The Day at a Glance | May 20 2020

Global trade records historical contraction

The World Trade Organization (WTO) estimated that trade could contract between 13% and 32% this year, depending on the pandemic`s duration. During March, the WTO`s trading of goods indicator fell to its lowest level since records exist (July 2016) and set at 86.6 (vs 95.5 Feb). The indicator captured data regarding new orders in surveys administered to exporting businesses, air cargo transport, transportation of containers by sea, automobile production, sales and trade of electronic and agricultural goods. Levels below 100 imply that trade is below the medium term average and the indicator seeks to identify tipping points in international trade`s track record. “The current reading captures the initial phases of the COVID-19 outbreak, and shows no sign of the trade decline bottoming out yet”, assured the WTO in a statement. Since las year, activity in international trade showed a downwards trend because of the trade dispute between China and the US. This year, the pandemic has accentuated this trend and reinforced incentives to relocate production chains, which is something that could structurally reduce trade flows at a global level.

No progress made regarding Brexit negotiations

In midst of a pandemic and with time running out, the United Kingdom seems to be skeptical about the progress made regarding a commercial agreement with the European Union. This morning, Michael Gove, member of the British government, assured that the third round of negotiations (completed last Friday) was “constructive”, however, there are still important differences and it will be difficult to reach a mutually beneficial agreement. Michael Barnier, the EU`s chief negotiator, assured that he is still determined to reach an agreement but is not optimistic, as the UK`s demands are not “realistic”. The UK`s proposal is to reach a free trade agreement with the European block similar to the ones seen in Japan, Canada or South Korea with the European Union. Barnier has declared that the EU has no intentions of replicating existing agreements, nor does it plan specific agreements by sector, like the ones proposed by the British government regarding fishing, law compliance, technical aspects regarding aviation or cooperation concerning energy. In the middle of the pandemic, the urgency of reaching an agreement have not disappeared, as the government remains reluctant to request an extension for negotiations beyond December of 2020. Yesterday, tentative lists of applicable tariffs as of January 2021 were published, which assume there will be a considerable increase in automobile and food imported from Europe. Next month a summit meeting will be held to look over the progress of negotiations. The British have assured that if no sufficient negotiations are made that will make a final agreement likely to be reached by December, they will break off negotiations and focus on leaving without a trade agreement.