World Trade Organization Looks at the Impact of COVID-19 Pandemic on Global Trade

The Impact of COVID-19 Pandemic

The information note provides an overview of the impact of COVID-19 on various modes of supply and sectors that have been heavily affected by the crisis.

It underscores that the crisis has led to greater reliance on online services in a number of sectors as consumers develop new habits to cope with social distancing measures imposed to combat the pandemic.

The report points to the importance of services to broader economic activity and its role in connecting supply chains and facilitating merchandise trade.

As services account for most of women’s employment globally and a great share of micro, small and medium-sized enterprises activity, disruptions in the supply of services also have an impact on social and economic inclusiveness.

The report suggests that services trade will be key to economic recovery globally.

Services such as telecommunications and computing that are vital for online supply and those such as distribution, transport, and logistics that facilitate merchandise trade will help to support economic growth.

Download: Trade in Services in the Context of COVID-19

Key points

• Services sectors have been heavily affected by the COVID-19 pandemic. Tourism, transport, and distribution services, for example, have suffered as a result of mobility restrictions and social distancing measures imposed for public health reasons. At the same time, the crisis has underscored the importance of services that enable online supply, such as telecommunications and computer services, as well as the broader infrastructural role of transport, financial, distribution and logistics services in facilitating trade and economic growth.
• Given the role of services in providing inputs for other economic activities, including connecting supply chains and facilitating trade in goods, disruptions in services supply are having a broad economic and trade impact.
• The type and extent of effects on trade in services vary by sector and mode of supply. Trade-in services that involve proximity between suppliers and consumers have been severely impeded. GATS mode 2 (i.e., supply in the context of the movement of consumers abroad) and mode 4 (involving the temporary movement of natural persons) have been largely paralyzed.
• The crisis is leading to a greater focus on online supply in sectors such as retail, health, education, telecommunications, and audiovisual services. Suppliers are accelerating efforts to expand their online operations and consumers are adopting new habits that may contribute to a long-term shift towards online services. In the future, the increased supply of services through digital networks could increase trade through mode 1 (cross-border supply).
• The increased use of online services during the COVID-19 pandemic has accentuated technology and connectivity disparities, as online classes are not feasible for students without computers, and telework is not an option for employees without broadband. Operators in developed and developing countries suspended data limits and boosted data capacity during the pandemic, and many governments issued an additional wireless spectrum to further increase capacity.
• Services sectors, and the creation of conditions conducive to trade in services, will be key to the recovery from the economic slowdown.

The message of Director-General Roberto Azevêdo on Trade Outlook 2020

Director-General Roberto Azevêdo notes (in the video above) that the COVID-19 crisis has caused dramatic supply and demand shocks in the world economy and that these shocks are inevitably causing major disruptions to trade.

WTO economists project that trade will fall steeply in every region of the world and across all sectors of the economy.

In an optimistic scenario, the volumes of global trade in goods volumes could tumble by 13% in 2020.

If the pandemic is not brought under control, and governments fail to coordinate policy responses, the decline could be 32% or more.

Two factors will determine the strength of our recovery. One, how quickly the pandemic is brought under control. And two, the policy choices governments make.

Related Article: Differences between the COVID-19 Pandemic and Other Supply Chain Disruptions

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