GENEVA — The dramatic reduction in manufacturing output in China in February due to the COVID-19 outbreak resulted in an estimated loss of exports of global value chains worth $50 billion, including more than $1.5 billion in textiles and apparel affected industries, due to shortages in intermediate inputs, a U.N. report said.
“It’s clear the global effects are going to be significant, and even if the COVID-19 is retained within China, which it hasn’t been, it will still have a continuous impact because of China’s impact into the overall value chains of world production,” Pamela Coke-Hamilton, director for international trade at the U.N. Conference on Trade and Development, said Wednesday.
The most significantly affected region, she said, was the European Union, with $15.6 billion, followed by the U.S. ($5.8 billion) and Japan ($5.2 billion).
The analysis by UNCTAD economists, titled “Global trade impact of the Coronavirus (COVID-19),” examined the impact on 13 industries, and revealed that, in regards to textiles and apparel, the most affected were industries in the EU with losses of $538 million; Vietnam, $207 million; Turkey, $164.2 million; Hong Kong, $107 million; Taiwan, $102 million, and the U.S., $80 million.
Asked about the big impact on the EU textiles and apparel sector, Alessandro Nicita, UNCTAD international economist, told WWD, the EU’s sector, still important for members such as Italy, France and Spain, “is very integrated with Chinese suppliers.”
China, he said, is an important supplier of intermediate inputs such as yarns, fabrics, zippers, buttons and other accessories for the sector.
Coke-Hamilton noted that at present about 20 percent of international trade of intermediate goods is reliant on China, and as a result, the country has become “a critical integral part” of economies and global value chains worldwide.
By comparison back in 2002, when China had just recently joined the World Trade Organization, its share of intermediate inputs (parts and components) “for manufacturing stood at just 4 percent,” said Nicita, who added the world economy today “is very reliant on China” and shows how integrated manufacturing has become in the global economy.
The UNCTAD economist told WWD if the spread of the virus outbreak is unable to be contained, it could turn out to be “a disaster for the world economy” and could trigger a global recession.
Hopefully, if the outbreak is contained, he said, the global economy would bounce back. He pointed to China’s Manufacturing Purchasing Manager’s Index, which fell by 22 points in February to 37.5, its lowest level since 2004, and noted this translates into a 2 percent reduction in China’s output on an annual basis.