Thank you.
Today I would like to share with you how the WTO has responded to covid-19, some macroeconomic outlooks of as the result of covid-19, what has been happening in trade, and some of the actions that WTO has been taking.
We’ve seen a big economic shock as a result of pandemic. In 2020, global output drops 3.2%. There has been a very significant recovery in 2021, where global output looks to be growing about 6%, slowing a little in 2022 at 4.9%. There is quite a bit of divergence between countries in district recovery. The advanced economy is recovering very strongly. The emerging market economy is also recovering strongly, including China. But some developing and least developed countries are experiencing much slower growth in recovery. That has to do partly with slower than anticipated vaccine rollout and also significant risks of virus mutation. This has significant downsides for these slower recovering economies because their financial condition could tighten rapidly. If we see increasing inflation being sustained over the next year, this could also have divisive effect on them.
When we look at trade, initially, I thought that the decline in trade in 2020 would have been much bigger than it was. It dropped by 5.3% in 2020. But now in 2021, we're seeing a recovery of almost 11% in volume terms. And global trade is now higher than it was in 2019. This is a significant recovery. There is a big drop that I thought would be bigger. But all the fiscal and monetary stimulus that countries rolled out particularly in the advanced economies, really helped them with much quicker recovery. That's good and very helpful. It ensures that people's livelihoods are sustained, that products are getting where they need to be, and that people have what they need to have a fruitful and productive life. We see this divergence between the advanced economy and emerging market economies, and the developing and least developed economies.
The trade recovery has been very robust across many products and a number of geographical regions. China's been exceptional. It has been a very powerful export machine, exporting the personal protective equipment and many other medical related goods that the rest of the world needs to deal with the pandemic. It's also been shipping many of the home and office equipment goods that people have been shipping to in the advanced economies, buying equipment for their home offices. We also see globally that agricultural products have sustained their export growth, which is good for global food security. So far, both of the goods side and the food side has performed well into 2021.
Unfortunately, it’s the services trade that we haven't seen doing very well, particularly tourism and many other in-person related services. They are still recovering very slowly, compared to 2019 and 2020. This uneven pace of recovery in this big increase in the demand, which is very strong, has stressed global supply chain. Many of you may have been reading about the developments and disruptions in global supply chains. I personally characterize this as much more of a supply chains being unable to deal with the sudden strong bursting growth.
The demand for freight and shipping goods exceeds the historical capacity of the global logistic system. There are indeed challenges around certain port lock downs, some other health related challenges, and climate related challenges that have disrupted supply chains. But by far, the biggest problem has been the burst of the demand in the short term global shipping capacity whether it's ocean or air, and caused price rises, and lots of complaints. If you read the newspapers, you'll hear about supply shortages. I get very frustrated with that. It's not a supply shortage, but excess demand above supply levels. I think that's quite a different policy environment, and that is what you need to do to deal with is quite a different thing than if it was truly a supply shock. So I think that's something to keep our eyes on.
My expectation is that, probably into the new year of 2022, we will start to see this demand slowdown. The expectation for global growth next year will be slower than this year. And I suspect that's going to fit through the goods trade and relieve this pressure on global supply chains.
There could be another variant of the virus that comes along and causes lock downs or more climate related shocks to the supply chains. But I think we will see the demand side of this issue starting to slowdown. We've seen quite a bit of variance across the different kinds of products, such as very strong exports of medical goods, particularly personal protective equipment. But you’ll see big declines in non-office related products. What we've seen is very high demand for protective pharmaceutical products and food, what in English are called, home and nesting products or haven products, but much less demand for clothing and textiles and some durable goods. This divergence from historical trends has been very visible in the data. It is a big compositional shift. We've seen a compositional shift away from services to goods which is causing stresses in global supply chains to keep up with all of that demand. But also within goods trade, we see a much less demand for clothing and textiles than durable goods, much higher demand in pharmaceutical home protective goods and nesting goods.
We see increasing commodity prices, and those partially explain the growth in trade value. We've seen oil prices increasing, and metal prices increasing. Now we're seeing food prices increase. And that's a little disturbing because it has implications for food security and affordability for many poor households. So we have to follow this very closely. Part of those food price increases are related to increased transportation costs because of the access demand for global shipping.
There's been diverse recovery trade volumes across regions. China and Asia are doing very well, with very strong exports; weaker exports out of Africa, the middle east, and south America; moderate export growth out of the United States and Europe; a very strong import growth in the United States and Europe; some strong import growth in Asia because of China's integration into global value chains, and imported parts and components to put it to the goods that are exporting to the advanced economies.
I worry a little bit about this strong growth and exports from Asia with relatively slow or moderate growth in exports from the United States and Europe. Historically that has contributed to trade tensions which can often result in the adverse policy actions that really don't serve the interests of the global population or those countries themselves very well. It's a macroeconomic challenge and very difficult to deal with those kinds of imbalances with direct trade policy.
As I mentioned, services trade has performed very weakly. We see travel dropping very significantly while office related services, and digital related services growth has been pretty strong. We actually see only a slow recovery in services, particularly travel and tourism related growth. But we see business services and transport services doing reasonably well into the future.
A big part of covid-19 has been monitoring trade policy development. And I think many people have criticized the WTO for not performing well over the past few years. I actually have quite a different tape. It's not just because that I am the secretary. I do try to look at this with an independent and objective perspective. What we see is that members, even before the pandemic, are very concerned about their WTO obligations. They still may have taken actions that did not sit well with other WTO members. But whatever they do this, they typically characterized it in the context of the WTO commitments and obligations and tried to pay the actions as being consistent with those obligations.
When we look at what's happened since the pandemic outbreak, what we see is that more covid-19 related trade measures tend to be trade facilitating in goods and services rather than trade restricting. On the export side, there was a lot of concerns initially around a large number of export restrictions being put in place, as countries worried about their domestic political circumstances and health circumstances and restricted exports of certain critical medical goods. But very quickly most of those have been removed. Over 65 out of 114 have been removed. And many of those continued to be phased out. More goods have experienced trade liberalizing measures than trade restricting measures.
In the vaccine area, we've seen some very significant concerns around export restrictions. But a large number of potential exporters, such as India, who has recently opened up, once its domestic covid-environment has started to settle down and get under control. They are now again opening up their vaccine market for exports which would be very helpful.
One of the interesting thing is that WTO is a part of this multilateral leaders’ taskforce which involves the World Bank, the IMF, and world health organization. And the WTO tries to track these trade policy-related measures that might be impediments to global vaccine production and distribution. What we've observed in terms of exports is right now the largest vaccine exporter in the world is China. And that's very interesting because China only recently has had its vaccines accepted under the WHO emergency use list, which means that they can now be used and purchased by the organization called COVAX, which is responsible for getting vaccines to least developed countries and those that are underserved. So China, even before getting WHO emergency use list, was a very large global exporter followed by the European union and the United States, and then India. With China's vaccines at least one of them being accepted under use list, they can be bought by COVAX for donations, and Europe and the United States dramatically increased their donations to COVAX to ensure that regions such as Africa which dramatically underserved get an increasing share of global vaccines. With India’s opening up, which has by far the largest productive capacity, we hope that we can now start to solve this vaccine inequity problem with regions such as Africa, Latin America and parts of south Asia that are being underserved.
The WTO meets regularly with pharmaceutical company CEOs including Chinese, Indian, South Korean, Japanese, US, European, and South African about once every six weeks. We hear from them as to what their current challenges are in trade environment and also just in general terms of production.
I have to say overall it's been a pretty amazing to watch how we've gone from essentially zero covid vaccines to now approaching over 15 billion doses of global production, with potential of reaching perhaps over 25 billion doses of productive capacity by the middle of 2022. Interestingly by the way, 25 billion doses would be far more than the world needs on an ongoing basis. It's likely to be the case that we're going to be facing some potential excess supply, after months of shortages and inequitable distribution. It's very likely that we could be facing a situation where the world has more vaccine production than it needs.
Unfortunately, the graphic diversification production has been very concentrated in certain countries, I mentioned China, India, US, and Europe. Increasingly Africa wants its own productive capacity because they recognize the political economy challenge that if a country is a large producer and has a large population, the vaccine is likely initially be kept at home. So Africa is very interested in having its own productive capacity, as is South America and other parts of Asia.
Solving this vaccine inequity problem, particularly getting vaccines into Africa and least developed countries is going to be critical to sustaining a global recovery into 2022, and for the long term global health of the global of the global economy. Trade plays a critical role in vaccine production. Even if vaccine production is currently geographically concentrated in a few countries, those few countries rely on many other countries for their input. No one country can produce everything it needs in order to create the vaccine. Once it's created that needs to ship. And when it arrives at a border, it needs other kinds of complimentary equipment to get it distributed to get it into people's arms.
So this is a very complex global value chain issue. It is only getting more complex as production is expanding and the connectivity between countries is very high. I actually have a picture of this but I can't show it to you right now. But if you go to our website, you can look at our covid-19 page. You'll see some images of the growing scale and complexity of the global covid-19 vaccine supply chain. And I highly recommend that you take a look at that.
Solving this vaccine probably preparing for the next pandemic it's going to be very dependent on global trade to help solve those challenges and it's going to be very dependent on global trade to help with a broad-based a globally-shared economic recovery.
And I'll stop there.
Thank you very much for taking the time to listen to my comments and I wish you a good day.
