Russia-Ukraine War: Global Supply Chain Grew By 4% in 2022, WTO Reveals

*Says wheat prices actually increased by 17% against projected 85%

Dike Onwuamaeze

In spite of the constraints on exports brought about by the war between Russia and Ukraine, a report by staff of the World Trade Organisation (WTO) has revealed that the global trade was resilient and performed above the WTO’s forecast of 3.0 per cent in 2022 while the supply chain recorded four per cent growth during the year under review.  

The report published in the WTO Information Note titled “One Year of War in Ukraine: Assessing the Impact on Global Trade and Development,” that was released yesterday, noted that “global trade continued to increase in 2022, including for products greatly affected by the war, highlighting the resilience of the multilateral trading system.

“Early estimates suggest that trade growth was above the WTO trade forecast from April 2022 (around 3 per cent) and substantially higher than the more pessimistic predictions for 2022.
“This stability is also reflected in trade in supply chains, which grew by 4.0 per cent year-on-year in the second quarter of 2022, when measured in terms of trade in intermediate goods.”  
The note also highlighted the importance of strengthening the multilateral trading system and warned that the least-developed countries would likely to be hardest hit if international cooperation were to break down.

According to the WTO’s Chief Economist, Mr. Ralph Ossa, “global trade has held up well in the face of the war in Ukraine. Despite the devastation we have seen one year on, trade flows remained open.
“We have not seen the worst predictions foreseen at the onset of the war. Sharply higher food prices and supply shortages have not materialised thanks to the openness of the multilateral trading system and the cooperation governments have committed to at the WTO.

“Resilience will ultimately be best served by fostering deeper and more diverse international markets, anchored in open and predictable trade rules.”  
The note further stated that prices for goods that were greatly affected by the war rose less than expected at the beginning of the war.
It stated that among products most affected by the war, “prices increased between 4.4 per cent (palladium) and 24.2 per cent (maize). While these price increases are substantial, they are significantly lower than the gloomiest predictions.

“The WTO Secretariat staff simulations highlighted that in the case of cascading export restrictions on food, prices for wheat could have increased by up to 85 per cent in some low-income regions compared to the actual increase of 17 per cent.”
The note attributed the relatively limited price increases to the restraint in the imposition of export restrictions by WTO members, which might have played a key role in keeping price increases in check.

It said: “During the period from mid-October 2021 to mid-October 2022 covered by the latest WTO Monitoring Report, estimated trade coverage of the regular (non-COVID-19-related) import-facilitating measures introduced by WTO members (USD 1,038.4 billion) far exceeded the trade coverage of import-restrictive measures ($163.5 billion).
“This, in combination with the limited price hikes, suggests that the 12th WTO Ministerial Conference, which resulted in a Ministerial Declaration on the Emergency Response to Food Insecurity, had a meaningful impact on reducing food insecurity.”

The note, however, stated that Ukrainian exports collapsed by 30 per cent in 2022 in value terms, especially exports of cereal, which were central to the food security of many African economies, declined by 14.9 per cent forcing these economies to adjust their sourcing patterns.
It recorded that Ethiopia, for example, which used to rely on Ukraine and Russia for 45 per cent of its wheat imports, reacted by increasing purchases from other producers including the United States (shipments up 20 per cent in volume terms) and Argentina, which supplied 21 per cent of Ethiopia’s imported wheat, up from zero in the previous year.

On the other hand, Russia’s exports expanded by 15.6 per cent in value terms because of an increase in prices particularly for fuels, fertilizers and cereals; even though estimates suggested that Russia’s export volume may have declined slightly. Trade flows are sharply down for industrial goods such as motor vehicles, pharmaceuticals or aircraft, where sanctions are more restrictive.