countries increase trade with politically close partners

After a decline in the second half of last year, global trade grew faster than expected in the first quarter of 2023, according to a UNCTAD report. But already in the second quarter and further until the end of the year, analysts predict a slowdown in growth rates. According to their estimates, one of the main trends in the near future will remain the strengthening of “political proximity” in trade – we are talking about increasing interaction between countries with similar values. For those who are not close, the reverse process is possible: an illustration of this can be considered a decrease in mutual dependence in trade relations between the United States and China.

In the first three months of 2023, the volume of trade in goods increased by 1.9% compared to the same period in 2022, in services – by 2.8%, according to UNCTAD data (United Nations Conference on Trade and Development). More actively than expected, trade in goods grew due to the revival of business activity in China (see Kommersant on April 19), services – due to the ongoing recovery in tourism after the lifting of coronavirus restrictions.

In value terms, the volume of trade in January-March compared to the previous quarter increased by $100 billion in goods and by $50 billion in services. The most noticeable year-on-year growth in both exports and imports of goods was recorded by analysts in the US, the EU, Brazil and India. In Russia, according to UNCTAD, compared to the same period last year in the first quarter, the volume of imports of goods decreased by 10%, exports – by 3%.

Compared to the previous quarter, the growth in global supplies was recorded in trade in pharmaceuticals (13%), minerals (6%), cars (3%) and chemical products (2%). In the “year-on-year” dimension, the volume of trade in energy resources (37%) and food (5%) increased most noticeably – we recall, according to the World Bank and the Food and Agriculture Organization of the United Nations (FAO), prices for both categories of goods after a period of growth from the beginning years have been relatively stable.

Note that earlier UN analysts expected faster trade growth in the second quarter and the next half of the year (see Kommersant of March 27), but now their forecasts are more pessimistic. UNCTAD is no longer waiting for the rapid recovery of the PRC and a significant improvement in the economic situation in the US and the EU. According to the organization, negative factors still prevail over positive ones: the effects of growing demand for services and the relatively low cost of container transportation do not compensate for the slowdown in industrial production, high commodity prices and the orientation of large economies to domestic markets.

The authors of the report record a trend associated with increased “political proximity” in trade: countries give priority to partners with similar political values. According to analysts, before the military operation of the Russian Federation in Ukraine, this trend and the processes caused by it had a limited impact on world trade, but the geopolitical situation became a catalyst for reducing the number of partners among countries and reducing the diversification of trade flows.

It is precisely with the influence of political factors that the authors of the study attribute the gradual decline in trade interdependence between the United States and China. According to UNCTAD, the U.S. share of China’s total exports fell from 18% in the first quarter of 2022 to 15% in the first quarter of 2023, while China’s share of total U.S. imports fell from over 19% to just over 19% over the same period. more than 14%. Overall trade interdependence, which is calculated as the ratio of bilateral trade (imports plus exports) of the United States and China to the total trade volume of these two countries, decreased year-on-year from 14% to 12%.

Recall that the United States, like the EU, is seriously concerned about the growth of China’s influence and seeks to reduce dependence on trade with this country. However, the United States has so far refrained from new restrictive measures, fearing possible consequences, in particular, increased pressure on inflation and serious retaliatory measures (see Kommersant of May 15). In Europe, the fight against Chinese expansion has been reduced to statements by the European Commission and has not yet been reflected in any specific actions (see Kommersant of June 21).

Christina Borovikova