This article is going to help us explore the economic effects of Covid-19 pandemic on both internal and international trade so far.
But before we do this, we need to know what goes into internal and international trade.
Internal trade which is also known as domestic trade is a kind of trade that takes place within a well-defined geographical boundary or territory of a particular country. Example Ghana. In this realm of trading, a common currency is used as the standard of exchange or medium of exchange. In Ghana, we use the cedi in our internal trading activities.
On the other hand, international trade which is also known as external (outside) trade is the trade that takes place across the barriers of a country. Here, different currencies are used in this trade as a medium of exchange. For example, cedi, dollar, Nira etc. Basically, there are two types of international trade namely, Bilateral and Multilateral trade.
Bilateral trade takes place between two countries only. It is the exchange of goods and services between two countries. Example, Ghana exporting Gari to Germany, and in turn importing capital goods like Vehicles.
Multilateral trade takes place among more than three countries. . It is the exchange of goods and services among three or more countries. Example, Ghana trading in different products and services with Togo, Nigeria and Britain.
As a country, we already know what is currently happening with regard to the Covid-19 pandemic on our local productions.
So, from here, I am going to emphasis more on the economic effects of the Covid-19 pandemic on international trade.
Before you will appreciate the economic effects of the Covid-19 pandemic on international trade in its totality, let me first of all, give you some of the reasons why countries engage in international trade below:
- No self-Sufficiency: What this means is that, no country in the world can produce everything on its own. That is why there is the need of export and import of goods and services.
- Differences in climatic conditions: From the perspective of Geography, climatic conditions across the globe are not the same. To this effect, some crops will thrive well in certain parts of the Globe while some will not thrive well in other parts of the Globe. In our part of the Globe (Ghana), we normally import apples from other countries because of the kind of climate we have. We also do export cocoa and soya beans to other countries because of their climatic conditions.
- Differences in natural resources: There is rutted distribution of resources among countries or nations of the World. While some countries have abundant supply of mineral resources such as gold, diamond, crude oil etc., some counties have limited or none at all. So there is the need for trade to take place so that countries can enjoy the mineral resources they need but not endowed with.
Now some of the effects of the Covid-19 pandemic on international trade are highlighted below:
- Fall in foreign exchange or fall in government revenue: During this Covid-19 pandemic, there has been a huge fall in foreign exchange or government revenue. This is because exportation and importation of goods and services are no more taking place among countries as a result of the Covid-19 pandemic which made countries across the globe to close their boarders. There has been a lot of unemployment issues since this Covid-19 pandemic started across the Globe. And as far as people are unemployed, government revenue will by all means fall.
- Private monopoly is on the rise: Private monopoly is normally controlled through international trade but as trading activities among counties are on hold now; individual countries are taking advantages of the Covid-19 pandemic in exploiting their consumers by charging unnecessary prices.
- There has been a great fall in the World output: International trade always bring about full utilization of resources and increase in productivity due to specialization of labor. When this happens, more goods and services are available at reasonable prices but the Covid-19 pandemic has negated this principle or notion above.
- World Peace is at stake: During international trade, there is genealogical relationship between or among nations. This makes issues which can degenerate into Global wars to be resolved amicably but this Covid-19 pandemic is bringing a lot of panic in the system. Which if care is not taken might lead to World war again.
- Economic growth and social progress is at stake as well: This Covid-19 pandemic has put certain restriction on the transfer of technology for economic growth and social progress to take place among countries.
We are all aware of the Covid-19 pandemic effects on all the sectors of the economy but I decided to just look at the effects of it on international trade as gaudily explained above.
Credit: Francis Pious Egoeh
Brief profile about the author of this article.
Currently, Francis Pious Egoeh is the Administrator & Secretary at Anim Psychological Counselling Services at Danfa-Accra.
Francis Pious Egoeh had his first degree in Economics and Geography from the University of Cape Coast (UCC), Ghana.