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TWN Info Service on Health Issues (Jun20/04)
13 June 2020
Third World Network


COVID-19: Global trade in goods set to fall further by 27%
Published in SUNS #9137 dated 12 June 2020

Geneva, 11 Jun (Kanaga Raja) – The value of international trade in goods is expected to further decline by 27 percent in the second quarter of this year, following a fall of about 5 percent in the first quarter, the UN Conference on Trade and Development (UNCTAD) has said.

According to UNCTAD’s Global Trade Update, released on Thursday, the dramatic fall in trade in goods has been due to the economic and social disruptions brought about by the COVID-19 pandemic.

Leading indicators, such as the Purchasing Manager Indices (PMIs), also signal further deterioration of international trade in the second quarter of 2020, said UNCTAD.

“International trade is likely to remain below the levels observed in 2019 in the second half of the year,” it added.

The magnitude of the decline in trade will be dependent upon not only additional economic disruptions brought by the COVID-19 pandemic but also on the type and extent of policies that countries will adopt to restart their economies.

Assuming persisting uncertainty, UNCTAD said its forecast indicates a decline of around 20 per cent for the year 2020.

This is in line with the estimates of the World Trade Organization which expects the decline in international trade to be between 13 and 32 percent. The European Commission expects that EU trade will decline by 10-16 percent in 2020.

The wide range of estimates is a sign of the still high uncertainty about the possibility of any economic recovery in the second half of the year, said UNCTAD.

According to UNCTAD, statistics for some of the major economies further reinforces the bleak picture for international trade.

Firstly, most recent trade figures indicate further deterioration in April and May. Secondly, except for the first two months of 2020, China appears to have fared better than other major economies.

In fact, China’s exports grew by 3 percent in April. However, most recent data for China indicates that such recovery may be short-lived as imports and exports fell by about 8 percent in May.

Third, said UNCTAD, intra-regional trade appears to have declined to a much lower rate for countries in the East Asian and Pacific Regions.

For the European Union, intra-regional trade has declined at a similar pace as overall trade. On the other hand, statistics for the United States indicate a much stronger decline of intra-regional trade.

According to UNCTAD, the general decline in international trade in Q1 2020 has been followed by a much more substantial decline in April, with this trend being observed for both developing and developed countries.

However, trade in developing countries appears to have fallen faster in April relative to developed countries, and this is especially noticeable for imports.

For developing countries, while declines in exports are likely driven by reduced demand in destination markets, declines in imports may indicate not only reduced demand but also exchange rate movements, concerns regarding debt and shortage of foreign currency, said UNCTAD.

Trade among developing countries (South-South) has also significantly declined in April 2020. No region has been spared from the decline in international trade, but trade in the East Asia and the Pacific regions appear to have fared better than other regions, said UNCTAD.

Trade declines for these regions have remained in the single digits both in the first quarter of 2020 as well as in April, although preliminary data for April suggest a sharp downturn in all other regions with declines of up to 40 percent for countries in South Asia and Middle East regions.

At the sectoral level, UNCTAD said that economic disruptions brought about by COVID-19 have affected some sectors significantly more than others.

In the first quarter of 2020, textiles and apparel declined by almost 12 percent, while office machinery and automotive sectors have fallen by about 8 percent. On the other hand, the value of international trade in the agri-food sector increased by about 2 percent.

Preliminary data for April indicates further declines in most sectors and a very sharp contraction in trade of energy and automotive products, of about -40 percent and -50 percent in value terms respectively.

Significant declines of above 10 percent are also observed in chemicals, machineries and precision instruments.

Conversely, said UNCTAD, office machinery appears to have rebounded in April, largely because of the positive export performance of China. Trade in agri-food products has been so far the least volatile, it noted.

In general, the variance across sectors has been driven by decreases in demand and disruptions of supply capacity and on disruption of global value chains due to COVID-19.

TRADE IN MEDICAL PRODUCTS

UNCTAD also said that one of the side-effects of the COVID-19 pandemic has been the increase in demand for medical goods and equipment such as ventilators, monitors, thermometers, hand sanitizers, protective masks and garments.

In the early months of 2020, the rapid diffusion of COVID-19 across the globe resulted in a race to secure supply of such goods, and in some instances of export restrictions.

Product level data for the three major economies (China, the European Union and the United States) shows that international trade played a positive role in meeting demand for medical products related to COVID-19, said UNCTAD.

While international trade of such medical goods contracted at the onset of the pandemic, it then increased in February and March and almost doubled in April 2020, thus contributing to the availability of critical equipment to countries affected by COVID-19.

For instance, the first two months of 2020 saw that the increase in Chinese domestic demand for such medical products resulted in a strong increase in imports.

This demand was largely met by increases in exports from Europe and the United States which were not yet significantly hit by COVID-19.

UNCTAD also noted that Chinese exports of such equipment declined by 15 percent in the first two months of 2020 as Chinese supply re-oriented towards domestic demand.

Data for March shows that imports of medical equipment continued to increase in China (by 41 percent) but also in the European Union (by 21 percent).

April saw a massive increase in Chinese exports of medical equipment (by 338 percent). This surge was largely driven by exports of protective equipment.

April data for the United States reflect the increasing concern for the COVID-19 pandemic as imports of medical products increased by almost 60 percent while exports declined by approximately 20 percent, said UNCTAD

 


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