Global trade recorded a 5% drop in the third quarter of 2020 compared with the same period last year, according UNCTAD’s new Global Trade Update. This marks an improvement on the 19% year-on-year plunge recorded in the second quarter, and UNCTAD expects the frail recovery to continue in the fourth quarter, with a preliminary forecast of -3% compared with the last quarter of 2019.
Depending on how the COVID-19 pandemic evolves in the winter months, the UN trade and development body expects the value of global trade to contract by 7% to 9% with respect to 2019.
“The uncertain course of the pandemic will continue aggravating trade prospects in the coming months,” UNCTAD Secretary-General Mukhisa Kituyi said. “Despite some ‘green shoots’ we can’t rule out a slowdown in production in certain regions or sudden increases in restrictive policies.”
Although a 7% to 9% decrease would be a negative finish for the year, Dr. Kituyi highlighted that it’s a much more positive result than was expected in June, when UNCTAD had projected a 20% year-on-year drop for 2020.
Since then, trade trends have improved primarily thanks in to the earlier than expected resumption of economic activities in Europe and east Asia.
As of July, the fall in trade was significant in most regions except east Asia. But the sharpest decline was felt by the west and south Asian regions, where imports dropped by 23% and exports by 29%. The figures for July were however an improvement on the 35% fall in imports and 41% decline in exports recorded in the second quarter.
Year-on-year growth of developing nations’ exports improved from -17% in the second quarter to -6% in July, while those from developed nations increased from -22% to -14%. And South-South trade, commerce among developing countries, has shown some resilience, with the year-on-year decline sitting at 8% in July, up from 16% in the second quarter.
The report’s assessment of trade in different sectors finds that the pandemic has hit the energy and automotive industries the hardest, while mitigation responses including teleworking and personal protection measures have led to strong growth in sectors such as communication equipment, office machinery, and textiles and apparel.
UNCTAD’s analysis gives special attention to COVID-19 medical supplies, which include personal protective equipment, disinfectants, diagnostic kits, oxygen respirators and other related hospital equipment.
According to the report, exports of COVID-19 medical supplies from China, the European Union and the United States rose from about $25 billion to $45 billion per month between January and May 2020. And since April, trade in such products has increased by an average of more than 50%.
The increase in such trade, however, has primarily benefited wealthier nations, with middle- and low-income countries largely priced out from access to COVID-19 supplies, the report says.
Since the outset of the pandemic, each resident of high-income countries has benefited on average from an additional $10 per month of imports of COVID-19 related products, compared with just $1 for people living in middle-income countries and a mere $0.10 for those in low-income countries.
This means that per capita imports of medical goods essential to mitigate the pandemic have been about 100 times higher for wealthy countries than for poor nations.
“While it should be expected that the increase of per capita imports of COVID-19 products would be larger for wealthier countries, the sheer difference is staggering,” the report says.
UNCTAD warns that if a COVID-19 vaccine becomes available, the access divide between residents in wealthy and poor countries could be even more drastic.
While some low-income countries have the capacity to locally manufacture some protective equipment, this may not be the case for vaccines, which require stronger manufacturing and logistics capacities.