GLOBAL TRADE DURING LOCKDOWN Kate Pearson

GLOBAL TRADE OVER LOCKDOWN

Global trade, also known as international trade, is simply the imports and exports of goods and services across international boundaries. Countries can gain comparative advantages through international trade due to producing some goods or services at a lower opportunity cost than other countries.

COVID-19 is a humanitarian crisis on a global scale. The introduction of the global restrictive measures began in the UK in March and included rigorous social distancing, the closure of businesses and travel bans. As widely expected, the measures introduced have disrupted global trade flows including temporary export bans, the elimination of import tariffs on certain commodities, increased trade costs and delaying or entirely prohibiting border clearance. The onset of the pandemic also created demand shocks, leading to stockpiling of essential commodities such as food products and medical items. Massive unemployment caused by the economic slowdown and business closures have fueled uncertainties, further reducing demand for international traded goods.

The coronavirus pandemic impacted upon UK trade in services, which saw falls in both imports and exports of £16.7 billion (31.8%) and £14.9 billion (18.5%) between April to June 2020 as compared to 2019. Globally, within the first few months of lockdown international trade of goods and services declined by 27%. The fall in services was largely seen in travel and transportation services; these trends are consistent with travel bans, global lockdowns, and the requirement to work from home where possible.

Within industries, there have been both winners and losers. A winning industry has been the trade of medical products related to COVID-19 such as ventilators, hand sanitizers and protective masks. The three major economies show that international trade played a positive role in meeting demand of medical products related to COVID-19. While international trade of such medical goods contracted at the start 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. April saw a massive increase in Chinese exports of medical equipment (338% increase). This surge was largely driven by exports of protective equipment. Too add, April data for the United States reflect the increasing concern for the COVID-19 pandemic as import of medical products increased by almost 60% while export declined by approximately 20%. On the other hand, a losing industry has been the trade of oil. With travel and broader economic activity across the world restricted, demand for transport fossil fuels has dropped. This reduction in demand is particularly notable in China, the world’s largest energy consumer, which in 2019 accounted for more than 80% of global oil demand. Industrial output and electricity demand and in the country has been functioning at levels far below their usual rate, with coal consumption at powerplants down 36% and the countries’ oil refining capacity reduced by 34%.

However, the easing of restrictions in June increased demand and allowed many more businesses to increase output or resume some level of trading. Trade in goods therefore made some recovery within July to September 2020 compared to April to June 2020. Although, exports and imports were not at pre-covid levels. Trade in services has not yet seen a similar increase in trade in goods exports and imports.