Changes in world trade and trade policy in the time of the COVID-19 pandemic: challenges and opportunities for Ukraine
Authors:   State Institution ", Ostashko Tamara ,   Institute for Economics and Forecasting, NAS of Ukraine", Kobuta Iryna ,   Food and Agriculture Organization of the United Unions, Italy
Published: October 2020

The article analyzes the trends of world trade and features of trade policies across the world during the period of economic restrictions imposed to prevent the spread of COVID-19. It also analyzes the development of Ukraine’s foreign trade and trade policy measures, which are applied by the government in the pandemic. Based on the identification of challenges and opportunities for the development of this country’s foreign trade during this pandemic and the analysis of forecasts and recommendations of international organizations, the authors substantiate proposals on the directions of Ukraine’s trade policy with an emphasis on the agri-food market. A comparison of world trade developments in 2020 and 2021 forecasted by international organizations is made in the article. In the first half of 2020, the world trade development was closer toward the optimistic scenario of the World Trade Organization (WTO) and the World Bank scenario, but the expected second wave of the pandemic may return the world trade trend to the WTO pessimistic scenario, where the world trade could be reduced by 31,9% in 2020. The development of Ukraine's foreign trade also shows a trend close toward the more optimistic scenarios of international organizations - in the first half of 2020 the country’s foreign trade volume only decreased by 10.6% compared to the first half of 2019. In the article, the main channels of the COVID-19 impact on the world trade are indicated, namely: reduction of the production of goods and services due to restrictions on economic activity imposed by countries, disruption of global value chains, rising commercial costs, sharp decline in services, and price decrease of goods with low degree of processing. As in the rest of the world, the negative effects of the COVID-19 pandemic in Ukraine are largely mitigated by the spread of digital technologies in trade, and conversely, the pandemic stimulates their development. Already in the second quarter of 2020, Ukraine’s exports of ICT services resumed growth and exceeded the pre-crisis level of the fourth quarter of 2019. The authors identify advantages and issues of accelerated digitalization of trade in a pandemic. The protection measures introduced by countries, including Ukraine, after the spread of coronavirus, are analyzed, with an emphasis on policy measures related to agri-food trade. It is proved that the limit of wheat exports during the pandemic is the result of annual memorandum of grain market players, so it cannot be considered a governmental measure restricting trade. It was also proved that the ban on the export of buckwheat introduced by the Ukrainian government, which expired on July 1, 2020, had of a rather socio-political nature, since the supply of buckwheat on the domestic market and the level of consumer prices for this product were guaranteed by import deliveries. This conclusion applies to other goods of significant social importance, whose imports increased significantly during the pandemic, especially for products of animal origin. The directions of the formation of Ukraine’s trade policy in the conditions of world trade changes and trade policies revision are determined. The spread of the trend towards country self-sufficiency in food will lead to a reduction in food chains, a decrease in import dependence, an increase in state support and, as a result, a strengthening of competitive position of domestic producers. Therefore, full and timely financing of state budgetary programs to support agriculture in Ukraine is of particular importance. In order to strengthen the competitiveness of small and medium-sized agricultural producers in the context of the accelerated digitalization of trade as a result of the pandemic, it is necessary to rapidly develop the infrastructure that provides rural areas with high-speed fixed broadband Internet access. Along with the spread of protectionism in world trade, there is an opposite trend of liberalization of agri-food markets, typical for food-importing countries. Thus, the countries-exporters of agri-food products, which include Ukraine, will have easier access to the markets of these countries, new markets will open, and the situation on export markets will improve.