International trade, more resistant to the pandemic than expected

International trade has been more resistant than previously thought to the “shock” caused by the pandemic, since after the initial interruption of trade flows, the supply chains adapted quickly, assured the World Trade Organization (WTO) when submitting your annual report.

After having fallen by 5.3% in 2020, world trade will grow 10.8% in 2021, the WTO estimated last October in one of its updates of its forecasts, which, however, warned that this positivism does not hide uneven recovery across regions and tensions in global supply chains.

According to the organization’s projections, the global Gross Domestic Product (GDP), which fell 3.5% last year (according to World Bank figures), will grow 5.3% in 2021, thanks in large part to the recovery of trade in goods, which will increase by 8%, while trade in services will remain depressed (tourism in particular).

When analyzing the state of international trade, the WTO economist and one of the authors of the publication, José Antonio Monteiro, pointed out that climate change has undoubtedly become a risk factor for trade due to the increase in the frequency, intensity and duration of natural disasters, while the risks related to technological or industrial accidents have been reduced.

The biggest change that has coincided with the pandemic has been the increased incidence of cyberattacks and data fraud, which specialists believe will increase.

On the other hand, the increase in inequality, the fragility of the economy and the growing political uncertainties together with geopolitical tensions increase the risk of conflicts and violence, with potential repercussions on trade, says Monteiro.

According to the WTO, there is a tendency to look at these risks separately, but warns that to the extent that they can interact with each other, a “cascade effect” can be generated.

The analysis also finds that the economic turbulence of the pandemic period has had a greater impact on developing countries, particularly in the poorest and smallest countries.

One of the reasons has been the strong inequality in the distribution of vaccines against COVID-19, said the Director General of the WTO, Nigerian Ngozi Okonjo-Iweala, in the presentation of the report.

Of the 7.3 billion doses administered so far, “only 0.6% have gone to people in the poorest countries, where 10% of the world’s population lives, and this situation makes the economic recovery fragile, due to the threat of new variants ”, he emphasized.

Okongo-Iweala indicated that it is time to use “the full power of trade to accelerate the production and distribution of vaccines that are needed to end this pandemic.”

On climate change, the head of the WTO argued that, although countries take measures to preserve their supply chains from external shocks, climate change is producing the opposite effect, putting, for example, the agricultural production of a country at the mercy extreme weather events.

“The possibility of importing is an important resistance factor for economies to face the disruption of supplies in specific sectors, and for this reason it is that trade integration is associated with a drop in economic volatility,” he stressed.

The world has been facing problems in global supply chains for weeks after the crisis caused by the pandemic, and this precisely in the middle of a significant increase in demand from consumers.

This situation has led to a decline in the last confidence index prepared by the WTO on a quarterly basis after continuous increases. The Merchandise Barometer, which denotes a contraction in global trade below 100 points, stood at 99.5 points this Monday, indicating a brake on the growth of exchanges, after 103.9 points in February, 109.7 in May and 110.4 in August.