By Lubna Olayan, Chair of the Trade and Investment Taskforce at B20 Saudi Arabia, Chair of the Executive Committee at Olayan Financing Company (OFC) and Chair of SABB.

2020 has been a challenging year for the trade and investment community. The multilateral trading system was already under significant pressure from protectionist measures worldwide. The unforeseen COVID-19 crisis and the ensuing global lockdown put additional stress on the global financial sector. And while there have been recent signs of recovery, the virus continues to significantly impact the world with concerns over a “second wave” causing further strain to the global economy. The pandemic has placed the business community in dangerous and uncharted waters, worsened by a 40% decline in foreign investments, with a grim forecast of a further  5-10% decrease next year, according to the June 2020 World Investment Report.

The growing tide of protectionism globally is having a disproportionate impact on the poorest and most vulnerable. This was obvious in the aftermath of the coronavirus outbreak, where the movement of critical goods and services was disrupted, creating a ripple effect on both the personal and financial well-being of people globally. Lockdowns make it extremely difficult for businesses to operate, with start-ups and micro, small and medium-sized enterprises (MSMEs) being particularly hard hit, putting their longevity in serious doubt. In a report released by OECD in July, MSMEs were shown to be facing severe losses in revenues and increasing concerns around their long term prospects, with one-third of them fearing they would be out of business without further support within one month and a half within three months.

Working with business leaders from around the world as the Chair of the Trade and Investment Taskforce at B20 Saudi Arabia – the voice of global business to the G20 – we began evaluating challenges facing these two vital sectors months before COVID-19 struck. Towards the end of last year, we identified several overarching priorities for our group to present to the G20 at its upcoming November meeting, which were brought into even sharper focus by the impact of the pandemic. If adopted, these priorities will play an essential role in restoring the health of the trade and investment sectors. However, this must be a collaborative and sustained effort – not a series of “one-offs” by individual nations – to establish a transparent and rules-based international system that will help spawn economic growth.

As a result of the economic destabilization, geopolitical friction and disruption of current global manufacturing and supply networks, the pandemic will most likely continue to have a significant adverse effect on global trade. Signs already point in that direction. According to the World Trade Organization’s (WTO) Goods Trade Barometer, the global merchandise trade volume declined by 14% between the first and second quarters of this year, and the volume is projected to decline by 13% in 2020,  compared to 2019. Trade and investment can contribute to a rebound after the crisis, especially if the policy environment is conducive to fostering growth, investment, and innovation by embracing several key strategies, which include:

Institute reform of the multilateral system.

We must strengthen the multilateral trade and investment system to support open markets and reverse protectionist trends. This includes implementing reforms to the World Trade Organization (WTO) to enhance the group’s impact and legitimacy with both the public and private sector. Such changes must strive to establish a level playing field for all businesses – large and small – in the pursuit of open and fair competition, considering each country’s capabilities and level of development.  Investment facilitation should be promoted to provide a non-discriminatory, predictable and transparent investment climate for the investors.

Establish a level playing field for e-commerce through enhanced digitalization.

The pandemic created an overwhelming demand for the digital and telecommunications sector. This pressure demonstrated the need for a more robust digital infrastructure, international rules for operating it and enhanced training and education to build the digital skills required to operate in a post-pandemic world. It will be important to foster the expansion of e-commerce by establishing inclusive and fair standards that take into consideration MSMEs, start-ups, and developing economies.

Promote the services sector.

Like many other industries, the services sector felt the impact of the crisis and its recovery could help reinvigorate the global economy. Industries like tourism have been particularly hard hit, recording a loss of US$320 billion in international tourism receipts between January and May.   Business and government must align to strengthen investment opportunities in all sectors, particularly in the tourism and travel-related sectors, by committing to reduce administrative hurdles and domestic market protection policies and to minimize restrictions for essential travel.

Facilitate trade finance.

A critical element of an enabling trade environment is the availability of trade finance.  There was a US$1.5 trillion trade finance gap before the pandemic, and the crisis has increased that funding gap. Trade finance should be made readily available, especially to MSMEs, by bringing forward the proposed Basel 3 reduction in risk-weights for MSME exposures from 100% to a range between 75-85%.

Develop actions to make trade and investment more sustainable.

Rebuilding the global economy post-COVID-19 requires aligning new trade and investment rules with other international initiatives to “build back better”. The international community can do that by closing the financing gap, monitoring the impact of trade agreements on the climate, and reinforcing the contribution of international trade to ensuring a smooth transition for sustainable, diversified economic development. By doing so, trade and investment can play a vital role in supporting the UN’s Sustainable Development Goals and contribute to fighting climate change.

According to research from BCG, our Knowledge Partner, and Co-Chair HSBC, the world stands to gain an increase of $5-6 trillion in trade value, with respect to trade numbers in April 2020, and associated $8-10 trillion of GDP growth by 2025, if we embrace an open and fair trading system, cut red tape, and refrain from adding restrictive measures. The world is at a critical point. Governments and businesses must shape effective trade and investment responses to the immediate crisis, but it will take more than a ‘band-aid’ solution. It has never been more important to look ahead and to transform the current system of trade and investment, making it more inclusive and more sustainable for the future of global economies. It would be a terrible shame simply to return to business as usual. Amidst the tragedy and challenges, the pandemic affords us a unique opportunity to reset and create a new and better normal, an opportunity that we must seize.