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Im­pact Se­ries: 03–20

Pandemic and Trade
The Dynamics of Global Trade in Times of Corona

Mathilde Le Moigne
Senior Research Fellow at the Kühne Center for Sustainable Trade and Logistics at the University of Zurich

Outline

The Covid-19 pandemic represents an unprecedented economic shock, insofar as it cumulates the effect of both a demand and a supply shock on the aggregate economy, as well as an unprecedented increase in trading costs. In response to this shock, global trade has declined by approximately 30% in the course of the first six months of 2020, but the subsequent rebound of trade volumes during the summer suggests a quick recovery of international exchanges. A detailed analysis of the times series across countries and sectors reveals the magnifying effects of sanitary measures and export restrictions on the effect of the pandemic on global trade. The absence of a significant decline in trade of essential goods and in particular of medical goods is nonetheless cause for optimism, as it illustrates the resilience of global trade relations.

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The Covid-19 pan­dem­ic has af­fect­ed the world econ­o­my across many di­men­sions, with fears that the reper­cus­sions of this shock will change the glob­al eco­nom­ic land­scape per­ma­nent­ly. The par­tic­u­lar­i­ty of the pan­dem­ic lies in the fact that it cu­mu­lates the ef­fect of both a de­mand and a sup­ply shock on the ag­gre­gate econ­o­my, as well as an un­prece­dent­ed in­crease in trad­ing costs.

The strong de­cline in ag­gre­gate de­mand since Jan­u­ary 2020 can be at­trib­uted to dis­rup­tions of con­sump­tion pat­terns due to stag­ger­ing in­creas­es in the num­ber of cas­es, the in­creased un­cer­tain­ty lead­ing to a de­crease in la­bor de­mand push­ing in­di­vid­u­als out of the la­bor force, and the de­cline in con­sump­tion brought about by san­i­tary re­stric­tions on in­di­vid­u­als’ mo­bil­i­ty and mass lock­down mea­sures. Par­al­lel to a de­cline in de­mand, sup­ply of in­ter­me­di­ate in­puts and ser­vices has been neg­a­tive­ly af­fect­ed by the in­crease in fac­to­ry clo­sures and strong re­stric­tions on free mo­bil­i­ty across coun­tries. Fi­nal­ly, in­ter­na­tion­al trade of goods be­came cost­lier in light of re­duced air traf­fic and ris­ing ex­ports re­stric­tions for fear of a short­age of es­sen­tial goods, in a po­lit­i­cal con­text of glob­al trade re­la­tions al­ready tensed.

In this se­ries we pro­vide some sta­tis­tics of glob­al trade pat­terns be­tween Au­gust 2019 and Au­gust 2020 to de­scribe the dy­nam­ics of glob­al trade in times of coro­n­avirus.

Be­tween Jan­u­ary 2020 (when the Chi­nese WHO of­fice first men­tioned the ex­is­tence of a new vi­ral pneu­mo­nia) and the end of March 2020 (when the WHO char­ac­ter­ized the nov­el COVID-19 epi­dem­ic as a pan­dem­ic), the to­tal val­ue of glob­al trade of goods de­creased by 35%, rep­re­sent­ing a drop of ap­prox­i­mate­ly USD 200 bil­lions in trade flows. Glob­al vol­umes of im­ports first de­clined by 11% in Jan­u­ary 2020, and by an ad­di­tion­al 13 per­cent­age points be­tween Feb­ru­ary and April 2020. The re­ac­tion of to­tal ex­ports ap­pears lat­er, with a sig­nif­i­cant 36% de­cline in the vol­ume of ex­ports be­tween March and April 2020.1

Glob­al trade vol­umes reached their low­est point since Sep­tem­ber 2019 be­tween April and May 2020, but the sum­mer showed signs of re­bounds: in June 2020, glob­al trade vol­umes were back to ap­prox­i­mate­ly 95% of their lev­el of Jan­u­ary 2020. The lat­est WTO fore­cast (Oc­to­ber 2020) an­tic­i­pates a 7.2% rise of glob­al trade vol­umes for the year 2021.

Source: COM­TRADE data. Month­ly ag­gre­gate vol­umes of im­ports and ex­ports be­tween Sep­tem­ber 2019 and Au­gust 2020, in mil­lions of cur­rent US dol­lars.
Source: COM­TRADE month­ly data. To­tal month­ly vol­ume of im­ports in­dexed by their val­ue in Sep­tem­ber 2019 for a se­lec­tion of re­gions: North Amer­i­ca in­cludes US and Cana­da; Asia in­cludes Japan, the Chi­nese ad­min­is­tra­tive re­gions of Hong Kong and Macao, Cen­tral Asian coun­tries and the Philip­pines. Data avail­abil­i­ty for Latin Amer­i­ca and Africa is too lim­it­ed to be in­clud­ed.

The ge­o­graph­ic spread of the eco­nom­ic re­sponse to the pan­dem­ic from Asia to­wards the West is par­tic­u­lar­ly clear when com­par­ing trade vol­umes across re­gions. Asian im­ports start­ed de­clin­ing as ear­ly as dur­ing De­cem­ber 2019 and reached their low­est lev­el in Feb­ru­ary 2020 (e.g. Japan­ese im­ports de­clined by 20% be­tween Jan­u­ary and Feb­ru­ary 2020), at which point In­dia’s im­ports start­ed dip­ping (-35% dur­ing Jan­u­ary and March). The de­crease in im­ports for the EU and North Amer­i­ca be­came more pro­nounced to­wards the end of the quar­ter. The stag­gered re­sponse of ex­port flows is even stark­er, with a 20% de­cline in Asian ex­ports be­tween De­cem­ber 2019 and Jan­u­ary 2020, a 30% de­cline in In­di­an ex­ports be­tween Feb­ru­ary and March, while ex­ports from EU and North Amer­i­ca de­creased by about 35% be­tween March and April.2

The dy­nam­ics of im­port and ex­port flows also sug­gests the im­por­tance of in­ter­na­tion­al and na­tion­al po­lit­i­cal de­ci­sions in mag­ni­fy­ing the re­sponse of glob­al trade to the pan­dem­ic. The de­cline of im­ports in two waves (Jan­u­ary–Feb­ru­ary 2020, and March– April 2020) sug­gests a sig­nif­i­cant im­pact of the so­cial dis­tanc­ing and mass lock­down mea­sures on in­di­vid­u­als’ con­sump­tion im­posed first in Asia and only a cou­ple of months lat­er in Eu­rope and the Unit­ed States.3 The re­bound of ag­gre­gate trade dur­ing the sum­mer of 2020 also co­in­cides with a gen­er­al­ized re­duc­tion of san­i­tary re­stric­tions across the globe.

The de­cline in ex­ports start­ing March 2020 co­in­cides with the im­ple­men­ta­tion of se­vere ex­port re­stric­tions across the globe (the EU reg­u­la­tion 2020/402 on Per­son­al Pro­tec­tive Equip­ment was im­ple­ment­ed on March 15. 2020, a sim­i­lar ex­ec­u­tive or­der was signed by the Unit­ed States on April 3. 2020, and re­lat­ed mea­sures have been adopt­ed by a large ar­ray of coun­tries in March-April 2020), and the ex­pan­sion of trav­el re­stric­tions be­tween non-Asian coun­tries (the WHO first quar­an­tine ad­vice was is­sued on Feb­ru­ary 29. 2020). While it is clear that the pan­dem­ic af­fect­ed ag­gre­gate sup­ply through a va­ri­ety of chan­nels in­clud­ing in­creased un­cer­tain­ty, busi­ness clo­sures and de­cline in in­ter­me­di­ate in­puts avail­abil­i­ty, the break in the times se­ries in March 2020 em­pha­sizes the ag­gra­vat­ing ef­fect of these ex­port re­stric­tions.

One of the key po­lit­i­cal con­cerns aris­ing from the pan­dem­ic and jus­ti­fy­ing some of the re­stric­tions men­tioned above was na­tion­al ac­cess to es­sen­tial goods. We con­sid­er some of these key sec­tors, name­ly food prod­ucts and en­er­gy, plas­tics and med­ical goods, and com­pare trade pat­terns in these goods with a se­lec­tion of “non-es­sen­tial” goods (clothes and ap­par­el, elec­tron­ics, toys and car man­u­fac­tur­ing parts).4

Ex­changes of en­er­gy-re­lat­ed goods (gaso­line, fuel, diesel oil and nat­ur­al gas) stand out from the group of es­sen­tial goods, with a de­cline of trade vol­umes of 60% be­tween Jan­u­ary and May 2020. This de­cline is symp­to­matic of the glob­al slow­down in trade of non-es­sen­tial goods (be­tween Jan­u­ary 2020 and April 2020, trade vol­umes in car man­u­fac­tur­ing parts de­clined by 65%, im­ports of ap­par­el by 50%, and elec­tron­ics by 20%) and re­straints on in­di­vid­u­als’ and goods’ mo­bil­i­ty. To some ex­tent, it is also a di­ag­nos­tic test for the in­crease in trad­ing and trans­porta­tion costs through­out the pe­ri­od. De­spite a 20 per­cent­age points re­bound in trade flows be­tween May and Au­gust 2020, ag­gre­gate trade vol­umes of en­er­gyre­lat­ed goods re­mained 40% low­er than their 2019 lev­els at the end of the sum­mer 2020, while vol­umes of se­lect­ed non-es­sen­tial goods were back to their Jan­u­ary lev­els. This may be in­dica­tive of de­lays in the eco­nom­ic re­cov­ery of some sec­tors, in par­tic­u­lar trans­porta­tion and tourism.

Source: COM­TRADE month­ly data. To­tal val­ues of glob­al im­ports and ex­ports of nonessen­tial goods, in­dexed by their val­ue in Sep­tem­ber 2019. Non-es­sen­tial goods are se­lect­ed by the au­thors for il­lus­tra­tive pur­pos­es and in­clude Clothes and ap­par­el (ex­clud­ing med­ical ap­par­el), elec­tron­ics, car man­u­fac­tur­ing parts and toys.
Source: COM­TRADE month­ly data. To­tal val­ues of glob­al im­ports and ex­ports of es­sen­tial goods (up­per pan­el), in­dexed by their val­ue in Sep­tem­ber 2019. Es­sen­tial goods’ de­f­i­n­i­tion is bor­rowed from Switzer­land’s na­tion­al stock­pil­ing pol­i­cy, and in­cludes food prod­ucts, plas­tics, en­er­gy sources (in­clude oil, nat­ur­al gas and ura­ni­um), and med­ical prod­ucts.

Trade in oth­er es­sen­tial goods, how­ev­er, re­mained sur­pris­ing­ly strong be­tween Jan­u­ary and Au­gust 2020. The vol­umes of trad­ed food prod­ucts and plas­tics (poly­eth­yl­ene es­sen­tial in the man­u­fac­tur­ing of the ma­jor­i­ty of con­sump­tion and pro­duc­tion goods) re­mained rel­a­tive­ly close to their 2019 lev­els through­out the first six months of 2020. Ex­ports of food prod­ucts ac­tu­al­ly in­creased by 16% be­tween Jan­u­ary and March 2020, while trade vol­umes of plas­tics only de­clined by 10% be­tween Jan­u­ary and May 2020.

De­spite the po­lit­i­cal­ly charged top­ic of ac­cess to med­ical test­ing kits, pro­tec­tive gears and res­pi­ra­tors, trade in med­ical prod­ucts re­mained strong through­out the first wave of the pan­dem­ic. In­ter­na­tion­al co­or­di­na­tion seemed to have played a key role in that re­gards, as is ev­i­dent from the 17% in­crease in trade vol­umes of med­ical prod­ucts be­tween Feb­ru­ary and March 2020, in the im­me­di­ate af­ter­math of the first WHO dis­patch of di­ag­noses kit.

Zoom­ing in on Covid-re­lat­ed med­ical goods, the large dis­crep­an­cies be­tween re­port­ed ex­port and im­port flows re­veals strong im­bal­ances in the glob­al sup­ply of these goods, with Chi­na ap­pear­ing as the lead ex­porter for the ma­jor­i­ty of these prod­ucts.5

Be­tween March and May 2020, the vol­ume of im­ports of masks (in par­tic­u­lar FFP2 and FFP3 masks for med­ical pur­pos­es, but also sim­pler chirur­gi­cal masks) in­creased more than 15-fold. This in­crease in nom­i­nal terms may re­flect both the surge in de­mand for an item at the heart of many coun­tries’ san­i­tary mea­sures, and a pos­si­ble surge in the price of these items. The to­tal nom­i­nal val­ue of im­ports of pro­tec­tive masks in May 2020 was USD 18 bil­lions. Amongst oth­er pro­tec­tive gears, im­ports of gog­gles in­creased by 46% rel­a­tive to Jan­u­ary 2020, and im­ports of gloves were 57% high­er in July 2020 than in Jan­u­ary.

In all these in­stances, ex­cess glob­al de­mand has been met by a dras­tic in­crease of the sup­ply from Asia and in par­tic­u­lar from Chi­na.

Trade in med­ical test­ing kits re­mained rel­a­tive­ly more sta­ble with a peak in­crease of im­port­ed vol­umes of 25% in March 2020. The role of the WHO in the dis­tri­bu­tion of med­ical test­ing kits is very clear in the time se­ries: the in­crease in trade vol­umes in March 2020 can be di­rect­ly as­so­ci­at­ed with the first WHO of­fi­cial dis­patch of kits. The sta­ble lev­el of trad­ed vol­umes af­ter­wards sug­gests a more bal­anced dis­tri­bu­tion of ac­cess to these goods across the globe.

These pat­terns of trade in Covid-re­lat­ed med­ical prod­ucts are re­as­sur­ing, as they show the re­silience and flex­i­bil­i­ty of a quick­ly adapt­ing glob­al trade sys­tem.

Source: COM­TRADE month­ly data. To­tal vol­ume of glob­al im­ports and ex­ports of med­ical goods par­tic­u­lar­ly used in the con­text of the Coro­n­avirus, in­dexed by their val­ue in Sep­tem­ber 2019. The la­bel “Masks” gath­ers HS6 prod­uct codes for FFP2, FFP3 and dis­pos­able chirur­gi­cal masks,“Mis­cel­la­neous pro­tec­tive gear” gath­ers ad­di­tion­al HS6 codes for face pro­tec­tions, sur­gi­cal blous­es, and ar­ti­cles of ap­par­el used in hos­pi­tals.
Source: COM­TRADE month­ly data. To­tal vol­ume of glob­al im­ports and ex­ports of med­ical goods par­tic­u­lar­ly used in the con­text of the Coro­n­avirus, in­dexed by their val­ue in Sep­tem­ber 2019. The la­bel “Dis­in­fec­tant” gath­ers codes for hy­droal­co­holic gel and med­ical soaps, “Gog­gles” con­sid­ers the HS6 code for pro­tec­tive med­ical gog­gles, “Gloves” gath­ers sur­gi­cal plas­tics or rub­ber gloves, and “Med­ical test kits” gath­ers prod­uct codes es­sen­tial in the im­ple­men­ta­tion of both sero­log­i­cal and vi­ro­log­i­cal COVID-19 tests.

Take Aways

The COVID-19 pan­dem­ic rep­re­sents a per­fect storm for a sharp de­cline of glob­al trade, but the eco­nom­ic re­ac­tion to its ini­tial shock is em­i­nent­ly po­lit­i­cal. While san­i­tary mea­sures are crit­i­cal in or­der to main­tain na­tion­al health care sys­tems afloat, it ap­pears that the com­bi­na­tion of na­tion­al shel­ter-in-place poli­cies and ex­ports re­stric­tions mag­ni­fied the ini­tial shock of the pan­dem­ic. Amidst fear of a col­lapse of glob­al trade, the evo­lu­tion of ex­changes of es­sen­tial goods pro­vides nonethe­less some grounds for op­ti­mism, as they are in­dica­tive of the re­silience of glob­al trade.

The re­bound of glob­al trade in the sum­mer of 2020 co­in­cides with the loos­en­ing of so­cial dis­tanc­ing in many coun­tries. The up­surge in the num­ber of cas­es in Sep­tem­ber 2020 con­firmed fears of a sec­ond wave of the pan­dem­ic. Un­der­stand­ing how trade vol­umes ad­just­ed to this ex­pect­ed sec­ond shock will be key in as­sess­ing the over­all im­pact of the pan­dem­ic on glob­al trade, and will be the ob­ject of a fu­ture Im­pact Se­ries.

  1. For this analy­sis we use month­ly trade vol­umes re­port­ed by COM­TRADE. The set of re­port­ing coun­tries be­tween Au­gust 2019 and Au­gust 2020 is not en­tire­ly sta­ble, and some mir­ror ex­changes are not re­port­ed. Amongst the most im­por­tant miss­ing re­porters are Chi­na and South Amer­i­can coun­tries. Im­ports from Chi­na are how­ev­er clear­ly re­port­ed. This may gen­er­ate non-neg­li­gi­ble asym­me­tries be­tween im­port and ex­port flows.
  2. Data avail­abil­i­ty for low in­come coun­tries is very lim­it­ed, which lim­its the scope for sound in­ter­pre­ta­tion of flows from Latin Amer­i­ca and Africa.
  3. The most re­cent em­pir­i­cal stud­ies on the top­ic of house­hold con­sump­tion in times of Covid sug­gest that an ini­tial re­sponse, in an­tic­i­pa­tion of the lock­down mea­sure, was an in­crease in stock­pil­ing be­hav­ior. In the con­text of the U.S. data sug­gest that the largest re­spons­es were ob­served for States with shel­ter-in-place mea­sures (Bak­er et al. 2020).
  4. The de­f­i­n­i­tion of es­sen­tial goods and sec­tors is pre­sum­ably coun­try-spe­cif­ic. We use a spe­cif­ic Swiss pol­i­cy that im­pos­es com­pul­so­ry na­tion­al stock­pil­ing of es­sen­tial goods to main­tain sup­ply in case of se­vere short­ages to iden­ti­fy such goods.
    https://www.bwl.ad­min.ch/bwl/de/home/the­men/pflicht­lager.html
    The se­lec­tion of non-es­sen­tial goods is dis­cre­tionary.
  5. Im­ports of goods, and in par­tic­u­lar of med­ical prod­ucts from Chi­na, are re­port­ed by the ma­jor­i­ty of coun­tries in the COM­TRADE data. How­ev­er, ex­ports from Chi­na are not re­port­ed, lead­ing to an ap­par­ent gap be­tween im­port and ex­port flows. Par­tial data on ex­ports from Hong Kong SAR, Chi­na con­firms that the ob­served pat­terns of im­ports of med­ical goods is mir­rored by ex­port pat­terns from Hong Kong.
  • World Trade Or­ga­ni­za­tion Press Re­lease 20-000, Oc­to­ber 6. 2020
  • S.R. Bak­er, R.A. Far­rokhnia, S. Mey­er, M. Pagel and C. Yan­nelis (2020).
    “How does house­hold spend­ing re­spond to an epi­dem­ic? Con­sump­tion dur­ing the 2020 covid-19 pan­dem­ic” – NBER Work­ing Pa­per 26949.
  • “Ex­port Con­trols and Ex­port Bans over the Course of the Covid-19 Pan­dem­ic: Ex­port Re­stric­tions Im­pair Abil­i­ty to Re­spond to the Cri­sis” – WTO BDI Re­port, April 29. 2020
  • Bericht zur Vor­rat­shal­tung 2019 – Schweiz­erische Ei­d­genös­sis­ches De­parte­ment für Wirtschaft, Bil­dung und Forschung WBF, Bun­de­samt für wirtschaftliche Lan­desver­sorgung BWL
  • WITS Trade Sta­tis­tics – List of med­ical prod­ucts re­lat­ed to Covid-19 (HS 6-dig­it)
    https://wits.world­bank.org/trade/covid-19-med­ical-prod­ucts.aspx
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Mathilde Le Moigne

Senior Research Fellow at the Kühne Center for Sustainable Trade and Logistics at the University of Zurich

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