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Trade
OpinionComment
Stephen Olson
Stephen Olson

Opinion | How trade’s resilience defies expectations amid coronavirus and global tensions

  • Contrary to many experts’ dire predictions and countries appearing to turn away from globalisation, trade has held up surprisingly well
  • Governments might bluster and even enact restrictions in pursuit of their geopolitical goals, but companies and consumers carry on

Reading Time:4 minutes
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Illustration: Stephen Case
Stephen Olson
In India, Prime Minister Narendra Modi is calling for economic self-reliance and raising trade barriers. China has adopted a dual circulation strategy which puts increased emphasis on domestic demand and relegates trade to a supporting role.
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The buzzword within the European Union is strategic autonomy, which recognises the need to strengthen domestic production capabilities and reduce dependence on trade. In the United States, the Biden administration is pursuing a worker-centric trade policy and has maintained many of the trade restrictions put in place by the Trump administration.
Scepticism about trade has been intensified by the Covid-19 pandemic. Countries and companies are now aggressively looking to reduce trade risk through more localised production and less trade.

Given these sobering realities, one might have reasonably expected to see a sharp decline in trade. In defiance of most projections, though, trade has held up surprisingly well.

Given the fallout from the pandemic and rising protectionism, the World Trade Organization estimated in June last year that global trade could fall by as much as 32 per cent in 2020. Yet, the actual decline was roughly 5 per cent. Given the broader macroeconomic environment, in which overall demand was dampened by a 3.8 per cent reduction in global GDP, trade remained buoyant.

Containers are parked at the harbour of Duisburg, western Germany, on May 8, 2020. German exports were down 9.3 per cent last year but they soared past pre-pandemic levels in June for the first time since the coronavirus crisis wreaked havoc on trade. Photo: AFP
Containers are parked at the harbour of Duisburg, western Germany, on May 8, 2020. German exports were down 9.3 per cent last year but they soared past pre-pandemic levels in June for the first time since the coronavirus crisis wreaked havoc on trade. Photo: AFP

Of course, specific circumstances produced eye-catching trade reductions for individual countries. Japanese exports slumped to their lowest level in 11 years in 2020, and German exports were down 9.3 per cent.

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