing the structural nature of the crisis, it is clear that anything short of a systemic “new deal”, defined at national and global levels would not measure up to the challenge. Several versions of the new deal have been recently proposed for policy debate.[6] They include green new deals or investments in the care economy that aim to stimulate the innovation and decent job creation potential, on the one hand, and the redistribution of social protections and access to services, on the other.
  • Secondly, we need to reverse the compartmentalization in youth policy narratives. Most surveys and diagnostic studies carried out in very different contexts  have pointed  to the multi-dimensional nature of the youth employment challenge in all local contexts. Yet, there is a marked preference and obstinate inclination by policy makers, public and private, to emphasize and address one factor only in each situation  to the exclusion of others. The “over-bloated” public sector employment in the Middle East and North Africa for example, or the business environment for start-ups, lack of level playing field for small and medium enterprises (SME), skills mismatches, the proliferation of tertiary education at the expense of vocational and apprenticeship schemes or youth behavior and unrealistic expectations, are among factors that are typically singled out. Such single-minded analyses have led to unifocal and distorted policy interventions,  at a time when inter-sectoral, mutually coherent and balanced diagnoses and responses are called for.
  • The third trend is the increasing securitization discourse that has taken shape in national and international contexts. Unlike in the previous narrative, where youth’s potential of creativity and innovation is constrained by the environment and/or their own misguided behavior, in this one, youth, in particular the unemployed, disenfranchised and the migrant among them, are seen as  a threat to security and public order. Hence,  responses that prioritize security, repression and exclusion which can further encroach upon rights and restrain civic and political spaces for  participation.
    Turning the securitization narrative on its head is to give space for the expression of  frustrations and to lay a rights-based platform for dialogue and for seeking positive solutions. It is the multiple insecurities that young women and men experience that should be addressed as a matter of immediate priority. 

Recent waves of mass protests in major cities show that deeply entrenched frustrations will not go away by themselves. Populations no longer accept makeshift and partial solutions. They are not ready to operate within the existing parameters of the exercise of power established by ruling elites and the institutions that serve them.
While  all generations are concerned with the range of existential questions at hand,  youth are clearly leading the civic movements claiming more inclusive and sustainable models of development and governance.
Changing the policy narratives on the role and place of youth in work, society and polity is a necessary first step in the search for real responses to their predicament.
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[1] ILO, Global Employment Trends for Youth- the update, 2011.
[2] UNU-WIDER, Youth unemployment and the Arab Spring, 2011
[3] ILO, Global Employmenment Trends for Youth 2017: Paths to a better working future.
[4] UNESCO, Global Education Monitoring Report 2019.
[5] Except for China which sustained stimuli packages for a longer period.
[6] For example:  Marianna Mazzucatto’s « mission oriented” investment and innovation; UNCTAD, Trade and Development report 2019. Financing a Global Green New Deal; N. Klein, On Fire: The ( Burning) Case for a Green New Deal. 2019; J. Rifkin, The Green New Deal, 2019.

NOTE: The opinions expressed here are those of the author and not of the GLO, which has no institutional position.

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Azita Berar on ‘Automation, jobs and inequality’. GLO Policy Brief No. 1.

Azita Berar is Director Policy of the Global Labor Organization (GLO), and Senior Fellow, Graduate Institute of International and Development Studies, Geneva.

GLO Policy Brief No. 1 – Theme 3. Future of Work


Automation, jobs and inequality

by Azita Berar

There is growing apprehension about new waves of technological development in particular about the implications of increasing automation and use of robotics  displacing human labour. To date, research and policy debate have mostly focused on the estimation of potential job losses that such technologies will entail sometimes with alarmist conclusions. We argue for considering a broader frame of analysis for research and policy that takes account of wider economic and societal implications, including the distributional issues and the need for policy to re-engineer new and evolving social institutions.
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What we should know

  • Recent empirical studies (see selected references below) have focused mostly on the job destruction and substitution impact in the US, other advanced countries and in a few emerging economies. Through different methodologies applied and assumptions made to project potential job losses, they reach very different conclusions about the number of jobs and/or the types of jobs that will be substituted. Their estimates vary greatly – by no less than 5 times amongst the most alarmist and the lowest band – even when focusing on the same economy and/ or sector.
  • The new job creation impact of automation within the same sector or the broader economy is usually underestimated. There are examples of  automation technology widely used today that clearly show the positive net job creation and economic expansion. The most cited example is the ATM innovation in the banking sector dispensing human tellers. There has been massive redeployment and upgrading of jobs of former tellers to offer different and higher quality banking products and services. Productivity gains have been invested in the expansion of the sector, in turn leading to new jobs and incomes within and outside the sector.
  • Another fast-evolving technological innovation is “co-bots”, where robots “co- work” along with (or assist) human workers. Used in the automotive and the health industry for example, these have contributed to reducing the drudgery and improving the quality of jobs for humans. And potentially leading to as many new jobs for humans as the use of this type of automation spreads.
  • It is also important to distinguish between the availability of technology that could  replace or displace a certain job/task – a starting premise of recent projections on automation induced job losses – and the probability that the technology will be adopted on a large scale replacing all such jobs/ tasks. There are gaps, sometimes very significant, between the two. This gap is larger in developing countries and amongst them, where as noted, there has been relatively little research. And where the diffusion and impact of automation can not be deducted from current estimates focusing on a limited set of countries and sectors.
  • An interplay of multiple factors pushing in different directions determines the pace and scale of adoption of automation innovation that goes beyond a simple comparison of relative cost among robots and human labour.
  • Understanding the decision-making process of managers and investors in the spread and large-scale adoption of automation is also key. Rarely, automation alone, in the absence of a broader firm strategy,  provides the competitive edge for increased profitability and productivity.
  • There are also wide sectoral variations in the nature of automation innovation and the dynamics of job, income and productivity gains and losses that could incur. A sector/industry focus would shed more light into specific dynamics.  Another under-researched area is the dissemination of technology within sectors and across borders including through global supply chains in highly globalized industries.
  • From a societal perspective, the key issue is how the productivity gains will be invested and/or distributed and through which mechanisms and institutions. This is highly important not from the angle of equity but for sustaining demand in the medium to long term.
  • Throughout previous waves of industrial revolutions and technological disruptions, starting with the mechanization of spinning and weaving in Britain’s textile industry the mid-18th century, there has been apprehension with regard to destruction of jobs and distribution of wealth and well-being. Then and now, there has been a sharp divide between optimists and pessimists! Looking back the reality has overtaken all projected scenarios in very different directions but it has also led to social engineering, policy innovations and the creation of new institutions to tackle wider societal implications.

Will it be different this time? Context and policy matter.

Automation in unequal and polarized environment

  • This new round of rapid automation innovations is taking place amidst a highly polarized environment.
  • Labour markets remain tight: globally 192 million people are unemployed of which over 70 million are young women and men. In many instances, the youth unemployment rate is three times higher than adult unemployment and female unemployment twice that of male unemployment. And these figures do not take into account the “discouraged workers”, those who have given up looking for a job. Quality of jobs is a concern. About 1.4 billion people are working in “vulnerable forms” of employment (own-account workers and contributing family workers) and this number is on the rise. Informality is widespread particularly in developing and emerging countries, where it reaches more than 60 per cent of total employment. There are large segments of population affected by “working poverty”, those who work but are trapped in poverty.
  • Rising inequality and polarization: in the last two decades, most regions have experienced an increase in income inequality. During the same period, there has been a decline in the share of income that goes to labour relative to capital. And this pattern has persisted while labour productivity has increased. Concerns with hollowing out of the middle class and income polarization along different groups of population galvanizes headlines regularly and feed into social unrest. These trends left unattended, automation is likely to exacerbate the inequalities and vulnerabilities and entail more apprehension, whether founded or not on evidence, and more resistance to change.

A broader policy and research agenda

  • For a more positive outlook into the future of automation and work in this environment, there is a need for a broader value-driven policy and research agenda that  engages multiple actors, spans to other geographies and provides a more integrated perspective. Beyond net job destruction and creation counts, induced by automation, distribution of jobs and skills, productivity and income gains should be the focus of research and policy.
  • Space for dialogues. There are examples of how more acceptable and equitable outcomes can be negotiated through social dialogue. The highly automated Hamburg Port is a case in point. Advanced automation has been accompanied by internal redeployment of employees to other jobs and tasks, their re-skilling and up-skilling packages, and redistribution of productivity gains through new working time arrangements and wage compensations.
  • Another innovative form of dialogue to explore, is dialogue among scientists and technology innovators with the research community in economic and social sciences.
  • Transition policies should become permanent features of public policy action and enterprise strategies, facilitating redeployment within firm, sector or economy. Use of  fiscal policies as well as private sector financing  can support active transitions in particular for those made vulnerable to automation, and who are in structural disadvantage in the labour markets.
  • Expansion and distribution of learning and re-skilling opportunities as automation and other technological innovations require different and continuously evolving  set of skills. Their accessibility to those who need them most can be powerful means to reduce inequalities.

The challenges of disruption in labour markets as a result of new waves of automation are real but more complex than a narrow focus on the potential job displacement and job creation impact. While this time too, the future may evolve in unpredictable ways, there is a need for a broader policy and research agenda and actions that accompany these transformations. In the polarized environment of today and the rapid pace of technological innovation, the time is now and the time span is limited to invest in new social engineering  and cooperative mechanisms that create more equitable and sustainable outcomes.

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Arntz, Melanie; Gregory; Terry; Zierahn, Ulrich. 2016. “The risk of automation for jobs in OECD Countries: A comparative analysis”, OECD Social, Employment and Migration Working Paper No. 189. Paris, OECD Publishing.

Frey, Carl Benedikt; Osborne, Michael. 2013. “The future of employment: How susceptible are jobs to computerisation?”, Oxford, Oxford Martin Programme on Technology and Employment, a revised version of which was published in 2017 in Technological Forecasting and Social Change, Vol. 114.

ILO, Employment Policy Brief 2017. New automation technologies and job creation and destruction dynamics.

McKinsey Global Institute. 2017. A future that works: automation, employment, and productivity.

World Economic Forum. 2018. The Future of Jobs Report 2018.

World Bank. 2016. World development report 2016: Digital dividend. Washington DC, World Bank.

NOTE: The opinions expressed here are those of the author and not of the GLO, which has no institutional position.

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