It looked like 2020 was supposed to be an annus horribilis for international trade. Instead, despite the pandemic, the international trade system withstood the impact, though not without some bruises. Global trade flows contracted by about 5%, much less than during the 2008-9 financial crisis: an overall better performance than what had been estimated during the first wave of Covid-19 which, due to sudden and rigid lockdowns, paralyzed many supply chains.
It is hard to imagine anything more central to the world's choke points than the Suez Canal. Albeit relatively recent, built only in 1869, its enviable position - where the Asian, European, and African continents meet - has meant it has quickly climbed the ranks of the hottest bottlenecks. Around 12% of global trade passes through the Suez Canal, accounting for 30% of all global container traffic, and over $1 trillion worth of cargoes annually. In 2020, some 19,000 ships used the route.
It looked like 2020 was going to be a catastrophic year for global trade flows. Actually, despite the heavy impact of Covid-19, the international trade system showed a remarkable degree of resilience. Trade flows shrank by 5% globally, a much better (or less worse) performance than it had been initially expected in view of the substantial paralysis of several global value chains during the first pandemic wave. Nonetheless, Foreign Direct Investments (FDIs) experienced a much more dramatic drop, falling by 40%.
The ocean transport market has been confronted with a worldwide prolonged disruption since August 2020. Consequently, date shippers have been trying to bring order to their procurement and carrier management processes , yet failing to do so, in part because maritime problematics concern both ports and hinterland connections.
On April 26, 1956, a converted oil tanker called Ideal-X departed Newark, New Jersey, carrying 58 aluminum containers on its deck. This voyage, which ended in Houston, Texas, received little attention at the time, but it gave birth to an industry that would reshape the world economy. Today, more than 5,300 container ships sail the seas.
Covid-19 triggered a significant contraction of international trade flows, disrupting global value chains and putting maritime logistics and transport under severe stress. Moreover, in 2021, accidents including the Ever Given container ship being stuck in the Suez Canal have raised questions around the long-term sustainability of an hyper-globalized trade system that is based on just-in-time mechanisms.
The digital transformation changes production technologies and, through this, impacts labour markets and global value chains (GVCs). Technological transformations, e.g. in communication and transportation, have enabled global value chains in the first place, but the digital transformation will yet again change production possibilities with unclear consequences for GVCs. Among other things, the digital transformation has increased the scope for automation in production and has led to a growing role of services in GVCs.
On January 20, Joe Biden was sworn in as the 46th president of the United States. According to a survey by the European Council on Foreign Relations (ECFR) as of January 2021, a majority of Europeans are happy about the election victory, but 32 percent say that the Americans can no longer be trusted after the four years of President Trump.
Regional integration makes sense for Africa. Addressing the challenges of small markets, small economies, the lack of infrastructure and the pernicious effects of non-tariff barriers (NTBs) require regional initiatives to complement and support national efforts. The COVID-19 pandemic has further highlighted the interconnectedness of Africa’s economies, and the need for regional responses to challenges that transcend national borders. But integrating unequal partners is a difficult task.
At first glance, a Carbon Border Adjustment Mechanism (CBAM) would appear to be a welcoming tool. It is designed to ensure that countries and regions that are curbing their greenhouse gas emissions are not penalised by the transfer of industrial production to other locations. However, amidst the current Covid-19 pandemic, there are some indications suggesting that a CBAM could be treated as a good opportunity for the introduction of protectionist measures or be perceived by trading partners as such.
The decade that began last year will be particularly crucial in determining the new trends of the global economy. International trade will be no exception. First, the pandemic has clearly hit both supply and demand hard, so it is necessary to get both back up to steam. Secondly, technological innovation is also revolutionising how goods and services are traded.
The establishment of global value chains since 1990 to the point where a majority of trade takes place within them is now widely recognised by trade specialists, and increasingly apparent to political leaders. The reasons for their establishment, the volume of trade covered, and their implications are still being discussed.