TWN Info Service on WTO and Trade Issues (Oct20/24)
22 October 2020
Third World Network

United Nations: Global trade to fall by 7% to 9% in 2020, says UNCTAD
Published in SUNS #9216 dated 22 October 2020

Geneva, 21 Oct (Kanaga Raja) -  Global trade is expected to fall by 7 per cent to 9 per cent in 2020, despite signs of a marginal rebound in the third quarter, the UN Conference on Trade and Development (UNCTAD) has said.

In its latest quarterly Global Trade Update, UNCTAD said that global trade continued to decline by about 4.5 per cent year-on-year in the third quarter (Q3) of 2020.

However, this is an improvement from the 19 per cent year-on-year drop seen in the second quarter (Q2) of 2020, it added.

According to UNCTAD, the economic and social disruptions brought about by the COVID-19 pandemic have resulted in a substantial reduction in global trade.

Already on a downward trend, global trade took a sharp downturn in Q2 2020 with a drop of about 19 per cent compared to Q2 2019.

It said that preliminary data for Q3 suggest that, while rebounding from Q2, global trade growth has remained negative in Q3 with a decline of about 4.5 per cent on a year-on-year basis.

The report noted that leading indicators, such as the Purchasing Manager Indices (PMIs), still signal substantial uncertainty for international trade in the coming months.

It is expected that the fourth quarter (Q4) of 2020 will remain on a negative trend, about 3 per cent lower than in Q4 2019, it said.

However, UNCTAD cautioned, this figure is still very uncertain due to persistent concerns about the effects of COVID-19 on economic activity in the coming months, which may result in a double dip trend.

Overall, global trade is expected to fall by about 7 per cent in 2020 under the assumption that the trend observed in Q3 continues into Q4.

It said that the lower bound for 2020 is at about 9 per cent and considers the possibility of a resurgence of the COVID-19 pandemic during the coming months and the prospect of a deteriorating policy environment, with sudden increases in trade-restrictive policies.

Official statistics for some of the world's major trading economies further indicate the extent of the downturn in international trade caused by the COVID-19 pandemic, it said, adding that none of the major economies has been spared this year.

However, UNCTAD noted that China's trade patterns have diverged from other economies.

After falling in the early months of the pandemic, Chinese exports stabilized in Q2 2020 and rebounded strongly in Q3 2020, with year-on-year growth rates of almost 10 per cent.

Overall, the level of Chinese exports for the first nine months of 2020 was comparable to that of 2019 over the same period.

On the import side, the Chinese demand for imported products recovered following a decline in Q2 2020.

Contrary to other major economies, Chinese imports stabilized in July and August, then grew substantially in September, said UNCTAD.

The UNCTAD report also said that the sharp and widespread decline in international trade in Q2 2020 has been similar for developing and developed countries.

However, trade in developed countries appears to have fallen marginally faster, both in relation to imports and exports.

On the other hand, trade among developing countries (South-South) has been relatively more resilient with a decline of about 16 per cent in Q2 followed by a decline by 8 per cent in July.

While no region has been spared from the decline in international trade in Q2 2020, trade in East Asia appears to have fared relatively better than in other regions, said UNCTAD, adding that this trend is even more evident for the month of July.

On the other hand, the sharpest decline has been for the West and South Asia region, where imports have fallen by 35 per cent, and exports by 41 per cent.

As of July, the fall in trade remains significant in most regions, said UNCTAD.

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

In Q2 2020, the value of global trade in the automotive and energy sectors was about half of what it was in Q2 2019.

Trade also declined significantly in chemicals, machineries, metals and ores, and precision instruments.

On the other hand, imports increased in office machinery and textiles and apparel.

"Such increases are linked to the COVID-19 pandemic as these sectors include home office equipment and protective equipment such as masks," said UNCTAD.

The data for July and August 2020 indicates similar patterns, it noted.

The value of international trade in the energy and in the automotive sectors was still substantially below its levels of 2019.

However, increases in demand of home office equipment and personal protective gear resulted in positive growth rates for trade in the communication equipment, office machineries, and textiles and apparel sectors.+