Global trade is expected to reach about $28 trillion in 2021, growing 11 per cent over pre-pandemic levels, according to the global trade update report issued by UNCTAD on Tuesday.

The outlook for 2022, however, remains very uncertain, due to slowing economic recovery, disruptions of logistics and rise in shipping costs, global semiconductor shortage, regionalisation of trade flows, debt burden and governmental policies affecting international trade, it added.

India’s growth accelerates

India’s trade growth accelerated in Q3 CY2021 — both in goods and services — while that of China remained relatively constant although at already high levels, the report said.

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India’s goods exports posted a rise of 27 per cent and 5 per cent, and services increased by 7 per cent and 17 per cent in Q3 of the current fiscal compared to the 2019 average and Q2 2021, respectively.

‘Strong year’

“Overall, 2021 is set to be a strong year for international trade....Trade in goods is projected to reach a record level of $22 trillion in 2021. Trade in services should be valued about $6 trillion in 2021, still slightly below pre-pandemic levels,” it said.

In 2021, the value of global trade in goods and services is expected to increase by about $5.2 trillion relative to 2020, and by about $2.8 trillion relative to 2019, the equivalent of an increase of about 23 per cent and 11 per cent, respectively.

Global trade growth stabilised during the second half of 2021, increasing by about 1 per cent quarter-over-quarter.

Risks remain

Commenting on future risks to global trade, the report pointed out that the strong economic recovery of the first half of 2021 had slowed during the second half. In particular, economic growth of China in Q3 2021 was below expectations and lower than in previous quarters.

The Covid-19 pandemic was continuing to pose a threat as some important sectors showed signs of weakness in 2021 because of semiconductor shortages.

“The shortage of semiconductors has already disrupted many industries, notably the automotive sector. If persistent, this shortage could continue to negatively affect production and trade in many manufacturing sectors,” it said.

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Further, additional borrowing of governments to sustain their economies during the Covid-19 crisis could pose continuous risks of financial instability, especially in the case of global inflationary pressures.

Efforts towards a more socially and environmentally sustainable economy can also affect international trade, the report cautioned.

Alluding to the carbon tax proposed by the EU on imports from countries with lower environmental vigour, the report said that government policies can aim to disincentivise the trade of product varieties with high carbon content, or of goods that are linked to the exploitation of labour or the environment.