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Coronavirus pandemic paralyzes global trade

2020-04-05T17:39:35.212Z


The confinement of Europe and the United States after China, the three largest exporters, has dealt a severe blow to world trade. All goods and services sectors are affected.


The Covid-19 continues to wreak havoc on the planet. The health crisis is worsening with more and more patients and regions affected. More than 3 billion people are in virtual confinement, shutting down whole swathes of the economy. If the uncertainty about the scale and duration of the crisis makes forecasts risky, the recession promises to be severe and the impact on trade even more massive in a globalized economy.

China, second economic power and first world exporter, was the first epicenter of the virus before its spread in Europe, the United States and more recently in Africa. Together, China, the United States and the EU - the world's largest trading region - account for 45% of international trade. We are heading towards a collapse of world trade which is very disorderly and certainly unprecedented since the Second World War. It would be logical for it to fall by more than a quarter from March-April, ” anticipates Sébastien Jean, director of Cepii, Center for Prospective Studies and International Information. During the great recession of 2008, trade within a few months had fallen by 40%.

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Above all, the slowdown will be done in successive waves. The first two months of the Chinese blockade quickly weighed on maritime transport. Ports have closed, traffic in Shanghai fell 20% in February over a year. Chinese exports fell 17% in February. If activity is gradually restarting - container ships have returned to the sea - in the meantime, Europe and then the United States, the world's largest importer, are now sealed off. Opportunities are likely to be lacking for China, which remains the factory of the world. " Who is China going to produce for ?" wonders Jean-Marc Siroen, professor emeritus of Paris-Dauphine University. We are facing a major demand shock. In addition, Chinese factories to produce require components from around the world. ” " There are bottlenecks in Asian ports ," said Christopher Dembik of Saxo Bank. Air freight, which has been very affected by the pandemic, is also weighing on world trade even if the transport of goods is mainly by sea and land.

Synchronized recovery

Pending the verdict of the World Trade Organization (WTO), which will publish its barometer of trade in goods and services in a few weeks, several signals are in the red. The indicator for new export orders, one of the components of the manufacturing PMI released last week, fell to 43.3 in April 2009 from March.

This trend does not actually date from yesterday. This is the 19th month in a row. The protectionist escalation between China and the United States has already dealt a severe blow to world trade. But it is increasing and is now being felt across the Atlantic: the activity of the port of Los Angeles, the main container entry, open to the Pacific and Asia, recorded a drop of 23% in February, at its lowest since 2008. US imports from China slowed in March. Another negative signal, mentions Jean-Marc Siroen, "the price index for maritime traffic has been divided by four since October".

Read also: Economy rescue plan: success for some, disappointment for others

All sectors are affected by the paralysis of production chains and movement restrictions. It's not just the tensions over medical equipment. The Covid-19 also jeopardizes food security. States are beginning to impose restrictions on exports, like Vietnam on rice. Three international organizations, health (WHO), food (FAO) and the WTO, launched the alert last week on the risk of shortages and called for international solidarity.

Difficult to predict the end of the crisis. " The rebound can be quick because companies don't have inventory, " notes Christopher Dembik. " In sectors such as the automobile, electronics or chemicals, it will take a synchronized restart of European countries ", illustrates Sébastien Jean for his part. The recovery may be more difficult for sectors with complex supply chains.

More generally, this unprecedented crisis is reviving the debates on the excesses of globalization that have arisen since 2008 and are accentuated by the climate emergency. Will there still be a before and an after? " This can change the way we look at the nature of risk, especially since we were already in the context of a trade war and a tense geopolitical climate ", underlines Sébastien Jean. He expects more from a “ reconfiguration of globalization than from demondialization ”, from more regional, less intercontinental organizations.

Source: lefigaro

All news articles on 2020-04-05

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