Annotation. The conditions of functioning of foreign and domestic trade in Ukraine in the conditions of the COVID-19 pandemic are investigated. The positive effects and negative consequences of trade policy under the COVID-19 pandemic, during the Great Depression and the global financial and economic crisis of 2008 are analyzed. Measures to establish the normal operation of small retail businesses during a pandemic are proposed.

Key words: foreign trade, domestic trade, Ukraine, trade policy, COVID-19 

The COVID-19 pandemic has radically changed the way people live in many countries. Social distance and restrictions on social contacts have become the norm. This had particularly negative consequences for small retail businesses. Prospects for overcoming the COVID-19 pandemic remain unclear. The urgent task is to establish the normal operation of domestic and foreign trade in the pandemic.

 In Ukraine, the first infected COVID-19 person was found on March 3, 2020. Since then, the number of patients diagnosed daily has been steadily increasing: April 1, 2020 – 149 persons; May 1, 2020 – 455; June 1, 2020 – 890; July 1, 2020 – 670; August 1, 2020 – 1205; September 1, 2020 – 2147; October 1, 2020 – 4179: November 1, 2020 – 8243; December 1, 2020 – 12774. [COVID-19 Dashboard, 2020] In December 2020, the rate of infection decreased.

As of December 19, 2020, 956123 cases of the disease have been confirmed during the entire pandemic in Ukraine, of which 16469 cases were fatal, 574536 patients recovered, 365118 patients continued to be actively ill. [Operational, 2020] Persons affected by COVID-19 were found in all regions of Ukraine. Case fatality rate was 2.02% in Kyiv, 2.84% in Lviv, 2.15% in Odesa, and 1.49% in Kharkiv. [COVID-19 Dashboard, 2020] 

Compared to neighboring countries, the prevalence of in Ukraine is moderate. As of December 18, 2020 the number of infected (per 100 thousand population) was: in Russian Federation - 264 persons; in Belarus - 267; in Poland - 397; in Ukraine - 411; in Romania - 437; in Moldova - 482; in Slovakia - 500; in Hungary – 683. [Information, 2020] 

Since March 2020, Ukraine's economy has been operating under quarantine conditions. According to the scale of restrictive measures, quarantine in Ukraine can be divided into two periods: 1) period of strict quarantine and 2) period of adaptive quarantine. Strict quarantine lasted from March to May. At that time, the Cabinet of Ministers of Ukraine allowed to continue production activities at construction sites, at the enterprises of energy, chemical industry, communications, defense industry, housing and communal services and food industry. At other enterprises, production activities were partially or completely suspended. [The COVID-19 crisis, 2020: 5-6] 

Partial or complete shutdown of enterprises affected the dynamics of industrial production. The greatest decline in industrial production was recorded during the period of strict quarantine. After the introduction of adaptive quarantine in June 2020, the rate of decline in industrial production decreased and became stable. The decline in industrial production has not yet been overcome. In January-October 2020, the decline in industrial production compared to January-October 2019 was 7%. [Indices, 2020] During the same period in 2015, the decline in industrial production was 13%. Thus, according to the results of 9 months, we can expect a smaller decline in industrial production in 2020 than in the crisis of 2015.

The decrease in foreign trade is a natural consequence of the reduction in production. In January-September 2020, compared to the same period last year, exports of goods decreased by 6% and imports - by 14%. [Geographical, 2020] Over the past 15 years, a larger decline in foreign trade in goods was recorded: in 2015 (exports - 29%, imports - 31%), 2014 (exports - 14%, imports - 28%), 2013 (exports - 8%) and 2009 (exports - 41%, imports - 47%). Thus, in 2020 the decline in foreign trade is expected to be smaller than in 2014-2015 and even more so than in 2009 during the global financial and economic crisis.

The geographical structure of exports did not change significantly during COVID-19. China remained the largest export market as a country, and among the tariff zones - the European Union. The growth rate of export supplies to China during the COVID-19 pandemic accelerated even more. If in 2019 the export of goods increased by 63%, then for 9 months of 2020 - by 86%. [Geographical, 2020] Exports to all other major export markets (EU, CIS, Turkey, India, Egypt, USA) decreased.

The commodity structure of exports did not change significantly during COVID-19. The nine largest product groups remained unchanged: 1) cereals; 2) ferrous metals; 3) fats and oils of animal or vegetable origin; 4) ores, slags, ashes; 5) electric machines; 6) nuclear reactors, boilers, machines; 7) residues and wastes of the food industry; 8) seeds and fruits of oilseeds; 9) wood and wood products. More specifically: wheat, corn, carbon steel semi-finished products, flat hot-rolled steel, sunflower oil, iron ore, electric cables, turbojet engines, cake, rapeseed, timber.

Although during January-September 2020, exports of goods decreased by 6%, the picture for some product groups was different. Exports of fats and oils of animal or vegetable origin increased by 20%, nuclear reactors, boilers and machinery - by 17%, ore, slag and ash - by 5%. Exports of seeds and fruits of oilseeds (by 36%), ferrous metals (by 17%), electrical machinery (by 14%), wood and wood products (by 4%) decreased. At the same time, exports of cereals and residues and waste from the food industry remained virtually unchanged. Among the main export goods, the export of sunflower oil increased the most (by 23%), and the largest decline was in the export of rapeseed (by 25%). Exports of sunflower oil in absolute terms increased the most to China, while rapeseed exports decreased the most due to reduced supplies to the EU.

In the geographical structure of imports in 2020 there were some changes. The share of imports from Belarus, Russia and Switzerland continued to decline. Imports from Belarus decreased by 26%, from Russia – by 38%, from Switzerland - by 42%. Russia in the ranking of importers in 2020 lost second place to Germany, Belarus lost fifth place to the United States, and Switzerland lost tenth place to Hungary. The only major importer that increased imports during the pandemic was Turkey. In the first nine months of 2020, Turkey increased imports by 16%, mainly due to imports of engineering products and petroleum products.

Among all product groups, Ukraine imports the most: 1) energy materials (petroleum products, natural gas, coal), 2) machinery and equipment. Due to the shutdown of transport during the strict quarantine and closure of enterprises, the import of energy materials in January-September 2020 decreased by 38%. This was also facilitated by the relatively warm winter of 2019/2020. Although imports of machinery and equipment as a whole decreased by about 15% for some household electrical appliances, there was an increase in imports. In particular, imports of refrigerators increased by 6%, air conditioners - by 7%, mobile phones - by 13%, washing machines - by 18%, vacuum cleaners - by 33%, TVs - by 35%.

In 2020, imports of certain food products increased. In particular, imports of milk and dairy products in January-September 2020 increased 2.1 times (butter - 4.8 times), vegetables - by 53%, finished meat and fish products - by 31%, and finished grain products - by 28%. This increase in imports was caused by the blockage of domestic food supply channels during strict quarantine. For supermarkets left the possibility of deliveries only on imports. Imports of pharmaceuticals increased by 11% and detergents by 14%.

With the beginning of the pandemic in Ukraine, e-commerce has further developed. In Ukraine, as in other countries, the first to sell goods on the Internet that can be easily converted to digital (audio recordings, books, movies, computer games, etc.). Then e-commerce covered e-goods, computers, toys, stationery and a wide range of other goods that are easily transported. The next stage in the spread of e-commerce was the sale of essential goods. In the conditions of the pandemic, public catering establishments were also involved in e-commerce.

In the pandemic, e-commerce minimizes personal contact between sellers and buyers. In addition, e-commerce offers an extremely wide range of products, which is many times greater than the range offered by traditional commerce. E-commerce creates stronger competition between sellers, which lowers prices and makes them more transparent. From a mobile phone, consumers have the opportunity to order goods around the clock and receive in almost any region of the country.

During the pandemic in Ukraine, the e-commerce infrastructure was further developed. For the convenience of customers, automated post offices with control over the Internet have appeared. A new supplier has entered the market of courier services - the state enterprise Ukrposhta. In the fight for customers, such logistics companies as Meest, Justin, Nova Poshta, Glovo, Raketa have intensified their activities. Logistics companies actively cooperated with restaurants whose activities were limited during quarantine.

A difficult problem in the pandemic is the organization of urban retail markets for industrial and agricultural goods. These markets are dominated by small businesses. In the 1990s, these urban markets played an important role in reducing unemployment. Gradually, the sale of food products moved to supermarkets. Sales of audio recordings, books, movies, and computer games were covered by e-commerce. Today, light industrial goods, as well as goods for repair and maintenance of housing, are sold in the city's retail industrial markets. Food is sold on temporary farm markets. Closing these markets under strict quarantine has hit small businesses hard and raised social tensions. The ways to organize these markets in the pandemic are to disperse them among urban housing, the use of mobile outlets (car shops) and more.

In January-September 2020, exports of goods from Ukraine decreased by 6%, and imports of goods to Ukraine - by 14%. Forecasts for the decline in world trade in 2020 are different. According to the IMF, world trade is expected to decline by more than 10% this year. [World, 2020: 16] The World Trade Organization estimates that the fall in world trade in 2020 will range from 13% to 32%. [COVID-19 and Trade, 2020: 3] Under the optimistic scenario, the decline in world trade will be greater than in 2009, and under the pessimistic scenario - greater than during the Great Depression of the 1930s.

Predictions of a moderate decline are based on the fact that the current recession reflects a particularly sharp decline in contact-intensive sectors, where foreign trade is not as intense as in industry. While the large decline is justified by the breadth of foreign trade. If in 2008-2009 the decline covered only the United States and the United Kingdom, in 2020 - all the largest players in the world market (USA, China, Japan, Germany, Great Britain, France, Italy).

The current crisis situation in world trade requires an appropriate trade policy. The trade policy of the Great Depression, the global financial and economic crisis of 2008-2009 and the current global recession has some common features, as well as significant differences. During the Great Depression, protectionism was directed against imports. In June 1930, the Smoot-Hawley Tariff Act was signed, which dramatically increased US import tariffs by more than 20,000 goods. The purpose of the law was to direct domestic demand to local producers. However, US trading partners in Europe have responded by raising their own import tariffs. Thus, a "protectionist spiral" was formed. As a result, all trading nations destroyed their own aggregate demand and found themselves in an economic crisis.

In 2008 there was another sharp decline in world trade. The recession affected all countries and all product groups. There is a danger of the crisis deepening further due to the introduction of protectionist measures. In November 2008, G20 leaders pledged to refrain from barriers to investment and trade in goods and services for 12 months. They also agreed to refrain from stimulating exports by WTO-banned methods. Although some countries did introduce protectionist measures, they did not receive a massive response.

Protectionist policies during the COVID-19 pandemic are predominantly anti-export. According to the World Trade Organization, in April 2020, 80 countries imposed export restrictions. These were mostly medical goods and food. Export restrictions continue to be imposed. Canada has banned the export of some prescription medicines inNovember 2020. [Canada, 2020] The current problem is the lack of domestic supply, not the lack of demand as in the 1930s and due to excess of local production as in the 2000s. Export restriction measures are short-sighted. They can destroy the world supply and deepen the crisis.

In the 21st century, production facilities are increasingly moving to places of most efficient production. A complex system of commodity flows and international value chains has been formed. For example, in 2017, world trade in medical personal protective equipment (suits, masks, gloves, goggles, etc.) amounted to $80 billion. [COVID-19 and Trade, 2020: 8] The largest importers were the United States, the European Union, China, Mexico and Japan. Imports from China to the United States amounted to $6.4 billion, and China in turn imported similar goods from the United States by $1.4 billion. Thus, the United States and China were heavily dependent on imports of personal protective equipment and simultaneously were major exporters. Therefore, in modern conditions, the artificial destruction of established cooperative ties can significantly reduce global production potential and harm the fight against the pandemic.

As in most other countries, with the spread of the infection, in Ukraine the export of certain goods was limited. The list of goods was relatively short: personal protective equipment, ethyl alcohol and buckwheat. In August 2020, restrictions on the export of these goods were lifted.

Thus, in Ukraine in 2020 a smaller decline in foreign trade is expected than in the world. In the domestic market, small retail businesses need special attention. He needs to be given the opportunity to work dispersedly and closer to urban housing. The experience of the 2020 pandemic shows the need to promote foreign trade. 

References:

1. Canada bans mass exports of prescription drugs.URL: https://www.bbc.com/news/world-us-canada-55119428 (accessed 19.12.2020)

2. COVID-19 and Trade Policy: Why Turning Inward Won’t Work. URL: https://voxeu.org/content/covid-19-and-trade-policy-why-turning-inward-won-t-work (accessed 19.12.2020)

3. COVID-19 Dashboard by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University. URL: https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6  (accessed 19.12.2020)

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9. World Economic Outlook, October 2020: A Long and Difficult Ascent. URL: https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020 (accessed 19.12.2020)