We’ve forgotten that logistics is the lifeblood of global trade
When academics, trade lawyers, government policymakers and so many others think of global trade, they think about trade agreements, rules and dispute processes at the WTO and the myriad of technical details that accompany the movements of goods and services around the world. Of course, this is all for good reason; ensuring exit- and entry-market obligations are met is critical to maintaining legal and regulatory compliance. However, recent events are demonstrating the error of taking another critical group for granted – those who are literally delivering the goods.
We now know that supply chain shortages are rampant throughout the global economy. What first emerged in media reports as a shortage of semi-conductor chips used in car manufacturing is now being observed in other sectors including electronics, pharmaceuticals, agri-food and other consumer products. The components, ingredients and other inputs that go into finished goods can’t be sourced for a variety of reasons.
Governments around the world, eager to be seen to be “doing something” are undertaking reviews of their vulnerabilities and looking for solutions. To be fair, long before the current supply chain woes began affecting consumers directly, U.S. President Joe Biden had initiated a 100-day review aimed at identifying supply chain vulnerabilities that could help reinvigorate U.S. manufacturing.
Overall, the most obvious culprit is the very nature of supply chains and supplier networks themselves: for decades, offshoring and outsourcing has become as synonymous with manufacturing as automation and regimented production. It is now painfully obvious, as the old saying goes, that a chain is only as strong as its weakest link. And while the pandemic has made things worse, this problem has been decades in the making.
Simply put, the transportation infrastructure that moves goods and services to every corner of our planet has not kept pace with the realities of 21st century global business. Whether its ports that need to be expanded and modernized or roads and railways that have not been maintained or upgraded, we have taken logistics for granted for too long. Images of container ships anchored, unable to even unload sums up the problem.
While it is true that the pandemic has grounded flights, thickened borders and been a contributing factor, these problems will persist long after COVID unless governments recognize the problem.
Ironically, recent trade agreements have often been branded as comprehensive, gold-standard and 21st century; yet the same governments that have negotiated them have failed to make similar investments that would facilitate increased cargo.
In short, global trade is as much about the marine shipping, cargo flights, railways, trucking and courier services as it is about tariff lines, customs forms, and policy details. Logistics is literally where the rubber meets the road.
As governments contemplate what to do next, they should ensure they are paring 21st century trade policy with 21st century transportation and logistics planning.