The COVID-19 pandemic has deeply disrupted normal economic activities and international trade. The outbreak has exposed weaknesses in the supply chains and a lack of cooperation at the global level. The consequent economic contraction will also lead to a strong decline in global trade. It could however be an opportunity to rethink trade deals and to further sustainability in trade.
The reduction in economic activity following the COVID-19 outbreak is predicted to prompt a sharp fall in world trade. The Directorate-General for Trade foresees a 9.7% decrease in global trade for 2020, while the WTO predictions anticipate a higher contraction of international trade of between 13% and 32% in 2020. Manufacturing sectors are forecasted to be the most strongly hit - particularly those characterised by complex value chain linkages, such as electronics and automotive products.
According to the WTO, the pandemic has so far resulted in the introduction of export prohibitions or restrictions in 80 countries. These measures mainly concern medical supplies but other goods, such as foodstuffs, are also affected. If temporary restrictions are allowed under WTO rules in exceptional circumstances, the countries need to notify the WTO as soon as possible. Unfortunately, only a few countries have complied so far, and this lack of transparency will worsen already existing trade tensions.
Since the beginning of the pandemic, EU Trade Ministers have been focusing on ways to increase global cooperation to keep trade flows open and avoid unnecessary disruption of global value and supply chains.
At amfori, we share these concerns. To support our members, we recently created a specific COVID-19 Taskforce to identify risks and potential solutions. amfori is also sharing regular updates on the impact of COVID-19 on trade and circulation of goods, providing recommendations and suggestions to its members and to EU institutions in these trying times.
If anything, the COVID-19 outbreak clearly highlighted the importance of having resilient supply chains and we are convinced that creating the right conditions for open and sustainable trade will be an essential ingredient of that resilience. amfori has for long called for a closer link between sustainability and trade.
In the post COVID-19 world, EU businesses will, more than ever, need to source products efficiently and cost effectively. It is therefore essential that the EU (the Commission, European Parliament, and Member States) focuses on finalising negotiations on trade and investment agreements with third countries and getting them implemented promptly. These must be ambitious: covering as many goods as possible with preferable duty rates becoming effective as soon as possible. At the same time, it is important that meaningful sustainability chapters continue to be included and that third countries’ commitments to these chapters are monitored closely.