Trade Plunge due to COVID-19
As per the press release by WTO, the World trade is expected to fall by between 13% and 32% in 2020 as the COVID-19 pandemic disrupts normal economic activity and life around the world.
• WTO Projects that merchandise trade will plummet by anywhere between 13% and 32% in 2020.
• It is more certain that the disruption and resultant blow to trade will in all likelihood be far worse than the slump brought on by the global financial crisis of 2008.
• The IMF also projected that the global economy is set to contract sharply in 2020, with “the lockdown needed to fight” the pandemic affecting billions worldwide.
• The tight restrictions on movement and social distancing norms across geographies have led to severe curbs on labour supply, transport and travel and the shuttering of whole sectors from hotels and non-essential retail to tourism and significant parts of manufacturing.
• The WTO expects all regions, Africa, West Asia and the Commonwealth of Independent States, to suffer double-digit declines in exports and imports this year even under its “optimistic scenario”, which postulates a recovery starting in the second half.
The WTO and the IMF chief have pointed to the fact that unlike the recession that accompanied the global financial crisis just over a decade ago, the current downturn is unique.
Global supply chains have increased in complexity, especially in industries such as electronics and automotive products, making them particularly vulnerable to the current disruptions, with countries that are a part of these value linkages set to find trade more severely impacted.
Also, services trade — in which India has a higher global share as an exporter ($214 billion, or 3.5%, in 2019)— may be significantly affected by the transport and travel curbs.
A small sliver in this bleak outlook for services trade is the role that the WTO sees for information technology services as companies try to enable employees to work from home and people order essentials and drugs online and socialize remotely.
India’s IT exporters have been busy supporting their overseas clients’ business continuity plans in the face of the pandemic and may find this hand-holding at a time of dire need earning them loyalty-linked business when economic activity revives.
The COVID-19 pandemic has affected the global economy and trade severely. A rebound in global economic activity will require trade to flow freely across borders as vitally as any fiscal or monetary stimulus. The world will be best served if nations do not turn insular and erect new barriers to the movement of goods, services and people in the aftermath of the pandemic.
The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations.
The goal is to ensure that trade flows as smoothly, predictably and freely as possible.
All major decisions are made by the WTO's member governments: either by ministers (who usually meet at least every two years) or by their ambassadors or delegates (who meet regularly in Geneva).
The primary purpose of the WTO is to open trade for the benefit of all.
The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948.
PEPPER IT WITH
IMF report on COVID-19, IMFC, World Trade Report