Managing Cross-border Risks and Working to Facilitate Resilient Supply ChainsCOVID-19 has undoubtedly changed the landscape of international trade. The turbulent times that COVID-19 has ushered in has subsequently established a chaotic trade climate that has seen both positive and negative trade actions by countries. Supply chains have been affected by manufacturing and port closures, as well as export restrictions on some medical and food products. At the same time, there has been positive trade momentum including tariff deferral and exclusions, economic stimulus, extra commercial plane cargo shipments, and increased demand of certain food products. The highs and lows of the pandemic have required countries to reassess their trade policies. Below is a summary of actions over the past three months and considerations for the future as we transition to a new normal and anticipate another wave of cases in fall and winter. Food Security and Export Controls
Food and agriculture export controls have been rampant because of COVID-19. Countries have become fearful that outbreaks in food processing plants coupled with increased grocery demand will cause shortages for their citizens. Instead of looking outward to expand their supply chain, 29 countries have established 49 export controls as of 12 June to protect food security.[1] Some of these trade actions include export bans, export quotas, and export authorization policies.[2] For example, Russia and the Eurasian Economic Community have implemented quotas on wheat, corn, rye, barley and meslin. In late April, this quota was filled, and exports of these products are suspended until 1 July.[3] For businesses, these trade actions can have a direct impact on supply chains and ultimately affect both inputs and finished products. Luckily, the food supply is steadily rebounding. The 10 ASEAN countries reversed previous protectionist policy and signed a pledge on 6 May to cut their food export restrictions.[4] Singapore and New Zealand have signed a pledge to reduce trade restrictions which can serve as a framework for trade liberalization in a post-COVID-19 world.[5] US meat producers who had to close due to outbreaks at numerous plants across the country have received help with reopening safely from the US government with meat inspectors ensuring safer work conditions.[6] Additional US action has seen the FDA ease restrictions on labeling making new product development easier.[7] Medical Export controls Countries have primarily focused their export controls on the medical sector and the food and agriculture sector. Medical export controls were implemented when countries feared they would run out of ventilators, drug treatments, and personal protection equipment, and other crucial supplies. These export controls were widespread with a recent Congressional Research Service article reporting that at least 50 countries had taken 95 trade actions on medical exports.[8] These medical export restrictions have had a wide-reaching impact that have caused increased trade tension. President Trump’s decision to restrict personal protection equipment exports from 3M led to a trade spat in April with Mexico and Canada.[9] This was eventually resolved when President Trump allowed exclusions for many of the original export restrictions, but demonstrated the volatile trade environment COVID-19 has created. Global Port Status Global ports were initially hit hard by COVID-19 in terms of container volumes and operational status, but as the pandemic endures, countries have begun to increase global trade and ensure that ports are able to sustain this rebound. Maersk reported that its quarter two shipping volumes were better than initially expected after an extremely disappointing first quarter.[10] Ports initially placed many restrictions and even closed in some cases to try to ensure that workers and crew stayed healthy. Crew changes continue to be a problem with container lines reporting potential crew shortages due to a lack of crew changes.[11] On a positive front, 57 ports around the world have signed a pledge facilitated through the Port Authority Roundtable to keep their ports open throughout the pandemic. This pledge has helped ensure that despite numerous barriers in international trade, goods still can be moved freely between countries. Escalating Trade Tensions The pandemic has heightened tension throughout the world and countries have started a blame-game to determine who should be held responsible. President Trump has wavered on whether he plans to keep the US in the Phase-One China trade deal. Recent statements suggest the United States is planning on “decoupling” and potentially incentivizing business to re-shore domestically.[12] Australia also faces a looming trade war with China, as the Australian government seeks a probe of the origins of COVID-19. China has implemented tariffs or import bans on Australian meat and barley.[13] These types of trade battles may be more common in future years as countries look to bring supply chains home. Trade Facilitation and Stimulus Since the beginning of the pandemic, governments have cumulatively spent an estimated $9 billion on stimulus programs.[14] The US Paycheck Protection Program has supported SMEs and in recent days loosened regulations on the program.[15] A Customs and Border Patrol initiative in April briefly allowed companies to defer duties and fees on imports.[16] Trade facilitation efforts and stimulus programs have helped businesses sustain themselves during quarantine measures and allowed imports and exports to continue to flow. Conclusion COVID-19 has created a new global trade climate that poses risks for companies. Trade actions that were taken during the pandemic endure with contrasting relief efforts being made on some fronts. Future waves of the virus could cause further disruption, leading to a reduction of globalization and international cooperation. Companies should continue to monitor and analyze trade actions, port status, and future stimulus to ensure they are in the best position to succeed amidst the pandemic. We may see a resurgence in uncertainty as COVID-19 trade-related policies and initiatives are rolled back in the summer and early fall, and reapplied when new waves of cases emerge, further impacting the global economy. In preparation, TradeMoves can help provide the intelligence, trade tools and support to further enable and strengthen your company’s supply chain to take advantage of risks and opportunities. Let us know how TradeMoves can help you understand and manage the pandemic’s influence on trade for your business. Andrew Polinski [email protected] [1] COVID-19 Trade Policy Database: Food and Medical Products, World Bank Brief, 4 May 2020 [2] 21st Century Approaches to Tracking Trade Policy Responses in Real-Time, World Bank, 2 May 2020 [3] Russia Cuts Off Wheat Other Grain Exports, VOA, 26 April 2020 [4] ASEAN Intervenes to Fight Death Spiral of Food Export Restrictions, VOA, 6 May 2020 [5] Export Restrictions in Response to the COVID-19 Pandemic, CRS, 15 May 2020 [6] US meat inspectors given new role looking after people, Financial Times, 1 May 2020 [7] FDA loosens food labeling restrictions amid coronavirus supply chain shortages, Fox Business, 25 May 2020 [8] Export Restrictions in Response to the COVID-19 Pandemic [9] COVID-19: Trump’s curbs on exports of medical gear put Americans and others at risk, PIIE, 9 April 2020 [10] Maersk seeing better-than-expected Q2 volumes, JOC, 17 June 2020 [11] A new threat to global trade: Exhausted crews want off cargo ships now, CNN, 18 June 2020 [12] Trump again threatens to cut China ties after US official ruled it out, The Guardian, 18 June 2020 [13] China hits Australia with barley tariff in latest blow to relations, Reuters, 18 May 2020 [14] Tracking the $9 Trillion Global Fiscal Support to Fight COVID-19, IMF Blog, 20 May 2020 [15] Trump Signs New Law Relaxing PPP Rules, Forbes, 5 June 2020 [16] Treasury and CBP Announce Deferment of Duties and Fees, CBP, 19 April 2020 Comments are closed.
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