As the pandemic engulfed the globe, we saw governments all over the world respond with a chain reaction of unprecedented trade policy measures. This new trade-policy landscape defined by a global economic downturn and coupled with the risk of second lockdowns will prompt small businesses to rethink their business strategies, including by looking for new markets and suppliers.
As the epicentre of the pandemic shifts across regions, the business landscape continues to evolve dramatically. Governments have put in place initial lockdowns with the resurgence of infections leading to isolated second lockdown measures. This has resulted in limited transport and logistical operations with the cancellation of 70% of global flights and a disruption of global supply chains across various sectors. These policy responses significantly limited business activities and disrupted international trade. In addition, governments introduced trade-policy measures to try to maximize access to vital resources to combat the pandemic, such as export restrictions on medical and food supplies combined with import liberalizations on these goods.
In June, several countries, especially in Europe began to relax lockdown measures. However, at the same time the pandemic intensified globally and showed exponential growth in other regions of the world, such as Africa, Central Asia and Latin America. According to the WHO statement on 8 June, the pandemic 'globally is worsening', breaking the single-day record of new cases on 7 June.
In this turbulent context, access to information is essential. Having access to reliable and up-to-date market information becomes crucial for firms involved in international trade.
Unprecedented trade policy response to COVID-19
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Source: Based on ITC Market Access Map COVID-19 page (as of 15 June 2020), https://www.macmap.org/covid19
Governments have put in place a number of trade policy responses to contain the pandemic and its consequences. The daily tracker on the ITC Market Access Map, officially launched on 9 April, shows that more than 100 countries have implemented 128 temporary export measures and 134 countries have implemented 157 temporary import measures to combat COVID-19 (see figure above).
The exponential rise in extraordinary export and import measures coincided with WHO's pandemic declaration on 12 March. However, by mid-April the curve of adopted measures began to 'flatten' and, in May-June, some countries began lifting COVID-19 trade measures (see figure below).
As of mid-June, 15% of temporary measures have been lifted, mostly relating to export restrictions. By end of June, 7% more lapsed, mostly on the import side. However, more than half of the measures do not have a specific lapse date, with many attached to a date of lifting the national emergency. It is crucial to continue monitoring the measures, as their dismantling appears to be more gradual than their enactment. A possible explanation is the lingering second wave of mass infections - however, protectionist motives and the new status quo could also play a role.
Source: Authors' calculations based on ITC Market Access Map COVID-19 page, https://www.macmap.org/covid19
Most of the adopted export measures are export restrictions, such as export bans, affecting trade in medical and key food products. Likewise, most import measures are liberalizations that remove duties and taxes on medical and key food products. Governments adopt these measures to safeguard short-term domestic availability of vital medical supplies and equipment, medicines and key food staples (see figure below).
It was positive that the number of liberalizing measures exceeded the number of restrictive measures in June. However, by the end of June, some governments phased out their temporary liberalizations, and trade policies went back to normal.
Source: Authors' calculations based on ITC Market Access Map COVID-19 page, https://www.macmap.org/covid19
At the beginning of the pandemic, most export and import measures covered personal protective equipment (for example, masks, gloves and disinfectants) and medical supply products to support patients' healing process (for example, medicines based on hydroxychloroquine and ventilators). However, as the world entered into a lockdown phase, food security concerns spread.
In response to export restrictions by producing countries, some countries responded by introducing export bans and import liberalizations on key food staples such as cereals, dairy, potatoes, rice or sugar (see below figure). According to World Food Programme estimates, 130 million additional are at riskof starvation due to coronavirus and trade-related impacts on food supply.¹
Note: Some measures target both medical and food products, hence double counting is present.
Source: Authors' calculations based on ITC Market Access Map COVID-19 page, https://www.macmap.org/covid19
As the world transitions from a public health emergency to an economic recession, several temporary trade measures are steering away from directly combating the pandemic towards mitigating negative economic consequences. For example, Sri Lanka banned imports of 'non-essential' goods due to foreign exchange outflow. Kazakhstan and Uzbekistan temporarily banned imports of cement to support domestic producers affected by reduced construction activity.
Looking forward
In the wake of new realities, governments have to adopt further trade-facilitating measures to mitigate the negative economic impact on small businesses. These measures, already adopted by some governments, include customs facilitation, such as relaxations in issuing certificates of origin, extending time frames for payment of customs duties and fees, enabling paperless trade and keeping trade finance flowing. Such measures, combined with timely trade policy and market access information, can empower small businesses to make informed decisions and effectively diversify market risks.²
Staying alert and responding to sudden trade-policy changes will become part of a new daily life of small businesses in the near future. To grapple with the new trade reality, they should benefit from the ITC market intelligence tools, such as the COVID-19 dashboard on temporary trade measures and other tools, which provide timely trade intelligence, including real-time data on temporary barriers and liberalizations on medical gear, food and other products.