The World Trade Organisation (WTO) has said in its latest forecast that global trade will fall between 13 per cent and 32 per cent in 2020 due to the spread of coronavirus, with every region expected to be hit. WTO economists believe the decline will likely exceed the trade slump brought on by the global financial crisis of 2008‑2009. The organisation predicted a range of scenarios, from an optimistic 13 per cent drop in global merchandise trade that would rival the Great Recession of 2008-2009 to a pessimistic drop of 32 per cent rivalling the Great Depression of 1930’s. The wide range of possibilities for the predicted decline is explained by the unprecedented nature of the coronavirus health crisis and the uncertainty around its precise economic impact. WTO Director-General, Roberto Azevêdo, said of the organisation’s latest outlook that “These numbers are ugly – there is no getting around that.” The Geneva-based organisation indicated that the unavoidable declines in trade and output will have painful consequences for households and businesses, on top of the human suffering caused by the disease itself. Nearly all regions will suffer double-digit declines in trade volumes in 2020, with exports from North America and Asia hit hardest, according to the trade outlook released Wednesday. Trade will likely fall steeper in sectors with complex value chains, particularly electronics and automotive products, owing to the fact that supply chains have been greatly disrupted across the world. According to the OECD Trade in Value Added (TiVa) database, the share of foreign value added in electronics exports was around 10 per cent for the United States and 25 per cent for China. It was more than 30 per cent for Korea, greater than 40 per cent for Singapore and more than 50 per cent for Mexico, Malaysia and Vietnam combined. Imports of key production inputs are likely to be interrupted by social distancing, which caused factories to temporarily close in China and which is now happening in Europe and North America. Services trade may be most directly affected by COVID-19 through transport and travel restrictions. In Rwanda, the services sector particularly tourism is believed to have missed out on about $10 million in the months of March and April only, the Finance Minister Uzziel Ndagijimana told this paper recently. With most hotels across the country closed as there are no conferences, meetings or events as well as guests, he said that the hospitality industry was also missing out on revenue of about Rwf3 billion. Recovery Merchandise trade volume already fell by 0.1 per cent in 2019, weighed down by trade tensions and slowing economic growth. The dollar value of world merchandise exports in 2019 fell by 3 per cent to $18.89 trillion. The value of commercial services exports rose 2 per cent to $6.03 trillion in 2019. Estimates of the expected recovery in 2021 are equally uncertain, with outcomes depending largely on the duration of the outbreak and the effectiveness of the policy responses. “The immediate goal is to bring the pandemic under control and mitigate the economic damage to people, companies and countries. But policymakers must start planning for the aftermath of the pandemic,” Azevêdo said. Decisions taken now are expected to determine the future shape of the recovery and global growth prospects. Robert Opirah, chief technical advisor at the Ministry of Trade says there’s no comprehensive analysis of how domestic trade will be affected, but suggests the trend is downward. “We see reduction in activities both for exports and imports. This is because in the lockdown very few people undertake activities,” he said. He indicated that some sectors will be hit harder than others, especially those that produce non-essential services like logistics and transportation, shipping and retail, to mention but a few. “An industry that trades in pharmaceuticals will not be affected as that which produces biscuits,” he noted. Countries including Rwanda, and other organisations are working to lay out strategies to respond to the expected slow trade growth. Frank Matsaert, the chief executive at TradeMark East Africa said recently that his organisation was planning to set up a facility that will enable businesses in the East African Community region to trade easily. “In our efforts towards promoting trading during this time, TradeMark East Africa with support from our donors is putting in place a facility that will make it much easier for cross border traders to continue engaging in business,” he said. Rwanda is one of the countries in which TradeMark has significant work around trade promotion and investment.
