Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.
Law360 (April 8, 2020, 5:16 PM EDT) -- Global trade could drop as much as 32% as a result of the coronavirus outbreak, creating the greatest dip in international commerce since World War II, according to a World Trade Organization analysis released Wednesday.
The WTO said that the economic devastation of COVID-19 shares characteristics with the 2008 financial crisis, but measures to fight the pandemic, such as social distancing and business shutdowns, have hampered economic activity in ways the financial crisis never did.
"The unavoidable declines in trade and output will have painful consequences for households and businesses, on top of the human suffering caused by the disease itself," WTO Director-General Roberto Azevêdo said.
Azevêdo said the speed at which the global economy could rebound in 2021 depends on the length of the pandemic and public policies created to handle the economic fallout. Political leaders must act now to address these economic consequences while trying to stop the virus from causing more harm, he said.
"Decisions taken now will determine the future shape of the recovery and global growth prospects," Azevêdo said.
The WTO presented two economic outcomes of the pandemic in its analysis: one in which global trade completely rebounds, another in which trade doesn't fully recover. International trade never resumed its previous course after the 2008 financial crisis, the organization said.
The analysis said that if consumer confidence returns after cases of COVID-19 subside, the global economy could return to its pre-pandemic state. But if fears of another outbreak linger, consumers and businesses may hold on to their money, it said.
Baker McKenzie forecast in its own report released Wednesday that the industries hurt the most by COVID-19 will be the first to bounce back at the beginning of 2021 as a result of "pent-up demand."
The law firm predicted that global trade will drop 4% in the first quarter of 2020 and continue to fall in the second quarter before rebounding in 2021.
Baker McKenzie's global chair of international commercial and trade, Mattias Hedwall, said in a statement that businesses should be flexible during the pandemic and work to limit the virus' impact on their supply chains.
"It is clear that the extended shutdown of parts of the world's economy is now feeding through to impact supply chains as existing stocks are depleted," Hedwall said.
Dean Pinkert, a former member of the U.S. International Trade Commission and senior counsel of Hughes Hubbard & Reed LLP's international trade practice, said in a statement that the coronavirus' impact on supply chains will cause a decline in international trade.
"When the economy goes into recession — even temporarily — international trade normally declines by even more than domestic economic performance," Pinkert said. But he added that with the help of public policy and a resume in economic activity, global trade could bounce back.
Earlier this week, the WTO and the World Customs Organization called for government leaders to refrain from overly burdensome restrictions on trade in medical supplies in response to the novel coronavirus outbreak.
The organizations' statement aligns with commitments last month from G-20 leaders, who pledged to keep trade channels open and said that any "emergency" steps taken to restrict trade should be "targeted, proportionate, transparent, and temporary."
But the WTO found in an April 3 report that personal protective equipment crucial to fighting the novel coronavirus outbreak faces global tariffs averaging 11.5%, with certain nations collecting duties as high as 65% on items like hand sanitizer.
--Additional reporting by Alex Lawson. Editing by Peter Rozovsky.
For a reprint of this article, please contact email@example.com.