All across the globe, the borders are shut tight in order to stop the spread of deadly COVID-19 virus. While this has numerous health-based ramifications, the truth is that international trade suffers as a result. The worst of it all is the fact that so many countries and industries depend on the import/export, which is why local quality of life, consumer purchasing power and manufacturing industries are suffering, as well. Sure, e-commerce and digital marketing are on the rise but this is a topic for another time.
Of course, governments across the globe are not sitting idle either and they’re working day and night to sort this out. With that in mind and without further ado, here’s what you need to know about the impact of a global pandemic on international trade.
When it comes to international trade, it’s only fair to start with the relationship with the world’s two biggest economies U.S. and China. Even before the COVID-19 pandemic, the relationships between the U.S. and China were not that great. In fact, there were various speculations about the looming trade war between the two. However, the codependency between these two economies prevented this from escalating. Sadly, after signing the Phase One Trade Agreement, the negotiations don’t seem to be progressing. Still, there are some who are unsure whether this is the result of the pandemic or the lack of willingness to find the mutual ground.
The next issue worth discussing here is the trade relationship between the EU and the US which, although traditionally solid, are now experiencing some difficulties. It all started with the aircraft subsidy dispute. In order to strengthen the local economy (one of the main issues of the Trump administration agenda), the U.S. repealed the aerospace tax breaks for Boeing. This allowed the US to levy heavy tariffs on EU goods (as much as $7.5 billion). At the moment, it is expected that the EU might retaliate with similar measures. The situation around the pandemic doesn’t seem to make things any better.
While, traditionally, the partnership between these two Atlantic countries is deemed as quite solid, during the pandemic, not even this is so easy to agree upon. You see, as officials of both countries (both governments and trade organizations) claim, they are committed both to saving lives and saving the economy in the process. Another pair worth discussing is the relationship between the US and UK, now that the UK is no longer officially part of the EU. At the moment, the negotiations are still in the preparation stage and are expected to start in the nearest future.
The post-BREXIT European Union is a place of great uncertainty and it was rather unclear where things are going even before the pandemic. Now, it seems, things are even more complex. The BREXIT negotiations were ongoing and were planned for the third week of March this year. Unfortunately, it was impossible for them to proceed, which meant that they were (once again) put on hold. Despite all efforts, the parties still fail to find common ground.
5. The logistics (in general)
One thing that is important to mention is the fact that the logistics of international trade are quite complex, as well. For instance, all across the globe borders are shut, however, this doesn’t necessarily mean that they’re closed for the goods. The international freight forwarder now has to fulfil a long list of requirements in order to ensure the safety of the cargo from the health perspective, as well. Not to mention the fact that international trade depends on manufactured goods. Due to the inability of a lot of manufacturing facilities to operate safely under these conditions, this too is experiencing a rather large difficulty.
6. Global statistics
Perhaps the most important thing, when it comes to putting things into perspective, are the statistics of this global phenomenon. In general, there’s a 9.7 decrease in global trade for 2020, which is both staggering and alarming. The worst part lies in the fact that this is probably not the end of the decline. According to the information available to the WTO, it is expected that the world merchandise trade could fall anywhere between 13 and 32 percent. While the results of the first seem like a nightmare scenario, the reality closer to the latter figure would be no short of catastrophic.
7. Not everyone is hit the same
One more thing worth mentioning is that not every country is suffering the same impact. Some countries (like Latin America and the Caribbean region) were already in the era of great economic weakness when the pandemic struck and made everything worse. Some of these countries were on their way towards the recovery and all the growth that they achieved in the last 5-6 years was reduced to the bare minimum. The regional GDP fell from a solid 6 percent to minuscule 0.2 percent. This alone was enough to upset quite a bit.
The very last thing worth mentioning is the fact that it’s incredibly difficult to figure out just how hard the pandemic has impacted international trade. As you can see from the above-listed, there were so many obstacles that are completely unrelated to the pandemic, which are causing obstructions even in these trying times. The BREXIT, China-US relations and the aircraft subsidy dispute are just some of the pre-COVID-19 problems that are continuing to escalate under these conditions. In other words, it would be safe to assume that the pandemic is making already existent international trade problems slightly or drastically worse.