Last reviewed 18 June 2020
Since the outbreak of the Covid-19 epidemic, various institutions have made forecasts about its impact on GDP and on global trade but the situation is volatile and fast moving.
International Trade Committee inquiry
The UK Parliament’s International Trade Committee continues its inquiry into the global trade policy response to the Covid-19 pandemic. Having examined the impact of the pandemic in the UK on medicine, food, manufactured goods, services and the flow of Foreign Direct Investment, the Committee has considered the global trade policy response to the pandemic and what actions the WTO has taken to encourage a coordinated global response as well as how it has tracked trade-related measures and data on Covid-19. The oral evidence transcripts and written evidence can be found at https://committees.parliament.uk/work/242/the-covid19-pandemic-and-international-trade/publications/.
The Committee hopes to conclude the inquiry before the summer recess in July.
Writing to the Committee, the International Trade Secretary said that in the first quarter of 2020 (January to March) total UK exports were down £21.5 billion compared to the previous quarter. UK imports were also down by £8.8 billion in this quarter. That data contains just one week of full UK lockdown measures.
DG trade at the European Commission published an analysis carried out during the month of May of the trade effects generated by the reduction in economic activity following the Covid-19 outbreak https://trade.ec.europa.eu/doclib/docs/2020/may/tradoc_158764.pdf.
It warns that the estimates are subject to a high degree of uncertainty given the many unknown variables including recovery time. DG Trade’s Chief Economist team estimates a decrease in global trade for 2020 between 10%–16%. For the EU27 the predicted reduction is expected to be between 9%–15% for extra-EU27 exports and 11%–14% for extra-EU imports (goods and services combined). Exports of primary sectors other than energy and services trade (although this is likely to be underestimated) turn out to be less affected than manufacturing sectors. Transport equipment and electrical machinery exports turn out to be the most affected sectors.
In early April the WTO forecast that world merchandise trade could fall by between 13% and 32% in 2020 depending on assumptions about the length and severity of the Covid-19 crisis. Merchandise trade volume already fell by 0.1% in 2019 as a result of trade tensions and slowing economic growth. EU27 exports were estimated to fall by between 12%–33% while imports to decrease by between 10%-25%. A 2021 recovery in trade is expected but is dependent on the duration of the outbreak and the effectiveness of the policy responses. Nearly all regions will suffer double-digit declines in trade volumes in 2020 with exports from North America and Asia hit hardest. Trade is likely to fall more steeply in sectors with complex value chains particularly electronics and automotive products. Services trade may be most directly affected through transport and travel restrictions. More details available here: https://www.wto.org/english/news_e/pres20_e/pr855_e.htm.
At the end of May the WTO looked at how the Covid-19 pandemic has affected trade in services, from tourism and transport to retail and health services. Given the role of services in providing inputs for other economic activities, including connecting supply chains and facilitating trade in goods, disruptions in services supply are having a broad economic and trade impact.
A WTO report at the beginning of June examined the impact of the pandemic on micro, small and medium sized businesses. These businesses represent 95% of all companies worldwide and account for 60% of employment. Many depend on international trade, either because they export their products or because they import inputs to manufacture the products that they sell domestically. They are particularly exposed to the economic impact of the pandemic.