Global Trade Rebounds, But Outlook For 2023 Is Bleak – OpEd

By Jaya Ramachandran

Trade in goods and services rebounded between January and March 2023 after two consecutive quarters of decline. However, the outlook for the rest of the year is bleak.

According To UNCTAD‘s Latest Global Trade Update, published on 21 June, global merchandise trade rebounded both in volume and value in the first quarter of 2023.

Global trade in goods increased by 1.9% from the last quarter of 2022, adding about $100 billion. Global trade in services increased by about $50 billion, an increase of 2.8%.

For the second quarter of 2023, UNCTAD expects global trade growth to slow due to recently downgraded World Economic forecasts, financial vulnerabilities, the war in Ukraine, and geopolitical tensions.

Overall, the outlook for global trade in the second half of 2023 is pessimistic, as negative factors outweigh positives.

The geographical proximity of international trade has remained relatively stable over the last five quarters, suggesting no significant nearshoring or farshoring trends.

According to the report, “friend-shoring” is on the rise since late 2022, characterized by a reorientation of bilateral trade flows toward countries with similar values.

During this period, key bilateral trade trends have been shaped significantly by the war in Ukraine, the decoupling of the United States-China trade relationship, and the consequences of Brexit.

According to the report, global trade has become more concentrated among major trade relationships as a result of a decline in trade partner diversification.

The report illustrates the ongoing decline in trade interdependence between the United States and China. Over the past year and a half, China has seen the United States become less significant as an export market. China has become even less dependent on the United States as a supplier during this period.

In the last four quarters, merchandise trade growth has been mixed among the world’s major economies.

Imports and exports increased significantly in Brazil, India, the United States, and the European Union.

Between January and March 2023, trade trends for major economies were more subdued, and in many cases negative. The notable exception is significant growth in exports from China and India.

Except for the Russian Federation and Central Asian economies, all regions saw international trade grow annually.

East Asian growth, however, has been significantly below average.

In most regions, the first quarter of 2023 saw a decline in the value of trade, except for the pacific region, North America and Africa, which experienced marginal growth.

During the same period, intra-regional trade followed similar patterns. However, trade within Africa outperformed other intra-regional trade by 3%.

During the past four quarters, global trade trends were influenced by the energy sector, where rising prices resulted in higher trade values, until a drop of 11% occurred between January and March 2023.

In addition to agri-food products, apparel, chemicals, and road vehicles, trade increased in other sectors.

In contrast, trade in office equipment and communication equipment, as well as transport, declined into the first quarter of 2023.