The covid-19 pandemic will not only directly disrupt international trade but also catalyse other trends that are reshaping the global exchange of goods and services.
The coming 12 months are poised to be volatile for the global economy, but especially so for international trade. Hesitant optimism from many quarters at the start of the year has given way to gloomier prospects. The spread of the coronavirus is affecting production in Asia, disrupting supply chains across the world and depressing consumer demand. As of April 7th, over one-third of the world’s population was under some form of lockdown.1 Movement has been restricted, work hampered and consumer spending patterns disrupted. Markets have sustained significant losses, shaking investor confidence. Economic forecasts that measure the depth of the looming recession vary, but there is a widespread consensus that the global economy will contract much more sharply than during the 2008-09 global financial crisis.2
This report, written by The Economist Intelligence Unit and sponsored by Basware, focuses on the key factors that will drive global trade and, by extension, business transactions over the coming year. The findings are based on in-depth interviews with experts in global trade. Despite the interviewees’ breadth of experience and their geographic spread, they are almost entirely aligned in their views. The following five drivers were unanimously identified:
- Covid-19
- US-China trade relations
- US-EU trade relations
- Rising non-tariff protectionism
- Taxing digital trade
These topics are closely intertwined and their overlapping nature means their combined impact is difficult to anticipate. However, the overarching view of each of our interviewees is a sense of pessimism about prospects for global trade over the coming year.
The covid-19 pandemic and its knock-on effects will have a far-reaching and long-lasting impact, interviewees believe. That impact is turning countries inwards and increasing the temptations of protectionism. Export controls have already been introduced by many countries, mainly on medical equipment and agricultural supplies.3 This backdrop makes it highly uncertain whether World Trade Organisation (WTO) members will agree to extend a moratorium on customs duties on electronic transactions.
All of this presents global businesses with the challenge of being adaptive in their supply chains and responsive in their financial operations at a time of great uncertainty.
However, amid considerable disruption there is also an opportunity for companies to restructure to match the new environment. Crises are often catalysts for innovation, and
companies may find that newly-introduced processes and techniques leave them more agile, sustainable and impervious to disruption than before.
About this report
A new era: global trade in 2020 and beyond is a report written by The Economist Intelligence Unit and sponsored by Basware. It draws on in-depth interviews with the following experts and executives conducted in March 2020.
- Deborah Elms, founder and executive director, Asian Trade Centre
- Simon Evenett, professor of International Trade and Economic Development, University of St. Gallen, Switzerland; founder, Global Trade Alert
- Stanley Kang, chair, Joint Foreign Chambers of Commerce, Thailand; deputy general manager, TIC Group
- Mia Mikic, director of Trade, Investment and Innovation Division, UN Economic and Social Commission for Asia and the Pacific
- Pavida Pananond, associate professor of International Business, Thammasat Business School, Thailand
- Antoine Sautenet, public affairs manager, Michelin
- Stephen Vaughn, partner, King & Spalding; former general counsel, Office of the United States Trade Representative; former acting US Trade Representative
We would like to thank all the interviewees for their time and insight. The report was written by Kate Parker and edited by Pete Swabey.
