Global merchandise trade volumes fell 14% in first half of 2020: WTO

Latest Goods Trade Barometer shows annual fall may be restricted to 13% in 2020

Global merchandise trade volume is estimated to have contracted 14 per cent in the first half of 2020, and may see an overall 13 per cent decline in 2020, the World Trade Organization (WTO) said.

The global body’s Goods Trade Barometer (GTB) on Wednesday confirmed trade volumes had crumbled steeply in H1 but hinted at a nascent recovery. 

The GTB provides real-time information on the trajectory of world trade relative to recent trends. Its latest estimates showed a reading of 87.6, up from 84.5 seen in May but still lower than 95.5 seen in February.

A reading of 100 indicates growth in line with medium-term trends, while readings greater than and below 100 indicate above-trend and below-trend growth, respectively.

The latest reading — the lowest on record in data going back to 2007, and on a par with the nadir of the 2008-09 financial crisis — is broadly consistent with WTO statistics issued in June. The latest barometer reading is driven by collapsing automotive products (71.8), slowdown in air freight (76.5), both of which remained the worst on record since 2007. Container shipping (86.9) also remained muted amid restrictions at ports across the world. On the other hand, the fall in export orders slowed (88.1) as compared to 83.3 in the previous round.

Nascent recovery

In May, the GTB had forecast an estimated 18.5 per cent year-on-year (YoY) decline in merchandise trade in Q2 of 2020 while the WTO had separately suggested that trade volumes would shrink by an estimated 14 per cent in H1. But since then, a slightly less pessimistic scene has emerged.

“This estimate, together with the new GTB reading, suggest that world trade in 2020 is evolving in line with the less pessimistic of the two scenarios outlined in the WTO’s April forecast, which projected that the volume of merchandise trade this year would contract 13 per cent compared to 2019,” the global body said on Wednesday.

While the exact extent of the fall in trade will only be confirmed later this year when official trade volume data for April to June becomes available, WTO economists have repeatedly warned that the heavy economic toll of the pandemic suggests that projections for a strong, V-shaped trade rebound in 2021 may prove overly optimistic.

“As uncertainty remains elevated, in terms of economic and trade policy as well as how the medical crisis will evolve, an L-shaped recovery is a real prospect. This would leave global trade well below its pre-pandemic trajectory,” the WTO said.

Legacy issues

Global merchandise trade volumes had already been reeling from the after-effects of trade tensions between the United States and China and had contracted 0.1 per cent in 2019, marking the first annual decline since 2009, when the last recession ended. This was markedly worse in the later part of 2019. The WTO has also warned that developing economies would require assistance given that the current crisis has hit almost all sectors.

“Global trade growth has been slowing since Q4 of 2018, finally turning negative in Q3 of 2019. The seasonally adjusted volume of world merchandise trade was already down 3.0 per cent YoY in Q1 of 2020, a decline that only partly reflects the effect of the Covid-19 pandemic. The full economic impact of the virus and associated containment efforts are expected to be seen in the statistics for Q2,” the WTO said. 

India’s exports contracted 10.2 per cent in July to $23.64 billion, shrinking for the fifth straight month as trade of major foreign-exchange earners such as petroleum, gems, electronics, and textiles struggled to catch up since the nationwide lockdown took its toll.