Global trade has finally returned to the pre-pandemic level. The estimated value of the world trade in goods and services reached US$28.5 trillion in 2021, recording an increase of 25 per cent over what was in 2020 and 13 per cent more than that of 2019. The 2019 was the last year before the Covid-19 pandemic struck and 2020 was the year when the deadly virus spread across the world and nearly stalled the global economy. The United Nations Conference on Trade and Development (UNCTAD) unveiled the preliminary estimation of global trade in the third week of this month.
UNCTAD estimation showed that annual resurgence of global trade in the last year was largely pushed by accelerated growth of trade in goods during the last quarter of 2021. The final data of the last quarter is, however, yet to be available. Preliminary figure is estimated at $5.8 trillion for trade in goods and $1.6 trillion for trade in services during the last quarter of 2021.
The strong rebound of global trade in the last year was 'largely the result of increases in commodity prices, subsiding pandemic restrictions and a strong recovery in demand due to economic stimulus packages.' Nevertheless, UNCTAD also projected that 'as these trends are likely to abate, international trade trends are expected to normalise during 2022.' Normalisation means there will be no big jump in global trade although the annual trade growth may post double digit growth. But, trade growth over 20 per cent is not a normal phenomenon.
Meanwhile, the Goods Trade Barometer of the World Trade Organization (WTO) showed 'a loss of momentum in trade at the start of 2022 following last year's strong rebound in trade volumes.' Although it is too early to predict the trend of global trade in the first quarter of the current year, WTO index also suggested that 'merchandise trade may turn up soon even if it remains below trend in the near term.' This is largely supported by the UNCTAD nowcast that trade growth will continue to slow during the first quarter of 2022. "Positive growth rates are expected for both trade in goods and in services, albeit only marginally, keeping trade values at similar levels to Q4 2021," said UNCTAD's report.
The rebound of global trade is widely reflected in the developing countries' trade that outperformed the developed countries in the last quarter of 2021. Moreover, South-South trade growth was 'above the global average.'
Bangladesh may be considered as an example of global trade resurgence. The country's international trade in goods touched US$110 billion in the last year, recording 34.50 per cent growth over $86.40 billion in 2020. Bangladesh faced a drop of 12.20 per cent in its trade with the rest of the world in 2020 due to the pandemic. Now it is hoped that taking advantage of strong recovery of the global trade, Bangladesh will be able to maintain strong growth in exports in the current year.
Continuation and normalisation of trade growth, however, is linked to several conditions. UNCTAD has identified five factors that has been influencing and directing the trade growth in the current year. These are: slower than expected global economic growth, continuing challenges for global supply chains, trade agreements and regionalisation trends, transition towards a greener global economy and rising concerns about debt sustainability.
Now, the sixth factor has also emerged in the scene - the Russian invasion of Ukraine. For the last couple of months, there was a clear indication that Vladimir Putin, the president of the Russian Federation, was going to attack Ukraine. In the last week, Russian army finally attacked Ukraine and is now advancing inside Ukraine. Putin tried to validate his actions asserting that the attack was needed to protect civilians in eastern Ukraine which is a false claim. He also accused the United States and its allies of ignoring Russia's demands to prevent Ukraine from joining North Atlantic Treaty Organization (NATO) and for security guarantees. He further claimed that Russia does not intend to occupy Ukraine but will move to "demilitarise" and "denazify" the former state of Soviet Union.
Putin's move has shocked the global economy which is still struggling to gain a better pace of growth. Oil price jumped and crossed $100 per barrel for the first time since 2014 and Stock markets in Asia, Europe and America have tumbled. As Western countries have also started to impose a series of economic sanctions on Russia, the situation is likely to be aggravated further. Global supply chain will be disrupted and cost of inputs will increase. This will also push up inflation which is already hurting most of the countries. All these will be a heavy blow to the global trade in the first quarter of the current year and snowball-effect will continue well into the second quarter even if Russian invasion is halted within a week.
Global shocks will also be transmitted to Bangladesh through trade channels. As the government is now mulling to reduce the subsidy burden, there will be upward adjustment of prices of utility services. These will push the cost of households and manufacturing units. Now, increase in the prices of raw material and intermediate goods in the international market due to supply chain disruption will increase the cost of imports in Bangladesh. This will further enhance the cost of domestic production.
Again, prices of different commodities will also increase as freighters have to increase charges due to diversion of some routes and higher insurance premium. In fact, food supply will be disrupted in Europe and some parts of Asia. Wheat and corn prices are already soaring. Russia and Ukraine jointly control more than one-fourth of the global wheat market. These two countries are also big shippers of metals and some other commodities.
Thus, global economy has again entered into another phase of inflationary pressure as well as trade turmoil. Countries like Bangladesh will have to bear the burnt in various forms.
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