Chennai: Revising its earlier estimate, the United Nations Conference on Trade and Development has predicted global trade to plummet by 20 per cent or by about $6 trillion in 2020.
In 2019, global trade stood at about $25 trillion, with estimates then predicting a 3 per cent rise in 2020. Without a swift recovery in the second half of 2020, the consensus now is that trade will instead plummet by about 20 per cent this year, or by about $6 trillion. Such a decline would be unprecedented, being significantly larger than the $4 trillion fall seen during the 2009 recession, said Mukhisa Kituyi, Secretary-General, UNCTAD in an article published on Thursday.
In early October, UNCTAD had said that it expected global trade to fall by about 7 per cent in 2020 under the assumption that the trend observed in Q3 continues into Q4. The lower bound for 2020 is at about 9 per cent and considers the possibility of a resurgence of the pandemic during the coming months and the prospect of a deteriorating policy environment with sudden increases in trade restrictive policies, it had said.
According to Kituyi, the impacts of Covid-19 on international trade have been many and varied. The world has seen falling commodity prices, reduced manufacturing output and disrupted operations in global value chains. Trade in services has been significantly affected. International tourism arrivals are expected to fall by between 60 and 80 per cent in 2020. Remittances have greatly diminished.
However, at the regional level, the picture is mixed. While East Asia appears to be on a recovery path, concerns remain for other developing regions where Covid-19 is not yet under control. As many borders remain closed and safety controls delay the movement of goods, developing countries that are highly reliant on external markets are being hit particularly hard. Small countries with high levels of external debt and limited resources to sustain their economies are most at risk of a severe economic recession.
The past few years have been characterised by the high-profile trade spat between the United States and China. In such a context, the pandemic adds to global instability by making the conditions unsuitable to meet the commitments of the two superpowers’ ‘phase one’ trade deal. Coronavirus has the potential to further exacerbate tensions, and to create a more segmented and polarised global economy, with obvious negative repercussions for many countries.
Before the pandemic, there was a growing scepticism towards international trade. Yet the Covid-19 emergency has shown the importance of keeping trade open in times of crisis. Cross-border trade has been instrumental in meeting the demand for Covid-19-related medical products on a global scale. International trade of items such as personal protective equipment and ventilators more than doubled in just a few months. The pandemic has also driven an increase in e-commerce, linking consumers to producers not only domestically but also across borders.