As we near the end of the year, it's clear that 2020 is going to go down as one of the most turbulent times for global trade in many decades. The coronavirus pandemic and its subsequent impact on economies around the world has upended many plans for the year and, while trade volumes are recovering from the worst of the recession, the outlook remains far from certain.
Indeed, a new report from the United Nations Conference on Trade and Development (UNCTAD) found that while the third quarter of 2020 has seen a notable improvement on Q2, the situation is still "frail" and could be subject to more disruption in the coming months, depending on how Covid-19 evolves in the northern hemisphere’s winter.
Secretary-general of the body Dr Mukhisa Kituyi said: "The uncertain course of the pandemic will continue aggravating trade prospects in the coming months. Despite some 'green shoots' we can't rule out a slowdown in production in certain regions or sudden increases in restrictive policies."
So, which parts of the global economy have been particularly hard hit by the disruption, which have weathered the storm well, and what are the prospects for a return to growth?
What sectors have seen the biggest changes?
Overall, the UNCTAD report found global trade volumes dipped by five per cent in the third quarter of 2020 compared with the same period in 2019. This was, however, a significant improvement on the drop of 19 per cent year-on-year recorded in the previous quarter, at the height of shutdowns around the world.
On a sector-by-sector basis, the biggest falls were seen in the energy and automotive industries, which recorded drops in volume of 52 per cent and 49 per cent respectively in Q2. These areas have also not recovered as quickly as many other parts of the global economy, with energy trade down by 35 per cent in Q3 and the automotive sector dipping by 18 per cent year-on-year.
One reason for this may be reduced demand for transportation as many major economies shut down and shift to teleworking. However, this trend has had benefits elsewhere, with sectors including communications and office equipment enjoying strong growth in Q3, up eight per cent and 14 per cent respectively.
Unsurprisingly, medical supplies and personal protective equipment have also enjoyed a strong 2020, but UNCTAD noted this has disproportionately benefited wealthier countries.
It observed that residents of high-income countries have benefited from an average of an additional $10 per month of imports of Covid-19 related products, compared with just $1 for people living in middle-income countries and $0.10 for those in low-income countries.
"In other words, per capita imports of the medical goods essential to mitigate the Covid-19 pandemic have been about 100 times larger in high-income countries in comparison to low-income countries," the report said. "While it should be expected that the increase of per capita imports of Covid-19 products would be larger for wealthier countries, the sheer difference is staggering.
What are the prospects for global trade moving forwards?
Looking forward, the UN report estimated that global trade volumes for 2020 as a whole will fall by around seven per cent compared with last year. However, if there is a greater resurgence of the pandemic in the winter months, leading to a deteriorating policy environment with sudden increases in trade restrictive policies, this could drop to a fall of around nine per cent.
However, even in this scenario, Dr Kituyi suggested this would still be a much more positive result than would have been expected in June, when a 20 per cent drop in global trade was being forecast.
This has been helped by earlier than expected reopenings of economic activity in Europe and east Asia. Meanwhile, China, the world's second-largest economy, has recently reported a return to growth with imports and exports on the rise.
While much depends on the progress of the pandemic into 2021, there remain some positive signs for trade. UNCTAD noted, for example, that trade between developing countries has already proven relatively resilient, while the east Asia and Pacific regions have been spared the deep drops seen in the west, so may signal the way forward for a global recovery.