Impact of COVID-19 on the Future of Trade Policy
Last week, the Washington International Trade Association (WITA) hosted a webinar titled “Impact of COVID-19 on Global Supply Chains and the Future of Trade Policy.” This was the fifth in a series of Thursday webinars, cohosted by WITA and the Asia Society Policy Institute, that relates to the COVID-19 crisis. The panelists set the stage by discussing how COVID-19 has impacted global supply chains with 76 countries having implemented export restrictions, mainly on personal protective equipment (PPE) such as masks, gloves, and medical gowns. Some countries have also imposed restrictions on agricultural exports, prompting the G20 agricultural ministers to emphasize the importance of keeping trade flowing and restrictions at a minimum.
Webinar speakers included: Beth Baltzan, Fellow at the Open Markets Institute; Anabel Gonzalez, Nonresident Senior Fellow of the Peterson Institute for International Economics; and Nicole Bevins Collinson, President of International Trade & Government Relations at Sandler, Travis & Rosenberg, P.A.
Panelist Nicole Bevins Collinson focused on the need for vertical integration in future trade practices. Rather than depending on multiple companies in multiple countries to produce one product, Collinson suggested that companies should have several locations in which all (or most) manufacturing occurs. In this scenario, even if manufacturing at one of the companies is disrupted, the other will remain active, preventing a disruption in the entire supply chain. In terms of future policy, Collinson noted that she expects to see changes in the area of transportation logistics. With COVID-19 providing transparency into supply chains, many companies have noticed—for the first time—the carbon footprint they are leaving. Collinson anticipates that this will cause companies to become more conscientious in future, which she says may lead to less air and ocean freight and more investment into train transportation.
Panelist Beth Baltzan began her discussion by declaring a need for a radical rethink about “the way we have been doing things” for the last 40 years. In particular, Baltzan focused on efficiency versus resiliency. She argued that COVID-19 has demonstrated how our current global trade environment emphasizes efficiency—essentially, producing the most goods for the least amount of money in the shortest time span possible. As a result, the global market has become less resilient and more prone to risk—something that has been glaringly obvious as supply chains worldwide are disrupted by this crisis. Although elimination of tariffs has become a rallying cry for some people as a result of the pandemic, Baltzan disagrees. She noted that diversification of supply chains is more important than immediate elimination of tariffs.
Anabel Gonzalez echoed Baltzan’s concerns about the efficiency vs. resiliency of the global trade market. In this particular pandemic, Gonzalez noted, ventilators were the medical devices needed most; what happens if the next pandemic requires something different? The role of trade policy, then, should be to prepare countries for future pandemics. In the wake of COVID-19, countries need to ensure that they are able to move good from where they are produced to where they are needed. Governments should restrict the use of export bans and establish conformity assessment procedures. Gonzalez emphasized that a global collective response is critical for responding to a crisis of this magnitude.
All three panelists seemed to be in agreement that future trade policy would require some level of reorganization of the global trading system as it currently stands. This opens the door for groups like the World Trade Organization to play a larger role in establishing trade policy in order to prevent the export restrictions and hoarding of materials that have been seen as the pandemic unfolds. This in turn may lead to a broader discussion about the role of governments, companies, and international organizations in the global market, and whether or not the time has come to rethink these roles.