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TWN Info
Service on WTO and Trade Issues (Apr21/02) Geneva, 1 Apr (Kanaga Raja) – World merchandise trade in volume terms is expected to increase by 8.0% in 2021 after falling by 5.3% in 2020, the World Trade Organization (WTO) has said. In its latest trade statistics and outlook released on 31 March, the WTO said that trade growth will likely slow to 4.0% in 2022, with the total volume of global trade remaining below the pre-COVID-19 pandemic trend. The WTO said prospects for a quick recovery in world trade have improved as merchandise trade expanded more rapidly than expected in the second half of last year. In some opening remarks at a media briefing at the WTO (also posted on the WTO website), the WTO Director-General Ms Ngozi Okonjo-Iweala said: “Following a sharp decline in the first half of the year, trade recovered more quickly than expected in the second half of 2020. This rebound has continued, and the WTO’s baseline trade forecast foresees an 8% increase in the volume of world merchandise trade for 2021.” “COVID-19 continues to pose the greatest threat to the outlook for trade. New waves of infection could easily further undermine any hoped-for recovery,” she added. The rapid development of effective vaccines has given the world a realistic chance of stopping this disease in its tracks and jump-starting the world economy at the same time, but this opportunity could be squandered if large numbers of countries and people do not have equal access to vaccines, said the DG. “A rapid, global and equitable vaccine roll-out is the best stimulus plan we have for the strong and sustained economic recovery that we all need,” she added. “Ramping up the production and deployment of vaccines in all countries will allow businesses and schools to reopen more quickly and help economies get back on their feet,” said Ms Okonjo-Iweala. “Depending on how quickly we can bring the pandemic to an end, trade could either see a major resurgence over the next two years, or it could experience a weaker, more prolonged recovery,” she cautioned. The WTO said that according to its new estimates, the volume of world merchandise trade is expected to increase by 8.0% in 2021 after having fallen 5.3% in 2020, continuing its rebound from the pandemic-induced collapse that bottomed out in the second quarter of last year. Trade growth should then slow to 4.0% in 2022, and the effects of pandemic will continue to be felt as this pace of expansion would still leave trade below its pre-pandemic trend, it added. According to the WTO, the relatively positive short-term outlook for global trade is marred by regional disparities, continued weakness in services trade, and lagging vaccination timetables, particularly in poor countries. “COVID-19 continues to pose the greatest threat to the outlook for trade, as new waves of infection could easily undermine any hoped-for recovery,” it added. The WTO said short-term risks to the forecast are firmly on the downside and centred on pandemic-related factors, including insufficient production and distribution of vaccines, or the emergence of new, vaccine-resistant strains of COVID-19. It added that over the medium-to-long term, public debt and deficits could also weigh on economic growth and trade, particularly in highly indebted developing countries. The WTO highlighted two alternative scenarios to its forecast for world trade growth. The upside scenario, where vaccine production and dissemination would accelerate, allowing containment measures to be relaxed sooner, would add about 1 percentage point to world GDP growth and about 2.5 percentage points to world merchandise trade volume growth in 2021. Trade would return to its pre-pandemic trend by the fourth quarter of 2021, said the WTO. On the other hand, in the downside scenario, vaccine production does not keep up with demand and/or new variants of the virus emerge against which vaccines are less effective. Such an outcome could shave 1 percentage point off of global GDP growth in 2021 and lower trade growth by nearly 2 percentage points, said the WTO. According to the WTO, for the whole of 2020, merchandise trade was down 5.3%. However, this drop was smaller than the 9.2% decline foreseen in its previous forecast in October 2020, said the WTO. “The better than expected performance towards the end of the year can partly be explained by the announcement of new COVID-19 vaccines in November, which contributed to improved business and consumer confidence.” The volume of world merchandise trade plunged 15.0% year-on-year in the second quarter of 2020 (revised up from -17.3% in October) as countries around the world imposed lockdowns and travel restrictions to limit the spread of COVID-19, said the WTO. Lockdowns were eased in the second half of the year as infection rates came down, allowing goods shipments to surge back to near 2019 levels by the fourth quarter. Faster trade and output growth in the second half of 2020 was supported by major government policy interventions, including significant fiscal stimulus measures in the United States. These measures boosted household incomes and supported continued spending on all goods, including imports, said the WTO. In addition, many businesses and households adapted to the changing circumstances, finding innovative ways to sustain economic activity in the face of health-related restrictions on mobility. The WTO said effective management of the pandemic limited the extent of the economic downturn in China and other Asian economies, allowing them to continue importing. “These actions helped prop up global demand and may have prevented an even larger trade decline,” said the WTO. Trade in nominal US dollar terms fell even more sharply than trade in volume terms in 2020. World merchandise export values were down 8% compared to the previous year, while commercial services receipts tumbled 20%. “Services trade was especially weighed down by international travel restrictions, which prevented the delivery of services requiring physical presence or face-to-face interaction.” According to the WTO, the impact of the pandemic on merchandise trade volumes differed across regions in 2020, with most regions recording large declines in both exports and imports. Asia was the sole exception, with export volumes up 0.3% and import volumes down a modest 1.3%, it said. Regions rich in natural resources saw the largest declines in imports, including Africa (-8.8%), South America (-9.3%) and the Middle East (-11.3%), probably due to reduced export revenues as oil prices fell around 35%. In comparison to other regions, the decline in North American imports was relatively small (-6.1%). In 2021, demand for traded goods will be driven by North America (11.4%) thanks to large fiscal injections in the United States, which should also stimulate other economies through the trade channel, said the WTO. Europe and South America will both see import growth of around 8%, while other regions will register smaller increases. Much of global import demand will be met by Asia, exports from which are expected to grow by 8.4% in 2021, said the WTO. European exports will increase nearly as much (8.3%), while shipments from North America will see a smaller rise (7.7%). “Strong forecasts for export growth in Africa (8.1%) and the Middle East (12.4%) depend on travel expenditures picking up over the course of the year, which would strengthen demand for oil.” Meanwhile, South America will see weaker export growth (3.2%), as will the Commonwealth of Independent States (CIS), including certain former and associate Members (4.4%), said the WTO. SOME TRENDS IN WORLD TRADE According to the WTO, in the second quarter of 2020, North America and Europe saw sharp year-on-year declines in export volumes, down 25.8% and 20.4% respectively. By the fourth quarter, these regions had recovered much of their lost ground, with respective year-on-year declines of just 3.0% and 2.4%. Middle Eastern exports also fell precipitously in the second quarter as oil consumption slumped worldwide due to restrictions on international and domestic travel, said the WTO. Asian exports saw a much smaller decline of 7.2% in the second quarter, but by the fourth quarter they were up 7.7% compared to the previous year. The WTO attributed their rapid recovery to “the relatively small impact that COVID-19 had on certain Asian economies, and by the fact that the region has been supplying the world with consumer goods and medical supplies during the pandemic, driving up regional export totals.” Highlighting the divergence in trade growth between the various regions, the WTO said that on the import side, Africa, South America and the Middle East will continue to see their merchandise trade stagnate while other regions will pull ahead. On the export side, most regions will only see modest gains while Asia continues to supply large quantities of goods to global markets. Charting the evolution of merchandise trade in current US dollar terms over the course of 2020, the WTO said the value of world trade in manufactured goods was 6% higher in the fourth quarter of 2020 than in the same period of the previous year. “This resurgence may be attributable to the resumption of factory operations in alignment with safety measures required to protect workers from COVID-19,” it explained. Trade in agricultural products was up by a similar amount over the same period. However, the value of fuels and mining products trade was still down 19% in the fourth quarter. The value of merchandise trade overall was up slightly compared to the previous year (2%), but this increase might be exaggerated due to the fact that the world trade was already slowing in the fourth quarter of 2019, before the pandemic, said the WTO. Most categories of manufactured goods saw significant gains in the second half of 2020, it added. World trade in iron and steel was down 17% in the third quarter, but this decline was reduced to 2% by the fourth quarter. “Iron and steel trade is indicative of broader economic conditions as these products are heavily used in both automobile manufacturing and building construction, both of which were hit hard by the pandemic,” said the WTO. Strong growth in textiles trade in both the third and fourth quarter probably reflects high demand for medical face coverings, which is included in this category, it added. Electronic goods including computers also saw steady growth of 12% in the second half of 2020, reflecting strong demand as households and businesses upgraded equipment to facilitate working remotely. As for world commercial services trade, the WTO said for the whole of 2020, travel and transport services were down 63% and 19%, respectively, while the category of other commercial services (including financial services and computer services) held up well, falling only 2%. Goods-related services fell 13%. “Transport and travel services were directly impacted by containment measures designed to limit the spread of COVID-19, many of which remain in place or have been tightened in response to the resurgence of the disease,” said the WTO. The WTO also said that it has been tracking timely, high-frequency trade-related indicators during the pandemic to better understand current trends in merchandise and commercial services trade. It noted that the number of daily international flights fell around 80% in the first quarter of 2020 as countries closed their borders to reduce the spread of COVID-19. This number gradually picked up as cases declined and people resumed limited travel. The end of 2020 saw an up-tick in flights as people traveled to meet friends and family for seasonal holidays, but a resurgence of the virus has reduced flights again in 2021. In contrast to international flights, seaborne transport has been steadier during the pandemic. The number of port calls dipped in February and April of last year as well as in January of this year, reflecting peak periods of infection. “The recent dip is worrying since countries have become increasingly reliant on international trade to obtain vital necessities such as food and medicine,” said the WTO. The WTO said that the daily prices of copper futures contracts declined sharply in March 2020 as news of the pandemic spread, but have risen since then, reflecting improving economic prospects. “Copper feeds into the manufacture of electronics, demand for which has been strong as people and businesses have invested in technology to allow remote work,” it added. An up-tick in November of last year probably reflected expectations of stronger economic growth after the announcement of new vaccines against COVID-19. The recent rise in 2021 may reflect expectations that stimulus measures in the US and elsewhere will boost economic growth, said the WTO.
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