The impact of Covid-19 has been debated more times than we’d like. But it’s now more than a year since we experienced our first lockdowns and witnessed first-hand what an economy on pause could look like. A lot of trade channels have been either severed entirely or have been put on an impasse with respect to functioning. There have been more trade barriers due to it as well. However, a major way to the economy recovering is though facilitating transactions. In face of the pandemic, the stakes must be freshly evaluated though.
In light of this, some trends that have been observed by the SALT team on imports and exports could help. These are some trends that take one back to the basics, as well as assist in evaluating the new stakeholders in the process, trade barriers, safety while ensuring that trading persists. Fresh challenges in light of COVID must also be borne in mind when conducting business now.
- Keeping supply chains operational
The Organization on Economic co-operation and development (the OECD) has stated that in challenging situations of emergency like the COVID, it was observed that important supply chains were kept operational. The decrease in mobility, trade barriers, etc. persisted. According to the World Bank, global trade fell by 6%. UNCTAD has also exhibited a 27% drop in global trade for 2020. However, in a lot of spheres, especially food, healthcare, and other essentials, the supply chains were kept operational.
In fact, in a lot of cases, certain industries boomed to meet the demands. The requirement of surgical masks, for instance, increased manifold post the pandemic. However, what was observed through the process of keeping supply chains operational, was that the biosecurity arrangements were more enhanced. The World Bank also believes that keeping supply chains operational through 2020 has assisted in improving the trade over the world. A paper released by OECD also suggested measures on how government policy could aid in ensuring better operation of supply chains. Keeping trade alive during these times, the OECD paper states, not only saves lives but also livelihoods.
The World Trade Organization observes in a study that through the continuation of supply chains, and people also continuing to work from home, the generation of income and demand continued. The study has also highlighted how people are looking to strengthen their supply chains. COVID has increased the need to identify the setbacks within the respective supply chains, and enterprises are looking to remedy this.
- Market-specific growth
An understanding of COVID on the global economy can be understood by market-specific growth or downfall. A paper by the World Economic Forum analyzed statistics for three of the world’s largest export economies- China, the US, and Germany. It concluded that while several industries saw significant growth (health, medicine, certain food sectors), other sectors like the garment industry or the car exports saw the sharpest decline in exports in around 5 years. The World Economic Forum paper also observed that agriculture at large witnessed some growth in export over the span of the past year and a half.
Owing to market-specific growth, it was noticed that many enterprises expanded their businesses into viable sectors. Enterprises, to sustain themselves have also branched across industries. For instance, a report by Deloitte noted how a number of restaurants began collaborating with supermarket chains or converting into other essential businesses.
Even though there was a concerted effort across the world to not dismantle supply chains, an interesting facet arose due to the trade barriers which arose due to COVID. The inadvertent effect on supply channels of some sectors led to an increased demand for sourcing locally. A global trade study noted that much of the global trade would become localized for a few years.
This would lead to the creation of a regional ecosystem, and local channels to cater to the same requirements. While local sourcing was something that became a necessity in all of 2020, it is something that is better evolving in 2021 as well. The same study, however, also cites that localized sourcing is posited not to be a replacement for the traditional trade channels, but an additional. These alternatives keep businesses more resilient in situations like economic crises or emergency scenarios.
- Virtual presence
Businesses have moved from brick-and-mortar settings to creating a virtual presence rather quickly. The evolution happened in early 2020 itself. Much of 2021 has been about solidifying its virtual presence through several channels. A common trend has been to alter their business models and expand into the online fora.
Customer communications have also seen significant alterations over a period of time with the COVID. There has been a higher requirement of safety in the business operations, as well as the necessity to convey this to customers. On an interpersonal, client, and business level, this would mean that better communication of supply delays, errors have been attempted to be delivered. Overall communication channels have sought to be strengthened in the course of this.
Conclusively, further economic trends in import and export will be shaped largely by how the global pandemic transpires further. What would also have a bearing on the trends further is the reach of the vaccination programs, policies of the countries in specific, etc.