Global trade roars back from depths of covid-19 pandemic

3 months ago 13

Global trade has rebounded from its collapse in the early stages of the pandemic, with China and other Asian manufacturing countries grabbing a bigger slice of exports of everything from masks to bikes—market share they are expected to keep after the public-health crisis fades.

Now, as a global recovery gathers pace, trade will likely keep growing, say policy makers, business executives and economists. But it will be hampered by the growing difficulties factories face in meeting Western consumers’ appetite for goods.

Last April, as large parts of the global economy were in a deep freeze, economists at the World Trade Organization said global trade flows could suffer the largest peacetime decline since the Great Depression, possibly falling by as much as a third.

Instead, global trade flows fell just 5.3% last year, according to new data from the CPB Netherlands Bureau for Economic Policy Analysis, after having returned to pre-pandemic levels by November. That recovery required less than half the time it took flows to return to their previous level following the global financial crisis.

Demand for personal protection equipment, including face masks, soared. Working and schooling from home boosted demand for computers. Efforts to avoid risky public transport systems in cities boosted demand for bicycles. Many splashed out on new kitchens and furnishings. Huge government stimulus in wealthy countries has only turbocharged such demand.

Silver Spring, Md.-based international development consultant Alice L. Morton has purchased a number of new work-from-home items during the pandemic including a laptop, headset, lamps, a new printer and computer software.

After a coronavirus relief package passed last March, and most American households received stimulus payments worth $1,200, she put her check toward a cellphone. The stimulus money also “made me feel that getting a new high-ish end laptop was possible," the 75-year-old said.

According to the United Nations Conference on Trade and Development, cross-border sales of personal protection equipment, such as masks, jumped 40% in the three months through September and a further 16% in the final three months of the year.

Much of the exported goods came from East Asia, where factories reopened after the virus had been largely contained.

China was the main source of essential PPE, and a major exporter of office equipment, which saw a 16% increase in cross-border sales in the third quarter and a 14% increase in the fourth. In 2020, Unctad figures show the share of total world exports accounted for by China rose 10%, but even that was outpaced by those of Taiwan and Vietnam.

Some manufacturers were able to draw on their experience of the 2003 SARS outbreak, including Taiwan’s Giant Group, one of the world’s largest bicycle makers. But they struggled to match rising demand, even after reopening factories in China that had been closed in the first months of the pandemic.

“We didn’t face any problems getting bicycles to overseas markets at the early stage of the pandemic," said Bonnie Tu, Giant’s chairperson. “However, as the demand for bicycles surged, that caused a huge disruption in the bicycle supply chain, and Giant could not keep up with the order demands from all our sales companies."

Getting goods made in East Asia and elsewhere to consumers in the U.S. and Europe was difficult, with airlines cutting back on passenger flights and the associated cargo space, while container ships saw schedules disrupted by crew illnesses and port delays.

For the port of Rotterdam, Europe’s largest, the pandemic presented an unprecedented set of problems.

“There was no blueprint, no manual to go by," said Allard Castelein, the port’s chief executive. “It was pretty much a full set of unknowns."

But by the time a renewed surge in infections was under way in late 2020, the port had adapted.

But even with factories working at full capacity and ports adapting to the disruptions, retailers faced shortages. In the U.K., demand for bicycles surged after the March lockdown, and some consumers couldn’t find the bicycle they wanted.

“Pretty much every part of the cycling supply chain has been impacted by Covid, from component manufacturing and assembly to container availability and port congestion," said Mark Eaton, supply-chain director at Halfords, the country’s largest bicycle retailer. “Inevitably we’ve had gaps in our range at times as a result."

Mr. Eaton said a number of supply-chain blockages were now easing. But many remain across global manufacturing and the trade network, and that might hold back growth in 2021.

The good news for the global economy is that demand remains strong.

“The bicycle supply chain is still trying to catch up with the demands from 2020 and we foresee the demand for bicycles will still be strong for 2021," said Giant’s Ms. Tu. “The world is cycling more because of coronavirus and we expect that to continue after the virus has passed."

But manufacturers report lengthening delays in securing supplies to make their products, according to surveys of purchasing managers conducted by IHS Markit. And while there are signs that shortages of containers in East Asia are easing, the global logistics network has yet to be fully repaired.

“We’re not back at a normal state," said Rotterdam’s Mr. Castelein. “Freight rates are incredibly high. The schedule is not in tip top shape. But I would consider that a slight bump."

The recovery in exports for Europe and the U.S. began a few months later than for China, and trade economists expect to see it continue this year. But it is unlikely that the gains in market share made by China and some other East Asian economies will be quickly reversed.

“These things tend to stick," said Alessandro Nicita, a trade economist at Unctad. “You need another shock. It’s complicated for other players to gain momentum."

This story has been published from a wire agency feed without modifications to the text.

Subscribe to Mint Newsletters

* Enter a valid email

* Thank you for subscribing to our newsletter.

Read Entire Article