Renaldo Weekes, Guest Contributor
COVID-19 has been characterised by the disruption of many systems and procedures that the world uses to conduct business and everyday life. It follows, then, that the global economy took a severe hit when the virus spread across the world and forced many countries to close their borders and businesses to halt or slow their operations. Many began to ponder how countries, especially Small Open Economies (SOEs), would survive. Now that a year has passed since the start of the pandemic, many are eager to return to the life we once had. Though this is possible with the availability of vaccines, there is no doubt that COVID-19 has left a scar on the world that may never be healed. In assessing this, we must consider the ways in which trade is impacted. Namely, through scams and Anti-Money Laundering (AML), tourism and immigration, and the acceleration of technological trends.
Scams and Anti-Money Laundering
Scams are schemes used to swindle money out of unsuspecting persons. The money gained from scams are laundered through the bank system in order to legitimize it. AML seeks to prevent the act of laundering money. In the context of the current COVID-19 pandemic, government agencies such as the Federal Trade Commission (FTC) have warned that fraudsters are sending phishing emails, posing as government agencies promising to provide aid in exchange for access to bank accounts.
As many countries and businesses are slow to recover from the pandemic, many persons remain desperate and vulnerable to scammers who continue to exploit the situation. In light of the increase in scam activity at a time when Governments are hyper focused on providing relief, it is imperative that AML procedures are enforced to ensure that fraudsters do not slip by. National Public Radio (NPR) in the United States (US) reported that so many business requested assistance that the government could not properly vet who actually needed assistance and thus, many fraudsters slipped by. How does this relate to trade?
Trade is driven by businesses and individuals located in different countries buying from or selling to each other. AML procedures can persuade persons seeking to do business in other countries. They indicate a jurisdiction’s commitment to stopping money laundering which can be used for things such as acts such as terrorism. Persons must be sure that their assets are safe. Scammers’ abilities to continually slip through the cracks during this crisis unscathed may serve as an indication of weak enforcement of AML procedures. Reviews of internal procedures must be prioritized. This issue is more likely to affect countries with an already undesirable AML rating, especially those that may have had the unfortunate privilege of being included on lists such as the European Union’s (EU) list of non-cooperative jurisdictions. Such lists can restrict foreign investment which is especially important to SOEs.
Tourism and Immigration
Tourism and immigration are two aspects of trade that are sometimes overlooked. Tourism is only associated with vacationing families and immigration associated with persons moving from one country to another permanently. However, there is more to these two areas. Tourism and immigration are predicated on the movement of people across borders and the pandemic has hindered this significantly, but how does this affect trade? We will consider tourism first. Tourism is defined by the UNWTO as “a social, cultural and economic phenomenon which entails the movement of people to countries or places outside their usual environment for personal or business/professional purposes.” It “has to do with their activities” which involves “tourism expenditure.” This definition notes that tourists travel for business, and contribute to expenditure. A paper entitled ‘Tourism and Trade: A Global Agenda for Sustainable Development’ notes that tourism counts as an export for the destination country and import for the tourists country of origin.
Tourism expenditure directly involves several companies such as hotels, travel agencies and tour companies, and self-employed persons who focus on tourists. Indirectly, tourism involves companies that provide services to the aforementioned companies. Part of their success depends on the success of those directly impacted by tourism. It is no secret that tourism is major source of revenue for SOEs, especially those in the Caribbean. A decline in a major revenue earner for SOEs counts toward a decrease in their exports and leads to the disruption of the value chains that exist between companies that are involved in tourism.
In addition to this, tourists aid building the brand of a country. Not only the for the sake of leisure but for the sake of investments. Each product they return home with, review of services and other infrastructure gives insight into the country. Tourists themselves can turn into possible investors. Being physically in a country provides experiences that online-only services cannot provide.
With this coming to a sudden halt during 2020 and some countries struggling to fully reopen, it remains a struggle to regain ground for those that rely on tourism. Though the distribution of vaccines seems promising, there are reports of a third wave of the pandemic in some parts of the world. This third wave will likely result in the reinstatement of lockdowns which will further hinder the regrowth of tourism. The institution of a vaccine passport is another hindrance as those unable to receive the vaccine will not be able to travel. This is especially for those who live in relatively poor countries that must rely on the COVAX facility and the generosity of wealthier nations for vaccine doses.
Immigration, being similar to tourism in terms of the movement of people, is affected in many of the same ways as tourism. Closed borders and the institution of a vaccine passport limit rates of tourism and immigration alike. This notwithstanding, immigration affects trade and concomitant supply links in other in its own ways. Firstly, immigrants add to the number of workers within a country and this increases the capacity of businesses and investment since there would be, in theory, more productivity. Added to this is the fact that immigrants are willing to do jobs that natural born citizens of a country may not be willing to do. For example, immigrants in America perform jobs that native born Americans opt out of. This being the case, immigrants contribute greatly to the export of commodities such as agriculture as this sector is likely to be filled with immigrant workers.
Secondly, immigrants forge links to their home country in their destination country. Immigrants have family and friends in their home country that they send remittances and other products to. In turn, they import products from their home country that may not be otherwise available in their new home. This diasporic link contributes to businesses that specially target immigrants. Recognizing the contributions that immigrants make to both their home country and their resident country, any downturn in immigration can hinder the growth of these trade links.
Acceleration of technological trends
Before the pandemic began, certain practices within the global economy were trending either upward or downward. One such practice that was trending upward was the reliance on technology. The worldwide spread of COVID has pushed a work from home initiative that has made technology more of a necessity in our lives. Many businesses and governments were forced to have more online presence and reshape their operations to have more technological focus. The benefits of this include more fluidity in logistics and operations as there would be less administrative overhead. This translates to better trade fluidity since efficiency would be increased. This is especially important for SOEs that heavily rely on trade. They must have a state of the art customs system that facilitates fluid importation and exportation that serve as the lifeline of the country.
While most persons are concerned with the side effects of the coronavirus on the body, the pandemic itself will prove to have variety of side effects on the global economy at large. It may have been obvious to the majority of persons that the world would have been forced to change as result of a pandemic that has pushed the boundaries of our systems and made reconsider things once considered impossible. However, some persons may not have considered the specific ways in which the world would be changed, especially international trade. In light of increasing scams related directly the pandemic, the current limits placed on tourism and immigration, and the acceleration of trends that were already in place, it is imperative that persons be ready for the stresses and permanent changes that are in place or will be put in place as we prepare to leave COVID behind once and for all and rebuild our society and economy.
Renaldo Weekes is a holder of a BSc. (Sociology and Law) who observes international affairs from his humble, small island home. He has keen interest in how countries try to maneuver across the international political and legal stage.
The views and opinions expressed herein are solely those of the guest author and are not necessarily representative of those of the Caribbean Trade Law & Development Blog.
FEDERAL TRADE COMMISSION WARNING – https://www.ftc.gov/news-events/blogs/business-blog/2021/01/business-owners-latest-covid-scam-directed-you
TOURISM DEFINITION – https://www.unwto.org/glossary-tourism-terms
DO IMMIGRANTS STEAL JOBS? – https://www.brookings.edu/blog/brookings-now/2017/08/24/do-immigrants-steal-jobs-from-american-workers/