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Info Service on WTO and Trade Issues (Feb21/09) Geneva, 10 Feb (Kanaga Raja) – Global trade recovered in the fourth quarter of 2020, reducing its overall decline for the year to about 9 per cent, the UN Conference on Trade and Development (UNCTAD) has said. In its latest Global Trade Update released on 10 February, UNCTAD said that the recovery in global trade was led by trade in goods, while trade in services continues to lag. East Asian economies have been leading the recovery process with strong export growth and gains in global market share, it said. Most manufacturing sectors recorded positive trade growth in the fourth quarter (Q4) of 2020, with the main exceptions being the energy and transportation sectors, it added. “The recovery process has been uneven, with many countries lagging,” said UNCTAD economist Alessandro Nicita. According to UNCTAD, the economic and social disruptions brought about by COVID-19 greatly affected global trade during 2020. Overall, world trade recorded a drop in value of about 9 per cent in 2020, with trade in goods declining by about 6 per cent and trade in services decreasing by about 16.5 per cent, it said. “The effect of COVID-19 on global trade was most severe during the first half of 2020 with a drop in value of about 15 per cent.” Global trade began to recover in the third quarter (Q3) of 2020 and more strongly in Q4 2020, said UNCTAD. The recovery in the second half of 2020 was largely due to the rebound of trade in goods, while trade in services continues to lag substantially below averages, it added. In Q4 2020, global trade in goods grew by about 8 per cent on a quarter-over-quarter basis while trade in services stagnated at Q3 2020 levels. According to UNCTAD, the projections for the first quarter (Q1) of 2021 indicate a slowdown in the recovery of trade in goods (a 1.5 per cent drop relative to Q4 2020) and a further decline for trade in services (a 7 per cent drop relative to Q4 2020), largely because of continued disruptions in the travel sector. “However, projections remain imprecise due to persisting concerns about COVID-19 and uncertainty about the magnitude and timing of stimulus packages in some major economies,” said UNCTAD. GLOBAL AND REGIONAL TRENDS According to UNCTAD, in the first half of 2020, all major economies experienced significant downturns in both imports and exports of goods, with even heavier declines in the trade in services. UNCTAD said although improvements have been seen from lows earlier in the year, the value of trade remained lower for nearly all major economies in the third quarter of 2020 than in the same quarter of the previous year. However, growth of around 3 per cent in Chinese goods exports was the exception to this trend. In the fourth quarter of 2020, while trade in goods ameliorated substantially across many major economies, trade in services, in contrast, remained below averages. Notably, exports of services from China, and to a lesser extent India, appear to have fared relatively better than other major economies throughout 2020, said UNCTAD. UNCTAD said that the trade recovery in Q4 of 2020 is largely due to developing countries. The trade of goods from and to developing countries has recovered more strongly relative to developed countries, especially in relation to exports. However, the positive trade growth of developing countries in Q4 2020 vanishes once East Asian economies are excluded, it added. “The importance of East Asian economies in explaining the recovery in the trade of developing countries is even more marked when considering trade among developing countries (South-South trade).” While South-South trade has outperformed global trade, excluding the trade of East Asian developing economies results in South-South trade to drop significantly, even for Q4 2020, said UNCTAD. UNCTAD also said that the trade recovery of Q4 2020 has been very different across geographic regions. On a year-over-year basis, trade in goods originating from the East Asian region grew about 12 per cent in Q4 2020, with goods imports increasing by about 5 per cent. In contrast, in Q4 2020, negative trends remained for goods exports originating from most other regions. At the sectoral level, UNCTAD said that the trade recovery of the second half of 2020 has encompassed most sectors of goods, with the exception of the energy and transport equipment sectors. The value of trade in these two sectors was still about one-third lower in the second half of 2020 relative to the same period of 2019. Notably, while the trade recovery in Q3 2020 was largely driven by sectors related to goods for which demand has increased because of COVID-19, i.e. textiles (including personal protective equipment) and (home) office equipment, the recovery has been much more broad-based in Q4 of 2020, with trade in most sectors recording positive growth, it said. IMPACT OF COVID-19 ON EXPORT COMPETITIVENESS According to UNCTAD, COVID-19 is having profound impacts not only on the global demand but also on the relative competitiveness of countries. “While exports have declined for most countries, some countries have gained in terms of global market share as their economies were able to better weather the challenges of the pandemic,” it said. The fall in global demand brought by COVID-19 has forced least competitive suppliers out of global markets, while enabling the most competitive suppliers to thrive during the recovery process, it added. According to UNCTAD, during the COVID-19 pandemic, Viet Nam, Uganda, China, Switzerland, Turkey and Taiwan (Province of China) have experienced relatively better export performance. On the other hand, Venezuela, Saudi Arabia, Colombia, and Nigeria performed relatively worse, it said. According to UNCTAD, COVID-19 has profoundly affected international trade because its effects have been very diverse across economic sectors. “The competitiveness of countries has changed across sectors, with some economies gaining market share in some sectors while losing competitiveness in others,” it said. For instance, during the COVID-19 pandemic, China was able to capture market share in many sectors including in some of the most negatively affected sectors (transport equipment and road vehicles). However, China’s export competitiveness eroded in some of the sectors exhibiting an increase in trade during COVID-19 (e.g. communication equipment and office machinery). Viet Nam, Thailand and Taiwan (Province of China) have been relatively better able to capture the additional demand in these sectors, said UNCTAD.
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