Earlier in 2020, the predictions for global trade were grim. However, as the year took its course and as we move into 2021, things do not seem as bad as they did. In fact, the WTO now projects that trade volumes in 2020 will have declined only by about 10% over 2019, warranting a sense of cautious optimism. In this article, we will look at some of the most important developments and trends for global trade in 2021.
UK – EU Trade Agreement
With Brexit a reality, there was serious concern over trade between the UK and EU. Fortunately, at the very tail end of 2020, the two were able to reach an agreement. Most importantly, a zero tariffs agreement, which is sure to provide much relief to businesses on both sides. There is also general agreement over standards and controls, which should make trade easier.
China Championing Free Trade with RCEP & CAI
The RCEP, led by China, created the world’s largest trading bloc and will serve to strengthen the Asian region. This agreement will promote peaceful cooperation in the region and expand trade horizons and potential for all. Along with this, the EU – China CAI will serve to further lubricate investment between the two regions.
Vaccines & Easing COVID Restrictions Will Spur a Rebound
The roll out of vaccines globally will help bolster consumer, investor and business confidence. This, coupled with the potential easing of COVID restrictions, will likely help to spur a rebound in global trade volumes which are expected to fall by about 7% -10% in 2020 and then grow by around 5% over 2021.
Supply Chain Resilience
While supply chain disruptions caused by the global pandemic are likely to continue to plague global trade in 2021, many industries will look to enhance supply chain resilience. Having said that, the cost of diversification and inventory management will likely inhibit any major migration of supply chains through 2021. However, on a grander scale, there is likely to be a move towards diversification in order to avoid disruptions in the future.
US China Trade War
While the more exciting and dangerous times of the trade war may be over, US–China tensions are likely to continue in 2021, though with less intensity, as the Biden administration takes over. However, China is unlikely to engage in much strong-arming as it needs to maintain excellent trade relations globally for its own survival.