As economies around the world continue their lockdowns and domestic battles against Covid-19, world trade has been declining at an unprecedented rate.
According to a report by the Netherlands Bureau for Economic Policy Analysis, the global trade volume for April decreased by 12.1% compared with March.
The report, which publishes a World Trade Monitor on behalf of the European commission every month, also announced negative growth in January (-1.2%), February (-1.5%), and March (-2.4%).
Both exports and imports fell dramatically across the globe, but it was the Eurozone countries which have suffered the most with exports declining by 13% and imports by 11%.
Global trade had been falling since the end of 2018, but only marginally, and can most likely be attributed to the trade war between the USA and China. The subsequent fallout since the beginning of 2020 is a totally different ballgame, and nothing the world economy has ever seen before.
Not only has Covid-19 caused a huge demand-side shock, and in turn had a negative impact on the volume of imports and exports, the nature of the pandemic has also questioned the way countries interact with each other in the global economy. Domestic buyers are now more cautious of foreign goods, and businesses are more reluctant to export when faced with the current logistical nightmare of transporting their goods across the world.
As the pandemic rages on, the question all economists are eager to find out is whether we will return to business as usual, or if this crisis will fundamentally change the dynamics of the global economy. And if it does, what will that look like?
THINK LIKE AN ECONOMIST!
Q1. What is meant by the term world trade?
Q2. Explain one reason why countries trade with each other.
Q3. With reference to the diagram above, analyse the trend in world trade growth since 2018.
Q4. Discuss the question posed in the last paragraph: What will the global economy be like after Covid-19?
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