COVID-19, Health, Writing

The supply of COVID-19 vaccines has improved, but has demand for it saturated in India?

This article was co-authored with Oommen C. Kurian

Latest available data indicates that India has administered 699.6 million first doses and 286.3 million second doses of COVID-19 vaccines to its adult population. The coverage is markedly higher amongst the 45+ population (Graph 1), with about 80 percent within the age group having received at least one dose, and more than 40 percent fully vaccinated. The Government of India’s goal is to vaccinate all adults against COVID-19 by 31 December 2021, and therefore, the pace of vaccination in the last quarter is of importance.

 Graph 1: Vaccination Coverage Across Age and Occupational Categories

Source: https://www.orfonline.org/vaccine-tracker/

The numbers in the recent weeks have been disappointing. Instead of accelerating to the required average daily vaccination rate of more than 11 million per day (required on October 1), the number of daily vaccine doses administered has shown a stagnation and, indeed, a decline. From 8.2 million doses on 8 October, the daily numbers have declined considerably, taking down the seven-day moving average from 6 million per day to 3.9 million per day on 18 October. While the festivities across the country may be part of the explanation, there are clearly other factors at play, which may undermine the 31 December target that the Government of India has set for itself. This, therefore, needs to be explored in-depth; the possible reasons behind such a surprising slowdown in the vaccine uptake uncovered and remedial measures instituted need to be examined.

Graph 2: Number of Vaccine Doses Administered per Day

Source: https://dashboard.cowin.gov.in/   

Is the decline in numbers due to supply constraints?

While it is a legitimate question to ask, given the history of delays in capacity ramp up for different vaccines in India, this does not seem to be the driver of the slowdown. A look at the unutilised vaccine doses still available within the vaccine cold-chain—the difference between doses supplied to the states and those administered—strongly points to this. A weekly analysis of the available doses with the states (Graph 3) shows that there is substantial build-up of vaccine inventory at the state level. During a month between 15 September and 14 October, the doses available with states almost doubled from 46.3 million to 88.9 million. The data made available on 18 October indicates that there are currently 107.2 million doses awaiting to be administered at the states and union territories. This trend indicates one possibility: There is a strong tapering off of demand for COVID-19 vaccines.

Earlier this year, at the beginning of the vaccination drive, when both number of cases and deaths were low, there was a distinct lack of demand for vaccines, which shot up only with the surge in cases. However, with more than 70 percent adult Indians already vaccinated with one dose, this may not be the major contributor. Demand may be flagging as many Indian states may have already reached almost all of the “willing” adults with one dose at least. Perhaps the undecided and the ‘vaccine hesitants’ are now the ones left and the tapering of numbers could be an outcome of this.

Graph 3: Weekly Analysis of Doses Available in the State-level Cold Chains

Source: Compiled by authors from daily PIB releases.

Weekly vaccination data disaggregated by doses from the 1st of September onwards (Graph 4) underlines this possibility. As a proportion of the weekly doses, first doses are on a clear decline over the last six weeks. In the first week of September, first doses constituted almost 70 percent of total vaccinations, but in the second week of October, it was just over 50 percent. This could only mean that the vaccination drive in many parts of the country may have already reached the easy-to-reach population. Vaccinating all of the remaining 30 percent or so of adult Indians will require additional efforts from the government, local leaders, and civil society.

Graph 4: Proportion of Weekly First and Second Doses

Source: Compiled by authors from daily PIB releases.

Towards herd immunity: the last mile will be the hardest

In the third week of October so far, second doses have outstripped first doses by a big margin. Between 14th and 18th October, of the total 14.8 million doses administered in India, only 6.3 million were (42 percent) first doses, showing clearly that the second doses are now driving the overall numbers. With the offer of free vaccine for all adult citizens, the Government of India has removed financial access barriers from the picture. However, for many sub-populations, physical access to vaccination centres may be difficult for a range of reasons. Vaccine hesitancy will also be a problem in a small but significant proportion of the population. To overcome these, the government must run the vaccination drive in surgical mode, focusing on communication, community engagement and hard-to-reach populations. Many states are already deploying mobile vaccination teams to take vaccines to the people in the margins, with success.

At the same time, the centre and state governments must now focus on district-level champions to win the battle of perception, and to take vaccines to the constituency that is the most difficult to reach—those hesitant to take vaccines. That many of them may be highly vulnerable to COVID-19 due to age or comorbidities makes such an initiative an ethical imperative. In short, first doses are drying up across the country, which could be either due to access-related issues or vaccine hesitancy. India needs district level mop-up operations. The vaccination drive’s initial phases leveraged technology in a big way, but the last mile needs to leverage communities and personalities alongside technology. Many countries are finding ways to nudge and even push the citizenry towards COVID-19 vaccination, focusing on employers and travellers. Canada, for example, is planning to place unvaccinated government employees on unpaid leave and has also made COVID-19 shots mandatory for air, train, and ship passengers.

The vaccination drive’s initial phases leveraged technology in a big way, but the last mile needs to leverage communities and personalities alongside technology. Many countries are finding ways to nudge and even push the citizenry towards COVID-19 vaccination, focusing on employers and travellers. Canada, for example, is planning to place unvaccinated government employees on unpaid leave and has also made COVID-19 shots mandatory for air, train, and ship passengers.

Throughout the pandemic,  India has had one of the highest proportions of  population willing to be vaccinated when compared with other countries. For the same reason, a smart communication campaign should do in India what vaccine mandates are failing to do in many other countries. With almost 100 crore vaccine doses administered, and a robust information backbone tracking tests, vaccinations and cases, it should not be difficult to convince those still doubtful about the efficacy or the safety of vaccines. Popular personalities, political and religious leaders, and civil society organisations should be engaged actively to take evidence-based messaging to the district level, particularly in those areas where vaccine uptake remains low. Given the deceleration in vaccination we observed over the last few days, it is easy for India to be in a situation where vaccine doses to meet the 31 December target are available but demand becomes the binding constraint.

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COVID-19, Health, Writing

The next 90 days: India’s ambitious attempt to vaccinate all adults

This article was co-authored by Oommen C. Kurian

Prime Minister Narendra Modi’s ambitious decision and the Government’s announcement to vaccinate all adults against COVID-19 by 31 December 2021 is now within reach. At the time of its announcement, the vaccination plan was seen to be both implausible and impossible by many who doubted India’s capacity and capability in dealing with this gigantic task. Some were also skeptical of the Indian State’s capacity to deliver the doses to a very diverse demography across the country. With the quick evolution of the CoWin platform, India has surmounted the challenge of having a reliable vaccination management solution at scale with the capability of working online and offline while providing a verifiable database. With the vaccine run rate of September where India delivered over 230 million doses, and assuming a modest increase in vaccine availability for the remainder of the year—relative to the significant buildup in the past five months—India has shown that it may just be able to dispense close to 1900 million doses by the end of this year.

Almost three-fourths of the elderly population in India has already gotten at least one dose, and the coverage in the 45-59 age group was even higher. Overall, more than one-third of the 45+ aged citizens in India are fully vaccinated.

It is now widely acknowledged among experts that the national vaccination drive is doing well when compared with other lower middle-income countries, and even some middle-income countries. At the end of September, India had managed to administer around 890 million doses among adult citizens. According to government communication at the end of September, more than 45.7 million vaccine doses are still available in stocks with States/UTs, with under 8.4 million doses in the pipeline. Almost three-fourths of the elderly population in India has already gotten at least one dose, and the coverage in the 45-59 age group was even higher. Overall, more than one-third of the 45+ aged citizens in India are fully vaccinated (Graph 1).

Graph 1: Vaccine Coverage in India (30 September 2021)

Source: https://www.orfonline.org/vaccine-tracker/

This is an admirable and astonishing achievement by a lower middle-income country and a feat that, for obvious reasons of scale and size, will have no parallel in the free world. Even as we are within a whisker of meeting the (self-imposed) deadline in terms of number of vaccine doses that we need for the task, some policy posers stare back at us and need to be addressed now to complete the job. And this must be an imperative.

In the recent past, we have witnessed that countries confronted with new waves of the pandemic have had two distinct characteristics; the relatively richer countries are seeing waves that are moderate while the poorer countries in general are experiencing their peak surges. This also typifies the global “Vaccine Divide”. The US represents a starkly unique geography where we have seen both play out simultaneously. The vaccine divide in the US is shaped more by political and ideological factors with deleterious consequences.

From the early days of the Liberalised Pricing and Accelerated National COVID-19 Vaccination Strategy in May, when the daily vaccine doses administered were around 2 million, India’s vaccination drive has come a long way with the month of September witnessing an average of over 7.5 million doses a day.

Experts have observed a general “decoupling” within the pandemic landscape, where countries and communities with access to vaccines are able to separate the intensity of transmission (case numbers) and the adverse outcomes such as severe disease, hospitalisation and death. Many nations with a high number of vaccinated people are now beginning to approach SARS-CoV-2 like an endemic virus. However, while there has been a general lowering of cases and adverse outcomes these past days, it would be dangerous to believe that we are at the tail of the pandemic. Mutations and large swathes of unvaccinated people offer the virus a chance to continue to be lethal and for the pandemic to take a dangerous turn. Vaccinating all adults and teenagers still has to be a national priority.

From the early days of the Liberalised Pricing and Accelerated National COVID-19 Vaccination Strategy in May, when the daily vaccine doses administered were around 2 million, India’s vaccination drive has come a long way with the month of September witnessing an average of over 7.5 million doses a day. An analysis of monthly vaccination numbers from the start of the vaccination drive (Graph 2) reveals a substantial scale up. While 61 million doses were administered in May, September saw over 230 million doses being administered, indicating an impressive quantum of capacity buildup of nearly 400 percent.

Graph 2:  India’s Covid-19 Vaccination Drive (Average daily doses administered – 100,000s)

Source: Press Information Bureau, Government of India

India set itself an ambitious aim of inoculating all its adult population by the end of 2021. That means, in real terms, giving two doses of vaccines to around 950 million people—delivering, in all, 1.9 billion doses. As on the end of September, India had managed to administer a total of 889 million of those doses, with 650 million being first doses and 239 being second doses.

Over the remaining days in this year, India needs to deliver over a billion doses and deliver them as per the dosage cycles of the two main vaccines—Covishield and Covaxin—currently dominating the vaccination drive. This would mean India now has to achieve the next quantum leap and achieve more than 11 million doses a day on average, which is a ramp up of 46.5 percent in the last three months.[1] With more vaccine manufacturing facilities coming online and given the substantial scale-up already achieved by the vaccination drive, it just may be possible, judging from past experience.

COVID vaccine(s) used and its impact on the speed of the vaccination drive

But the rub lies elsewhere, the mainstay of the Indian vaccine effort is the Serum Institute’s Covishield, which accounts for approximately 88 percent of all doses delivered as of now and has a dosage cycle of 12 weeks (Graph 3). As of October 1st, there were nearly 300 million adults who were yet to receive the first dose. Some of them can be vaccinated with Covaxin or Sputnik-V (both have a dosage cycle of one month or below) while a substantial number of them will have to spill over into January if the Covishield dosage cycle of 12 weeks is to be followed.

Source: https://dashboard.cowin.gov.in/

The policy poser, therefore, may not just be about a vaccine capacity ramp up of about 47 percent, which is eminently doable, but the composition of the vaccine candidates given the dosage gap.

India needs to deliver over a billion doses and deliver them as per the dosage cycles of the two main vaccines—Covishield and Covaxin—currently dominating the vaccination drive. This would mean India now has to achieve the next quantum leap and achieve more than 11 million doses a day on average, which is a ramp up of 46.5 percent in the last three months.

There are three hypothetical responses that can be considered by the health ministry. First, is there a genuine possibility of Covaxin finally ramping up its production and stepping up to the plate? Even if they were able to double their production, we will still have a large, uncovered population unless Sputnik V exponentially increases its production. The second option is to reduce the gap between two doses of Covishield. This will allow the bulk of the vaccine capacity to be used for second doses in much of November and all of December. And the third, of course, is that a new vaccine with large capacity (doses) and shorter dose gap enters the scenario latest by October end.

In a situation of major delays in the scale-up of all the other candidates, it is Serum Institute’s “over performance” in Covishield production, going beyond even the most optimistic projection five months back, that has helped India’s vaccination drive.

Of the other major vaccines that will be available in India soon, application for emergency use authorisation of Covovax is likely to be made only by the end of 2021, according to Serum Institute and, thus, it is unlikely to make a big difference in the timeline we analyse here. Similarly, reports indicate that a surge in cases in Russia will affect Sputnik-V’s plans in India, although the vaccine with a short 21-day dosage gap would be ideal, given the tight timelines. Biological-E’s production of Johnson & Johnson’s  vaccine will likely take off only by the end of the year, and no information on timelines is currently available. Zyduc Cadila’s three dose vaccine is also bound to start production at a modest rate of 10 million doses a month; and as the first vaccine approved in India for use in children, it may not make a difference in the adult vaccination numbers at least in 2021. Although Zydus Cadila’s doses can be available for the adult vaccination drive, as the only vaccine yet approved for children, the initial doses should go to children with co-morbidities.

Covaxin is reportedly expanding production from 35 to 55 million doses from October onwards. The Government of India has also clarified that, for now, there is no plan to reduce the mandatory three-month wait for second shots of Covishield. However, with more doses being available for the national vaccination drive, this may be revisited.

Possible pathways for India’s vaccination drive 

The following exercise discusses two possible scenarios among a cluster of pathways that are likely to emerge in the coming months that would allow India to fully vaccinate its adult population

(Table 1). Available information till date suggests that there are three factors influencing the December deadline of the immunisation drive, namely, manufacturing capacity which is fast improving; the three-month gap between Covishield doses; as well as the need to have an exportable surplus. Scenario 1 assumes that the availability of vaccines will remain at the September 2021 levels, which is around 230 million per month. In such a scenario, it will be possible to vaccinate all adults in India only by February 2022 and at the end of December, India will be 321 million doses short (Table 1).

Scenario 2 assumes an average 46.5 percent increase in the vaccine doses compared to the September 2021 levels. Given that between May and September, daily vaccine doses administered increased by 400 percent, such an increase is not impossible. After Covishield recently announced that its production capacity has been ramped up from 160 million doses a month to 200 million doses, reports already suggest that  that the company will be delivering 220 million doses in October, indicating an accelerated scale-up like in the previous months. In Scenario 2, India will vaccinate every adult with one dose in December 2021, and with both doses in January 2022, with 251 million second doses of Covishield spilling over to January 2022.

These scenarios ignore Sputnik-V as the surge in cases in Russia is holding up imports of vaccine components. Indeed, India has not made vaccination mandatory, and a considerable proportion of the adult population will be reluctant to take the jab voluntarily, for a range of reasons. Our analysis assumes that any Indian citizen above 18 years of age should be able to demand and receive two vaccine shots within the timeline. Thus, it does not discount for vaccine hesitancy and considers every eligible individual in the analysis. This analysis also does not consider possible innovations in the future like fractionation of COVID-19 vaccine doses among the relatively less vulnerable population or mixing of vaccines (something we already do within other disease control programmes in India), which can extend limited supplies, reduce mortality and also accelerate the journey towards universal vaccine coverage. 

Table 1: India’s Journey towards Vaccinating all Adults by December 2021: Two Scenarios

As is clear from the numbers, in light of the global context, scenario 2 seems feasible, whereby all adults are covered with at least one vaccine dose by the end of November 2021, and their respective second doses spill over into 2022. For a country of 950 million people over 18 years, securing universal coverage of a single dose in 11 months will itself be a commendable achievement. Scenario 2 also accounts for considerable exportable surplus of vaccine doses from November 2021.

Even as India accelerates its vaccination process among adults, unfortunately, there is no such thing as herd immunity threshold exclusively for the adult population. Herd immunity for COVID-19 will have to be achieved at the overall population level, and for a very young India, this means a need for a substantial number of its under-18 population to be vaccinated. Even if India manages to inoculate all its willing adult population by December 2021 or even January 2022, unless its hundreds of millions of children are vaccinated, the country cannot reach anywhere close to herd immunity levels. Achieving that, while respecting renewed commitments to export vaccines to the rest of the world, will be the next ambitious goal for India as the country tries to turn COVID-19 into a manageable risk, controlled by access to vaccination and responsible behaviour.

This exercise proves that the goal of vaccinating all adults by 31st December 2021 is not as unrealistic as it may have seemed earlier. As India continues to steadily ramp up Covishield and Covaxin production as it has in the past, it can achieve the ambitious tasks of vaccinating all adults by January 2022, sharing doses with the world, and to also consider provision of booster doses to severely immunocompromised citizens.


[1] Based on calculations done by the authors using the statistic that between May and September, daily vaccine doses administered increased by 400 percent

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Research, Writing

Diplomacy and Resilience: Betting on India is a Good Wager

Co-authored with Prof. Harsh V Pant

At the India-EU summit in early May, French President Emmanuel Macron declared, “India does not need to listen to lectures from anyone about vaccine supplies. India has exported a lot for humanity to many countries.” The sentiment was shared by most of the European leaders who took part in the extraordinary summit that saw Prime Minister Narendra Modi interacting with all 27 EU national leaders as well as presidents of the European Council and the European Commission. The EU leaders expressed their full solidarity with India at a time when the country is battling a treacherous second wave of the COVID-19 pandemic. Ahead of the summit, EU member states had mobilised more than €100 million worth of emergency medical equipment in support of India’s battle.

It may be difficult to comprehend at this moment of distress, but if not for India’s earnest global engagement over the past few years—and, its proactive assistance to many nations  during the first wave of COVID-19—it would not have been possible to swiftly mobilise such remarkable amounts of global resources for India’s battle with the pandemic. From western nations to India’s partners in the Middle East and the Indo-Pacific, so many nations have rallied behind India.

If not for India’s earnest global engagement over the past few years—and, its proactive assistance to many nations  during the first wave of COVID-19—it would not have been possible to swiftly mobilise such remarkable amounts of global resources for India’s battle with the pandemic

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Research, Writing

Global trade after COVID-19: From fixed capital to human capital

Co-authored with Dr. Alexis Crow

Some commentators have trumpeted the “end” of globalization in the wake of rising protectionism over the last half decade, the sudden economic stops wrought by COVID-19, and the corollary disruptions of supply chain activity around the world.

The truth, though, is that for companies and investors involved in the exchange, transmission, and sale of goods, services, technology and finance, globalization is anything but dead. Granted, the landscape has dramatically shifted since the 1990s, and executives will need to be nimble and agile in navigating the new environment, which is currently in a state of flux.

Indeed, more recent developments in the global trade environment including green frameworks, digital protocols and regional partnerships offer a glimpse not of the demise of globalization, but rather, of what global trade may look like in the post-COVID-19 era.

Globalization and its “discontents”

Globalization is defined as the process by which technology and the information and communication technology (ICT) revolution of the 1990s enabled faster transaction times and processes for exchanges of currency, capital, information, innovation, goods and people around the world.

These transmissions of commerce have been facilitated by norms, laws, regimes and treaties governing trade, such as the World Trade Organization at the global level and agreements such as ASEAN at the regional level. At a national level, the creation of free-trade zones further facilitated the ease of trade: for example, a shipping container can move through a seamless logistics corridor in the United Arab Emirates from the Port of Jebel Ali to the Dubai International Airport within four hours.

In financial services, hubs such as the City of London and latterly Singapore have attracted leading talent from across the globe to investment banking, trading, fintech and asset and wealth management, with executives and their teams using these hubs to penetrate the “spokes” of business in the EMEA (Europe, Middle East, Africa) and south/southeast Asian regions.

Unfortunately, the very same global interconnectedness that facilitated wealth creation and economic opportunities also had a dark side that manifested throughout the 1990s and 2000s. Global and transnational risks such as international terrorism (such as the attacks of 9/11), environmental degradation, cyber-attacks, pandemics, human trafficking and financial instability and financial crises ricocheted across the globe. Such risks might pop up in one jurisdiction and by the very same conduits that fostered the “bright side” of globalization easily spread across geographies.

Today, we might say we are dealing with a different shade of discontent within societies— particularly pronounced within advanced economies—for which the process of globalization is often blamed: rising domestic income inequality. While global trade has lifted billions of people out of poverty and sharply reduced inequality at a global level (such as that between China and the West, and southeast Asia and the West), income, wealth and opportunity inequality have been steadily rising within countries such as the United States, the United Kingdom and Italy. Clearly, the benefits of globalization have not been shared by all. Yet, the globalization of labour markets is but one of a number of contributing factor to rising inequality within these societies since the 1980s.

Value of world services exports by category (USD Billions)
Value of world services exports by category (USD Billions) (Image: World Trade Organisation)

Nevertheless, some leaders have found it both palatable as well as politically convenient to point the finger of blame at other countries. Rising income generation and economic advancement in Japan, for example, became a target of ire within certain circles in the United States during the late 1980s and early 1990s. More recently, some activist politicians and commentators have pointed to the economic gains made by certain groups (such as immigrant workers) as a clear causal factor for the erosion of the domestic middle class.

Rising economic nativism has taken various forms within the last few years and has in some cases been accelerated in the wake of the COVID-19 pandemic. Regardless of the underlying causes of domestic inequality and social anxiety, politicians have acted out against trade in the following ways:

  • Ructions against goods. In recent years, some countries have focused on the balance of trade in goods (or the imbalance) as a way to reduce imports or to onshore production. Tariffs became the policy tool of choice as a way of addressing such imbalances, but when implemented, have had mixed results. Data shows that efforts to boost domestic production of goods and services comes at a cost: quite literally, for the governments, companies and consumers.
  • Restrictions on mobility. Responses to the angst felt against global trade have not been limited to goods or volume of merchandise. States have also moved to restrict immigration, vowing to protect domestic workers from a perceived disadvantage. It is important to note that curtailing mobility also comes at a cost—during COVID-19 restrictions, a sharp reduction in migrant agricultural workers within OECD countries has contributed to a sharp rise in food prices, which have reached a six year high.
  • Tech bifurcation. Although countries, companies and individuals are importing and exporting more services than ever before, a bifurcation has developed between the United States and China regarding certain aspects of trade in technology. Indeed, the situation has been referred to this as a “technological Cold War” between the “two greatest powers” in the world.

While some European countries have also passed legislation to restrict inbound investment in specific targets or sectors, the EU-China Comprehensive Agreement on Investment (CAI)—signed at the end of 2020—was designed to improve laws and practices for mutual investment between China and the EU, at a federal level. Although currently on hold, the negotiations did demonstrate a willingness for both sides to convene in order to potentially step up the level of investments within their respective economies.

Three emerging paths forward

Within a turbulent geopolitical context, the shape of a post-COVID-19 trade landscape is becoming clearer, particularly regarding the digital, green and regional spaces.

  1. The digital realm

A multilateral framework is… the need of the hour to avoid any more trade wars that the pandemic-stricken world economy cannot bear.

Data protection and securing user privacy in the digitized world has been a major issue of cross-border friction. But here we are seeing concrete efforts being made. To this end, the EU General Data Protection has offered a common template that has even inspired the California Consumer Privacy Act.

This is not to say that all contentious issues have been resolved. One complicated issue has been the taxation of digital services. Although there has been an attempt by the OECD to devise a framework for digital taxation, a multilateral solution has not evolved so far. Against this backdrop, the United Kingdom, France, India and Italy among other countries have started levying taxation on digital services, with the United States taking subsequent action under Section 301 of its trade law. A multilateral framework is, therefore, the need of the hour to avoid any more trade wars that the pandemic-stricken world economy cannot bear.

The fact that there is some early convergence on contentious issues is a positive dynamic and suggests that even though an overarching framework governing the digital realm is elusive so far, consumer interest will be the guiding force in determining the nature of regulation.

  1. The green space

Increasingly, at least in the developed world, “going green” is the new industrial and growth strategy.

Climate action is the base on which economic policies of the twenty-first century are likely to be formulated—increasingly, at least in the developed world, “going green” is the new industrial and growth strategy.

To be sure, there are challenges. Recent discussions on the EU’s carbon border adjustment mechanism, essentially an emissions-related import tariff, are the first sign of movement towards a global “carbon club”, shutting out exports from countries that may not comply. But the current moment presents a historical opportunity for cooperation. As climate commitments strengthen across the globe, economies of scale have led to rapidly falling costs for green energy and technology.

  1. A region-based approach

As efforts are underway at reforming the global trading system, regional or bilateral agreements are helpful in providing building blocks for greater cohesion.

While many Western countries have been contending with populist movements in the years leading up to COVID-19, and then resurgent strokes of economic nativism in the wake the pandemic, countries in Asia signed the largest trade agreement in history—the Regional Comprehensive Economic Partnership (RCEP) in November 2020.

Effectively, RCEP incorporates some rich income Asian countries within the ASEAN community; and in a historic step, it is the first framework to include China, Japan and South Korea together within a trade agreement. While some commentators argue that RCEP is less comprehensive than other deals such as the Trans-Pacific Partnership agreement, the convening of RCEP signatories signals Asia’s continued commitment to connect “multiple factory floors” at a regional as well as a global level.

The cementing of RCEP—with the participation of some of the fastest growing economies in the world—raises the question: do regional trade agreements help or hinder the global trading landscape? With variegated standards on data privacy, green and carbon, and with countries at various stages of economic growth and employment, a global architecture might be elusive. It can therefore be argued that as efforts are underway at reforming the global trading system, regional or bilateral agreements are helpful in providing building blocks for greater cohesion.

Reaping the benefits of a global division of labour and capital

Even though the global trading architecture has taken severe knocks from both populism and the pandemic, nearly one-third of the world’s population and one-third of global GDP have recently been incorporated in a historic trade agreement.

And even amidst the “great lockdown” of 2020, the contraction of global trade in goods was less than half of that of the trough of 2009, in the wake of the global financial crisis. Moreover, an asynchronous regional recovery from COVID-19 has meant that many companies have been able to make up for the loss demand in one region (such as Europe) by the growth in demand in another region (such as China). And uneven sectoral activity, such as the working-from-home dynamic, is propelling demand for critical goods such as semiconductor chips, which is propping up export markets for countries such as South Korea. The growth of the electric vehicle industry and the commitments by governments to “build back greener” are also contributing to cross-border flows of metals and materials.

Nevertheless, as policy-makers set their priorities on rebuilding their societies, the lure—or mystique—of self-sufficiency remains strong. Indeed, the COVID-19 pandemic has caused severe losses to income for both advanced as well as emerging economies—the former experiencing a loss of 11% of income of 2019 levels, and the latter nearly double, at 20%. Yet, the way out of economic desolation is not via isolation, or constructing a fortress nation.

The way out of economic desolation is not via isolation, or constructing a fortress nation.

The way out of economic desolation is not via isolation, or constructing a fortress nation.

Laudably, within some advanced economies, COVID-19 relief measures have catalyzed the implementation of policies, including those designed to address housing affordability and access to childcare, that are meant to combat systemic income inequality. As countries transition from relief to recovery, and policy-makers weigh up prospects for bolstering domestic employment, it goes without saying that demand for many jobs within tradeable services is implicitly connected with the viability of export markets.

Thus, the ability to underpin and renew export ties with dialogue—such as that recently conducted between the US and the EU—is integral to sustainable domestic growth. Additionally, in the realm of non-tradable services, creative policies to incentivize corporate and private investment in reskilling, upskilling and learning for working are absolutely critical – in essence, segueing from investing in fixed capital to human capital. Amplifying competitiveness and improving productivity in both tradable and non-tradable sectors can also be enhanced by infrastructure spending and investment, in hard and soft sectors.

In the realm of non-tradable services, creative policies to incentivize corporate and private investment in reskilling, upskilling and learning for working are absolutely critical – in essence, segueing from investing in fixed capital to human capital.

In the realm of non-tradable services, creative policies to incentivize corporate and private investment in reskilling, upskilling and learning for working are absolutely critical – in essence, segueing from investing in fixed capital to human capital.

As countries increase investment in non-defense related R&D in sectors such as biotech and electric transport, it is important to consider that innovation is implicitly tied to immigration. In the United States, this has been the case throughout the 19th and 20th centuries, and with immigration as one causal factor of the blossoming of cutting-edge technology businesses and the growth of entrepreneurship in the country. Thus, data shows that the vitality of human capital is inherently cross-border and reliant on immigration. Recognizing this is a requisite component of any industrial, or rather, post-industrial policy, for advanced economies and for emerging and developing economies that are shifting from old to new economic growth.

Originally published https://www.weforum.org/agenda/2021/05/the-global-trade-map-after-covid-19-from-fixed-capital-to-human-capital/

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