FOREIGN TRADE TRENDS AFTER THE PANDEMIC

Hüseyin Cahit SOYSAL
Board Member

The world has been struggling with the COVID-19 pandemic for 10 months. There is no country left unaffected by the virus. While some countries were fighting the disease in a more controlled manner, a "global power" like the USA made a lot of effort to give a picture of how to be helpless in the face of the pandemic. As of October 15, the number of people infected with COVID-19 in the USA reached 6,400,000 and the number of deaths reached 200,000. In the world, the number of people infected with the virus has increased to 30,000,000 and the number of deaths has increased to 920,000.

In terms of world tourism, 2020 has already taken its place in history as the "lost year". Due to the approaching winter, the expectations of this sector have been postponed to "another spring". Domestic tourism in Turkey has also changed shape. Those who flock to 5-star resorts every year have turned to renting houses monthly in the south and renting rooms in houses where single husband and wife live, in order to avoid gathering with too many people. The loss in tourism revenues reached 19.8 billion dollars.

There were serious contractions in all production areas except for medical devices and medicines and consumables used in treatment. All indicators reached their bottom in March-April, when almost the entire world was confined to their homes. Indicators started to rise again in the May-June period, when people started to leave their homes.

During this period, while the Gross National Product in Turkey contracted by 9.9%, exports decreased by 35.3% and imports decreased by 6.3%. With gold imports reaching a historical high in August, monthly imports increased by 21% compared to the same period of the previous year, while the 12-month foreign trade deficit increased to 43 billion dollars. According to the IMF's estimates, the contraction in exports in 2020 will be 10% in Greece, 9.1% in Italy, 7.2% in France, 7% in Germany, 6.5% in the UK, 5.5% in Russia, while it will be 10% in Turkey. It will be experienced as 5%.

All these events naturally changed the business models of foreign traders and governments made structural changes in their foreign trade policies. We can list the prominent ones among these new approaches in the world of production and trade as follows:

Companies that sent their salespeople from one city to another, from one country to another, had the opportunity to make direct contact with their customers through e-conference programs.

Businesses that import inputs in large batches prioritized the "just in time" production model by importing inputs in smaller batches due to shrinking markets.

In the textile industry, the variety of products on the looms has been cut like a knife. Especially in the first five months of the year, only "medical masks" were produced in almost all stalls. As a result of the contraction in the tourism sector, the sales- and therefore the production - of products such as bed sheets, towels and tablecloths have dropped significantly.

Since people confined to their homes could not attack "spring creations" or "summer creations" products, the production of these products was put on the brakes at the global level.

There was an explosion in demand for products such as cologne, wet wipes, paper napkins and hand sanitizer, which were previously produced in limited volumes due to very low demand levels. The industry wasted no time in meeting increasing demand.

Electronic commerce volume doubled the previous year's figures. This development occurred simultaneously not only in Turkey but in all countries. While e-commerce in Turkey was 136 billion TL in 2019, it was stated that this figure will exceed 250 billion TL by the end of 2020.

Both lockdowns and distance education programs increased television and tablet sales. Internet service providers have become unable to meet new demands.

The axis shifts in governments' foreign trade policies during this period can be listed as follows:

The “nationalist foreign trade policy” initiated by the USA before COVID-19 had already resulted in the mutual imposition of additional customs duties and non-tariff barriers. These trends have increased after COVID-19. Every country began to withdraw into itself like a beetle and establish minimal contact with the outside world.

When domestic demand decreased due to closed economies, countries tended to export more but import at a lower rate. However, the principle of the global production model that "each item of input is produced on the basis of economy of scale and presented to global markets" was ignored. This led to an increase in the prices of export products. This time, foreign market customers were lost due to rising prices. (We should especially point out that this determination is not for Turkey. On 15.09.2017, 1 $ = 3,43 TL, on 15.09.2020, 1 $ = 7.48 TL. For this reason, Turkey, whose products have become relatively cheaper, has started to experience an increase in exports, especially in recent months.)

Shrinking economies prompted country leaders to look for "foreign enemies." Governments that have difficulty finding a medicine or vaccine for COVID-19 in a short time have targeted some countries or their leaders to their public opinion by exaggerating minor problems that have never been brought to the agenda before. This was reflected as a contraction in the foreign trade volume of the targeted countries.

Just as an employee who loses his job reduces his expenses, countries whose tax revenues have decreased and whose foreign exchange reserves have begun to melt have gone too far in their attempts to reduce imports. Nobody asked, "How will you produce and sell export products when you make it difficult to import machinery?"

In summary, the post-COVID-19 world is poised for a seismic shift. The potential for the economic contraction caused by the epidemic to endure for decades is a stark reality we cannot afford to ignore. Even with the discovery of a vaccine and medicine, the process of application to 7 billion people and the return to pre-pandemic conditions will be a protracted one.

For the first time since the first years of humanity's existence, there has not been a war on a global scale for 70 years. While people have become able to listen and understand each other regardless of race, color, religion, or language, there is a time when mutual trust is shaken again. Everyone fears another country and raises their guard. We must remember that cooperation and cooperation are inevitable in order not to return to the world.