The Asia Pacific Economic Cooperation Forum (APEC) on Tuesday issued a study with three recommendations from its analysts to control trade costs, amid ongoing crises and disruptions.
APEC referred to economic news related to rising food and energy prices, high borrowing costs, climate-related energy crises, growing trade deficits in major centres in the region, as well as changes in production, inflation and warnings of an oversupply of semiconductors that complicate the trade scenario.
Amidst that uncertainty, one thing is clear to APEC: “Gone are the days of stable and reliable global supply chains, essential to trade networks.” It added that “such trading hubs were the unappreciated goose that laid the golden eggs. They proved effective, efficient and reassuring, but overlooked the risk and fragility they inherently posed.”
The pandemic caused a huge impact on economic activity and transformed the world as we know it, changed the way we live, challenged the status quo and shook the traditional architecture of global trade and supply chains.
In the study, the analysts presented two different views on global trade and supply chains under COVID-19, a virus that continues to mutate.
“Global trade is conducted through a network of value chains", he indicated Akhmad Bayhaqi, Senior Analyst, Policy Support Units of APEC“Like a complex circulatory system, when value chains are functioning well, they rarely become the focus of attention. However, since the beginning of the pandemic, supply chains have been at the forefront of people’s and policymakers’ minds,” he added.
“In the early stages of the pandemic alone, global trade collapsed by almost 16 percent,” he said, warning that “The outlook is worrying, especially without tangible measures to address rising trade costs and facilitate complex supply chain networks.”
To put the narrative into perspective, Bayhaqi and his co-authors, Nguyen Thu Quynh y Emmanuel San Andres, reviewed trade costs in APEC over the past two decades. Between 2000 and 2018, the average for APEC economies decreased by 8,5%, from 129% to 118% in tariff-equivalent terms. ad valorem. While global trade costs soared in 2009 and 2020, the APEC region showed a degree of resilience, with its trade costs rising more slowly than the world as a whole.
According to the authors, this could be attributed in part to APEC’s ongoing efforts in trade facilitation, including the first and second Trade Facilitation Action Plans and the Supply Chain Connectivity Framework Action Plan, where member economies simplify and streamline customs and administrative procedures that make it difficult, delayed or increase the cost of moving goods across international borders.
“Trade costs are a key determinant of trade,” Bayhaqi said. “With global trade now dominated by trade in intermediate goods, lower trade costs could facilitate global supply chain participation and growth.”
Despite showing some resilience, trade costs remain at risk, especially with additional inflationary pressure. Therefore, keeping trade costs relatively low while continuing to facilitate supply chain networks to become more resilient is key to a strong economic recovery.
To this end, the analysts issued the following: recommendations:
La first recommendation is to invest in trade facilitation reforms and facilities to address supply chain bottlenecks. Some concrete actions to consider are implementing the trade facilitation measures in the WTO Trade Facilitation Agreement, further simplifying trade processes and authorisation requirements, providing better access to transport infrastructure and facilitating dynamic domestic logistics providers.
La second recommendation is to support supplier diversification; take steps to ensure a trusted and rules-based business environment; and create a responsive regulatory environment. It becomes particularly important for governments to help companies diversify their supplier portfolio when disruptions occur.
La last recommendation is to strengthen regional coordination and cooperation when adopting economic policy. Shoring up production, promoting self-sufficiency and dismantling trade integration may seem like the best options, but they can backfire and create unintended spillover effects in other economies.
At the end of the APEC study, the leader made a reflection: “Ensuring transparency and predictability of trade policies will facilitate coordination and cooperation, as it helps traders minimize costs and anticipate sudden changes in policies.”. (APEC Regional Trends Analysis, May 2022: Addressing trade costs and facilitating supply chain networks; Sustainable recovery amid uncertainty)
Aduana News is the first Argentine customs newspaper to launch its digital version. With 20 years of experience, its publications and initiatives aim to provide the most relevant knowledge on customs issues in order to contribute to safe trade in the region.
