WTO: Trade decline could match Great Depression

By Jack Grimshaw
World Trade Organization (WTO) research has revealed that the COVID-19 disruptions to the global economy and international trade could see trade drop by...

World Trade Organization (WTO) research has revealed that the COVID-19 disruptions to the global economy and international trade could see trade drop by similar levels to those seen in the Great Depression of the 1930s.

WTO economists predict that, in a best-case scenario, the volume of global merchandise trade could fall by 13% compared to 2019. However, if governments fail to properly address the pandemic, and responses aren’t successful, the decline could be 32%, or potentially even more severe.

However, comparisons between the current situation and the Great Depression, or even the financial crisis of 2008, may be difficult to make. Prior to the pandemic’s outbreak, the economy was in reasonable shape, banks were not undercapitalised, and many governments have had time to prepare before being hit by the virus. 

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If the issues surrounding trade are addressed successfully soon enough, a rapid, prosperous rebound has every possibility of becoming a reality for companies and economies around the world. The importance of the speed that the correct decisions are made cannot be overstated in this scenario, with the likelihood of a strong rebound diminishing as time continues to pass.

Keeping markets open to international trade and investment is crucial for the recovery of economies, as opposed to a mentality shift towards protectionism. A turn in the wrong direction could easily see new challenges introduced to economies on top of the already present ones, further hindering the possibility of a rebound. Fiscal, monetary and trade policies must all be pulled together, and heading in the same direction.

WTO experts have predicted that a return to pre-pandemic trajectories for trade and output could be possible by 2021, as long as governments get the situation under control soon enough with the correct policies in place. This return to normality could even be possible regardless of how steep the initial fall is.

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