Global trade recorded a 5% drop in the third quarter of this year compared with the same period last year, according to an UNCTAD report.
This marks an improvement on the 19% year-on-year plunge recorded in the second quarter, and the frail recovery is expected to continue in the fourth quarter, with a preliminary forecast of -3% on year.
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% this year.
“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, 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 due to the earlier than expected resumption of economic activities in Europe and east Asia.
China’s notable recovery
China has in particular restarted its economy much earlier than initially expected. The nation’s exports, after falling in the early months of the pandemic, stabilised in the second quarter of this year and rebounded strongly in the third quarter, with a growth rate of almost 10% on year.
“Overall, the level of Chinese exports for the first nine months of 2020 was comparable to that of 2019 over the same period,” the report says.
Chinese demand for goods and services has recovered from the decline in the second quarter. Contrary to other major economies, its imports stabilized in July and August and then grew by 13% in September.
Export growth in September was also recorded in India (4%) and South Korea (8%).
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 sharp and widespread decline in international trade in the second quarter of this year was similar for developing and developed countries. But exports from developing economies appear to be recovering faster.
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 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.
Wealthier nations benefit
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.
“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.