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Travel restrictions stifle trade and investment, says WTO

“Human mobility constitutes services trade in its own right, while also enabling trade in goods and other services,” reads a thought-piece on the impact of COVID-19 travel restrictions on international trade put together by the secretariat of the World Trade Organization.

The note comes at a time when countries in Europe and elsewhere are tightening up the screws once again on cross-border travel as fears mount of a second wave of the global pandemic.

The WTO has done a mapping exercise of the typical travel restrictions enacted in recent months across the world aimed at halting the spread of the virus. Such restrictions include entry bans, travel guidelines and bans and quarantine requirements.

WHO: Travel restrictions not good instruments to mitigate pandemics

From a health perspective, travel restrictions are not seen as a good instrument to contain the virus, including by the very World Health Organization. The international health body considers that such measures can have some justification at the very beginning of an outbreak to give time to a country to set up mitigation policies.

The WHO has also said that any such restrictions should “be based on a careful risk assessment, be proportionate to the public health risk, be short in duration, and be reconsidered regularly as the situation evolves.”

The WTO think piece shows that the sectors most affected so far are tourism – to the detriment mainly of the world’s poorest countries – and the higher education sector as international student enrolment has dropped as high as 50 to 70 percent in some countries.

Long and short-term economic damages

There are more subtle damages to global economic health.

“Empirical evidence shows that when visa restrictions hamper personal contacts across borders, there is a detrimental effect on both trade and foreign direct investment,” reads the WTO note.

“For instance, with unilateral border restrictions, bilateral trade and FDI have been estimated to fall by 19 and 25 per cent, respectively. If mobility restrictions are symmetrical, the negative effect on trade is larger, at up to 25 per cent, while the impact on FDI is essentially the same as with unilateral restrictions.”

Also: “An increase in the temporary employment of foreign workers generates, over time, significant indirect effects on services trade through other modes of supply, as well as increases in merchandise trade. These effects are a result of skill and technology transfers, the development of specific knowledge, reputation effects, and the creation of networks and contacts abroad.”

Finally: “Empirical evidence from the United States and the European Schengen travel area additionally shows that, although all trade responds significantly to restrictions on international mobility, some types of trade are particularly sensitive, notably services, and particularly those whose production depends on relatively scarce or highly specialized skills, and which emanate from micro, small and medium-sized enterprises (MSMEs) and from non-traditional sources.”

Goods trade has also suffered from the flurry of recent travel restrictions.

“Border closures, the re-imposition of frontier controls and other travel restrictions have … prevented maritime crew disembarkations and changeovers and led to shipping disruptions, affected aircraft operations by requiring the quarantining of crews, and engendered congestion and delays for cross-border freight transport,” the WTO says.

“Due to border closures, some least-developed countries (LDCs) have been reporting difficulties in importing goods other than medical supplies, including foodstuffs, as well as in exporting to neighbouring countries,” reports the WTO.

The travel restrictions have negatively impacted the transport sector too, leading to potential higher costs and less efficient product delivery in future.

The WTO notes that accelerated digitalisation of many transactions, economic activity and human interactions during the pandemic has helped mitigate economic losses – but the sense is that this is only a very partial response which brings its own inefficiencies.

So what is to be done?

Here’s a very polite suggestion by the highly diplomatic WTO:

To better prepare for future crises WTO members could “consider exchanging information on their experiences with travel restrictions and their trade implications, and sharing lessons they may have drawn. This exercise could help governments identify ways to implement travel measures that meet public health protection objectives while keeping trade-distortive effects to a minimum.”



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