Global Trade: Features of Change in the Post-Pandemic Era
Global trade fell by 8.9% in 2020, due to the drastic effects of Covid -19 pandemic. This significant disruption to the global trade severely affected the service sector that fell by more than 20% in 2020, approximately 4 times the decrease in the global goods trade sectors, according to Bank of England’s report of July 2021. In addition to this, the variance in regional trade has added to the remarkable increase in shipping costs.
Global Service Trade VS Goods
While restrictions and lockdown factors hindered the global service sector exceptionally, global goods trade recovered faster due to the limitations of factories shutdowns. Especially for some durable goods such as furniture and appliances. In spite of this, the world trade’s losses were less comparing to the global crisis in 2009. But still, the global GDP has witnessed an exceedingly larger decline in 2020. Economists explained that international service sectors resemble the majority of economic activity in the advanced economies, while it only represents about a quarter of the global trade.
Pandemic Shocked Countries’ Trade differently
It is true that the pandemic shocked the global trade, but its impact was different across countries, particularly China. The Chinese trade recovery was strong due to their ability to reopen their domestic supply chains before other countries. This was the result of the strong international demand for the Chinese goods. However, the cost of shipping had raised about 350% since May 2020, due to the shortage of shipping containers that were stuck in the US & Europe instead of returning to Asia. Most analysts don’t expect to see a decline in the cost of shipping in the near future, as a result of the robust manufacturing and the booming commodities market that happened after the economic recovery all over the globe.
World Trade Bounces Back from the Impact of COVID-19
While some economic experts expected that the pandemic would cause the global corporate to increase within their local region rather than globally, the World Economic Forum report 2021 founds that, the international flow of goods is growing faster now than flows within regions. “Trade, capital flows and global internet traffic are back at, or even above, pre-pandemic levels. COVID-19 also caused a temporary ceasefire in international trade wars, with the United States and China trading more during the pandemic than before, although travel and tourism have been hard hit. But in the fourth quarter of 2021, international travel is still more than 80% below its pre-pandemic level.” These are the findings of the DHL Global Connectedness 2021 Index Update, by Dr. Steven Altman and Caroline Bastian, New York University’s Stern School of Business. Their study examines the strengths of globalization through measuring the global flows of trade, capital, information and people.
Global Capital Fows Withstands Rredictions.
The UN Conference on Trade & Development (UNCTAD) report, 2021, says that the rate of foreign direct investments is on the way to reach pre-pandemic levels in 2021 after dropping by a third (35%) in 2020, because corporates postponed foreign-investment projects to avoid economic risks due to pandemic uncertainty that aggravate macroeconomic measures and restricted business travel. Additionally, the procedures that were taken by governments to protect their national economics 2020, had put the global trade in jeopardy.
High Inflation Rate Caused By Pandemic
The US economy is facing a high rate of inflation in this period due to the recently back to semi-normal life after the pandemic’s lock down. People were hardly spending any money in 2020, and now they started to travel and spend money. So, we are in the bottleneck of very high demand level which is abnormal for our economic system. This is the main reason for inflation in the background of formula of short supply versus high demand. Another reason for the high inflation rate is the lower interest rates (almost zero) since March 2020. This raised the demand for housing and other huge loans. The large borrowing backlog increased the inflation rate as well.
Vaccine Gap Among Countries
Statistics show that there is a vaccine gap among countries that left developing nations behind economically. There is only 3.7% of the population in low-income nations having received at least one dose of vaccination. Compare this to about 61% of people in high-income countries. This imbalance created significant variations in the economic recovery from region-to-region.
More Globalization is Needed to Contain the Pandemic
The world needs to create more ways of integration to contain the pandemic’s consequences. The poorest countries must receive urgent vaccination aids as priorities in the present time. Global connectedness and strong cooperation are a must now to decrease some of the pressure on price levels that cause high rates of inflation. For the global economic recovery to be strong, fast and sustainable, the world has to use the diverse strengths that every country can offer to create the best prospects and economic solutions. That means we need to increase the globalization level and the global leadership coordination to decrease the economic risks caused by the pandemic. More by Jihan Mansour
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