International trade, without antivirus

The trucker tries to enter the border with merchandise and the authorities inform him that he will not be able to do so. He talks on the phone with the company that hired him asking for instructions. Thousands of trucks are detained at the borders of many countries over anti-coronavirus measures. However, there are imports of medicines, food, supplies and chinstraps that cannot wait.

Milan and Madrid, two cities usually full of tourists and fashionable businesses are practically empty. Sales have fallen to zero and they hope that in the next few days everything will resume.

The famous El Corte Inglés store decides to close its facilities even before the Spanish government defines it. Businesses were already empty of people before the presidential decision. Without tourists and people on the streets, businesses have no one to sell to.

Youth unemployment in Spain rises due to the impact on tourism. Global demand falls and trade within the European Union has suffered.

In China, the world’s leading exporter and second buyer of goods, nothing works like last year.

The year of the rat began on January 25 and the forecasts said that it was going to be a year of radical changes. It seems the horoscope was right …

The Asian country is growing at six percent and a drop in its pace will have a negative effect on the entire world economy.

Italy, South Korea and Spain suffer in their population and in their economies. A key issue is how long the Covid-19 crisis lasts.

Chinese pulmonologist Zhong Nanshan, who led health teams during the previous Sars pandemic, says it could end in June if the measures taken are strong and appropriate.

Some American specialists talk that it could last up to 18 months. The Health Minister of the city of Buenos Aires, Fernán Quirós, stated that it will not be overcome before the winter of 2021.

The time and size of the fall

Everything suggested that this year world trade was going to exceed $ 20 trillion in movement.

The coronavirus – could be called the airplane virus, because it reached all countries by this means of transport – impacted the main economies and exporting countries.

It started in China, which sells 2.5 trillion dollars to the world, in the United States, with 1.6 trillion and, to a lesser extent, Germany (1.4 trillion).

It seriously affects Italy, which is the country with the most affected and also the ninth global exporter that sells for 500 billion dollars and buys for a similar amount.

The last drop in international trade volume was in 2016 and, since then, it has been growing at a rate of 10 percent per year.

The coronavirus would modify this growth trend and will depend on the time of the crisis. If it extends until the middle of the year, the effect of a subsequent rebound could lead the figures to growth between 7% and 10%.

In contrast, if the pandemic continues or expands, a drop in international trade could be expected.

As a sample, Chinese exports have fallen 10% in the first two months and their imports have also decreased, although to a lesser extent.

Lower exports are also less purchasing power than central countries such as China and the United States and there will be less sales from countries such as Argentina and other Latin Americans.

The national impact

A drop in world trade means fewer exports for Argentina.

The lower global demand will lead to lower prices of the products that our country exports.

Another effect of this crisis is that the supply chain breaks and some companies will run out of supplies to manufacture.

Argentina has a trade surplus and needs a fiscal surplus. For this, it had a collection for export rights (withholdings) that in this context will be very difficult to fulfill. Argentina spends more dollars than it has and more pesos than it collects; and must make strong commitments in the coming years.

The rumor that the International Monetary Fund could grant some special plan to mitigate the world situation may be a great relief for Argentina, although everything should not be left to that possibility.

In the case of the United States and Mexico, they have closed the borders to tourism and unnecessary travel, but maintain them for the entire commercial sphere.

One idea could be a decrease in export duties for wheat, corn and soybeans until June.

In this way, producers are benefited and, in turn, greater sales and exports are promoted, which implies more collection and more foreign exchange earnings in a key period of the year.

World trade is going to decrease and the world economy will feel it. Everything will depend on the duration of this crisis.

Argentina was in therapy and this can complicate it even more. Measures have been taken to reduce the economic impacts and we must continue on this path. After all, a crisis is always an opportunity.

* University teacher. Foreign trade specialist.