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A masked worker walks through the port of Jebel Ali on the outskirts of Dubai on June 18, 2020.

KARIM SAHIB/AFP/Getty Images

Global merchandise trade fell by a record amount in the first months of the year because of the COVID-19 pandemic, but stopped short of a worst-case scenario, the World Trade Organization (WTO) said on Tuesday.

The Geneva-based body forecast in April that global trade in goods would fall by between 13 per cent and 32 per cent in 2020, numbers that the WTO chief described as “ugly,” before rebounding by 21 per cent to 24 per cent in 2021.

The WTO did not set new figures on Tuesday, but said rapid responses by governments meant its pessimistic scenario for this year was unlikely.

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The volume of merchandise trade in fact shrank by 3 per cent in the first quarter, the WTO said, and initial estimates pointed to a year-on-year decline of 18.5 per cent for the second quarter.

“The fall in trade we are now seeing is historically large – in fact, it would be the steepest on record. But there is an important silver lining here: It could have been much worse,” WTO director-general Roberto Azevedo said.

The WTO said governments had reacted quicker than in the 2008-09 crisis and income support had encouraged consumers to keep spending. Some sectors such as automobiles had fallen sharply, but others such as electronics had held up well.

If trade were to increase by 2.5 per cent a quarter for the rest of the year, the more optimistic projection of minus 13 per cent could be met, though that would still be worse than at the height of the financial crisis in 2009, when trade dropped by 12.5 per cent.

However, the WTO said weaker-than-expected growth, wider trade restrictions and a possible second wave of infections could see a 2021 rebound falling short.

Trade could then recover only by about 5 per cent, leaving it well short of the prepandemic trend. Monetary, fiscal and trade choices will play a significant role, the WTO said.

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