Post-COVID Global Economic Policy Keywords: 'Stimulus, GVC Restructuring, Strengthened Protectionism'

KOTRA Publishes Report on Economic and Trade Policy Trends of Major Countries Amid COVID-19

KOTRA published the report "Economic and Trade Policy Trends of Major Countries Regarding COVID-19" on the 15th. (Photo by KOTRA)

[Asia Economy Reporter Kim Ji-hee] An analysis has emerged that major countries will implement economic policies focused on large-scale economic stimulus, responses to the reorganization of global value chains, and strengthening protectionism following the novel coronavirus infection (COVID-19).

According to the report "Economic and Trade Policy Trends of Major Countries after COVID-19" published by KOTRA on the 15th, major countries such as the United States, China, Japan, Vietnam, India, and Germany are adopting policies centered on boosting consumption, stabilizing employment, and strengthening corporate supply chains in the post-COVID-19 era.

First, each country is injecting massive fiscal resources. A representative example is the United States enacting a $2 trillion (approximately 2,500 trillion KRW) COVID-19 stimulus law aimed at preserving personal income, expanding corporate loans, and improving public healthcare services. Japan has prepared its largest supplementary budget ever at 234 trillion yen (approximately 2,600 trillion KRW), and China has introduced a super stimulus package worth 8.25 trillion yuan (approximately 1,400 trillion KRW). In particular, China plans a mega New Deal worth 50 trillion yuan (approximately 8,000 trillion KRW) in the mid-to-long term for 5G, future vehicles, and infrastructure projects.

In addition to short-term stimulus measures, mid-to-long-term policies responding to the reorganization of global value chains (GVC) are also being introduced. Unlike the existing value chains focused on cost reduction and efficiency maximization, the COVID-19 pandemic has shaken supply chains, making securing value chains with stability, crisis responsiveness, and resilience a critical issue. Accordingly, the United States, Japan, and Germany are actively supporting reshoring to ensure their core industries have supply chains within their own countries or nearby regions. They are also focusing on diversifying supply chains outside China.

The United States has integrated state-level manufacturing support policies into a federal government framework, offering bold support to reshoring companies. The government has decided to apply a principle of prioritizing domestic products when procuring medical supplies. Through trade policies such as the enactment of the United States-Mexico-Canada Agreement (USMCA), it is expected to strengthen a U.S.-centered regional value chain.

Japan announced in April through its "Overseas Supply Chain Reform Policy" that it would support up to two-thirds of the costs for companies relocating production bases back to Japan. Germany is responding by establishing a federal government-level task force to increase domestic production shares in core industries such as medical, energy, and infrastructure sectors.

Competition among countries to become the center of the "China+1" strategy, which diversifies supply chains outside China, is fierce. India is showing the most aggressive moves, with Prime Minister Modi personally promoting phased manufacturing development policies and foreign investment attraction policies. Vietnam is highlighting its advantages as an alternative investment destination with low wages, a young workforce, and policies favorable to foreign companies.

On the other hand, it is notable that import regulations and non-tariff barriers such as anti-dumping measures are increasing despite COVID-19. Export restrictions, especially on medical supplies, are also being introduced, suggesting that protectionism will further strengthen.

Son Su-deuk, head of KOTRA's Economic and Trade Cooperation Headquarters, emphasized, "Although the world is facing a global crisis due to COVID-19, opportunities are also emerging as countries announce economic stimulus measures. To seize opportunities amid the crisis, our companies, government, and related organizations must swiftly unite their efforts."

This content was produced with the assistance of AI translation services.