The year 2020 will definitely be globally marked by the coronavirus pandemic that has been wreaking havoc across medical facilities and economies. In fact, the global economy hadn’t seen such a vast disruption since the Black Thursday back in 1929.
Since production and consumption have scaled in nearly every country on the globe, it is hard to measure the exact impact COVID-19 has had on international trade. However, from the World Trade Organization’s (WTO) predictions and recent ravel and trade bans, we can make a rough estimate of the overall impact ta pandemic has on the global economy.
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The figures put forward by the WTO
If we wanted to show the impact of the pandemic in numbers, then WTO’s estimates are relevant the most. In its annual Trade Outlook published on the 8th April, the WTO estimates that world merchandise trade will plummet between 13% and 32% by the end of 2020.
The estimated decrease in global trade will not be distributed evenly across all sectors. The electronics manufacturing sector, the automotive industry, and tourism are expected to take the biggest blow. On the other side, travel and trade restrictions are likely to significantly impact services trade, closing countless retailers and hospitality establishments for good.
It’s not a one-time thing
Apart from the coronavirus itself and the lives it impacted directly (sick, deceased, fired, etc.), another key aspect to measure the impact of the crisis is the response from governments across the globe. In January and February, when it became clear that an epidemic in China will develop into a pandemic, governments, and health authorities across the globe were quick to react.
In terms of economic subsidies, measures ranged from paying all citizens a stipulated amount to pumping in billions of dollars into the economy to keep it going during lockdowns and curfews. However, many governments made the mistake of investing too many funds during the initial stages of the pandemic, expecting it to be over by the onset of summer.
Individual citizens were also too quick to withdraw funds from savings accounts, making the situation dire for them as well.
The case of the Spanish flu pandemic
The last great pandemic was the Spanish flu that lasted more than two years, from February 1918 to April 1920. Although global trade, in the sense we understand this term today, was virtually non-existent, the sheer duration of the Spanish flu pandemic instructs us to prepare for a long and tiresome battle with the virus.
Although markets should be kept markets open and predictable, the world needs to brace for a pandemic that might last until 2021 and even 2022. Therefore, economic protectionism is the wrong way to go, as a rapid rebound of the world economy is possible if a vaccine is found in the foreseeable future.
Trading medicines
Medicines are among the most valuable goods in international trade nowadays. In order to battle the coronavirus, medical staff in nearly every country on the planes requires medicines. These are the result of international trade that is more important now than ever.
Regardless of a country’s economic power, no nation is fully self-reliant in this time of crisis. In fact, many nations rely on 3PL services for medical equipment, medicines, and other goods their public health systems desperately need.
Sadly, there have been cases of vetoes on the trade of medical supplies in Europe but these bans were soon lifted as it became clear that the European Union and the whole world have to fight COVID-19 together. However, the danger of import and export bans, quantitative restrictions, and non-automatic import licensing still lingers are public health services are placed under greater stress
Global trade was already on a mild decline
One of the biggest fallacies about the impact the coronavirus pandemic has had o world trade is that the global economy was doing great when the virus hit. Although the global economy wasn’t doing particularly bad, the fact is that it was on a mild decline even before the first case of COVID-19 was recorded in Wuhan, China.
The merchandise trade volume had already lost 0.1% of its value before December 2019, when the outbreak started. The reason for this drop are trade international tensions (most notably, a trade “cold war” between China and the USA) and a slowing down in the economic growth of most developed countries. Another indicator is the drop in the value of the dollar’s world merchandise exports by 3% in 2019.
Restrictions on travel
World trade is impossible without free trade. In the past, free trade was endangered by despotic regimes but nowadays, sanitary measures are responsible for sanctions on the transport of goods and people. The list of countries that have introduced travel bans is changing on a daily basis, making it hard to plan for a vacation and more importantly, ship goods.
Shipping companies have to stay up to date with the latest measures if they don’t want their trucks, trains, or freighters to become trapped due to whimsical health measures. As a result, more and more goods are shipped inside the boundaries of a single country, so domestic trade is blooming in the time of the coronavirus.
A shared future
Although the health and economic measures to stop the spread of COVID-19 are arbitrary and vary from country to country, the WTO is still a forum where nations can express different views on the matter and perhaps negotiate a joint response.
For now, nations are regularly submitting notifications to their neighbours and the WTO about all trade-related measures, such as border closures, travel restrictions, and import bans or quotas. Although a uniform response to the crises in terms of global trade still falters, at least he communications channels are still functioning, so shipping companies know what to expect.
Measuring the full impact the 2020 coronavirus pandemic is going to have on international trade is a difficult task. However, one thing is certain: the global market will never be the same. The global economy is bound to shrink and the movement of goods, services, and people will be impeded for years to come, prolonging the crisis into 2021 (at the very least).
