Global Trade Takes Hit from Omicron VariantBy Sofía Hanna | Fri, 12/31/2021 - 14:50
Global trade is experiencing a decline in freight transport after four consecutive quarters of solid expansion due to disruptions in supply chains, shortages of production inputs and the increase in COVID-19 cases. These issues have hampered the growth of trade. Meanwhile, international organizations are planning to improve access and transport COVID-19 vaccines to prevent further spread.
According to the World Trade Organization (WTO), trade volume was still up 11.9 percent from year-to-date through September. However, it experienced a strong decline in 3Q2021. WTO had anticipated a 12.7 percent increment over the same period, but instead, there have been recurring cooling signals of trade growth in the closing months of 2021. In fact, the volume of world merchandise trade decreased by 0.8 percent in 3Q2021. Nevertheless, the emergence of the Omicron variant has tipped the balance of risks towards the downside, increasing the chance of having a more negative outcome. As stated in the official report, “In contrast to volume, the value of world merchandise trade continued to climb in the third quarter as export and import prices rose sharply. World trade as measured by the average of exports and imports was up 24 percent year-on-year in the third quarter in nominal US dollar terms. This growth is weaker than the 46 percent jump in the second quarter but stronger than the 15 percent increase in the first quarter.” The reason for this decrease, besides the omicron variant, is a weaker level of exports and imports for North America and Europe. This translates into a reduced number of exports from those regions as well as from Asia.
Some of the risks and challenges facing merchandise trade at the moment, as previously mentioned, are the number of COVID-19 infections since the start of the pandemic by region. The third peak corresponded to 3Q21 when outbreaks began to disrupt activities at Chinese ports, including Ningbo, the world’s third busiest. This might cause further disruptions that could affect world trade in the fourth quarter and beyond. This is why leaders of the WTO have begun to discuss ways to improve vaccine access and delivery to low and lower middle income countries. In a joint statement, the importance of facilitating vaccines and that the governments of the world take certain measures are the following:
- Contract additional doses immediately through AVAT, COVAX, or bilaterally.
- Establish in-country surge capacity to increase the rate of vaccine utilization as supplies increase.
- Coordinate between health and finance authorities for making increased use of multilateral development banks’ resources that are readily available for both vaccine purchase and deployment.
These measures aim to increase vaccine volumes globally and avoid markets and economies to continue experiencing major delays, thus, affecting their overall development recovery.