This April, the World Trade Organization (WTO) released a report that estimates that international commerce will contract by 13% to 32% over 2020. This steep decline in global trade will represent a worse drop in trading activity than was witnessed during the global crisis of 2008.
While the coronavirus pandemic prevents businesses around the world from trading as standard, there is hope for those prepared to endure these uncertain times.
Global trade suffers as a consequence of coronavirus regulations
The report predicts that in the worst-case scenario, global trade would suffer similarly to how it did during the great depression that occurred almost a century ago.
As governments worldwide order businesses to halt operations, enforce temporary restrictions on imports and exports, and ask citizens to limit travel internationally as well as nationally to reduce the spread of the COVID-19 virus, global trade is naturally suffering as a result.
The best-case scenario would still see global trade drop significantly, by 13%. For this to ensue, countries around the world would have to take significant steps over the summer to resolve the health crisis and get restrictions lifted, reigniting international trade in the second half of the year.
Given the coronavirus pandemic's unprecedented nature, levels of uncertainty are high, making it difficult to predict the exact outcome of the health crisis on world trade. Both the worst or best-case scenarios could arise; results could sit outside of these predictions.
The take-home message is that global trade is being detrimentally impacted, but its extent cannot yet be predicted.
How businesses can protect themselves from a global drop in trade
Uncertainty is making SME owners unsure of how to react to the crisis to protect their businesses. Fortunately, a few strategies can be taken to limit the impact of a drop in global trade.
Firstly, companies should make it a priority to protect their employees from contacting the disease. An outbreak of the virus within a workplace could halt operations and prevent facilities from running, even at a reduced capacity. Therefore, employees should implement remote working where possible and enforce social distancing policies.
The second tactic is to be in the know. Business owners should investigate their procedures from every angle to ensure that they understand how new regulations and restrictions that have been put in place due to the pandemic will impact every shipment. Currently, import and export via sea-freight remain the most unaltered option, although future restrictions may change this.
SME owners can also look to the UK government for help. A small business grant scheme has been set up to support those struggling due to the pandemic. £12 billion has been allocated to offer relief to small firms in the form of £10,000 grants. Business owners should consider if they would benefit and if they are eligible for the grant. While the scheme has received some backlash due to many business owners failing to access them, efforts are being made to iron out the scheme's flaws.
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