Event looks at how to mitigate impact of rising shipping rates on trade flows

The constraints faced by WTO economies due to recent spikes in shipping costs was the focus of intensive discussions on 10 November between WTO delegates, academics and representatives from the private sector.

In her opening address, Director-General Ngozi Okonjo-Iweala called on governments and businesses to “continue identifying supply chain bottlenecks and implementing measures to mitigate their impact on trade” and to work towards “making global supply chains more resilient”.

The information session, which is part of the WTO’s enhanced and ongoing efforts to analyse the dynamic situation in global supply chains, was organized to share information on members’ constraints in importing and exporting goods due to current shipping disruptions and to exchange views on measures to mitigate the impact of those disruptions.

The essential role that the WTO can play in helping strengthen global supply chains was also touched upon. Implementing trade facilitation measures, accelerating automation and digitalization, and embracing market opening in transport and logistics services were among the elements cited as helpful. Underlining the benefits of the Trade Facilitation Agreement, the Minister of Foreign Affairs, Regional Integration and International Trade of Mauritius, Alan Ganoo, called for “streamlining, modernizing and digitalizing trade procedures, reducing physical contact between workers in the shipping industry, while at the same time keeping ships moving and ports open”. He also called for finding creative approaches, such as cross-national cooperation among countries and transport service providers.

The DG called on governments and businesses to continue identifying supply chain bottlenecks and implementing measures to mitigate their impact on trade.

Operational disruptions — including shutdowns of major ports caused by the COVID-19 pandemic — have put logistic systems under stress, created uncertainty and increased trade costs. Pressures on supply chains have been caused by the recent strong rebound in global trade and the surging demand for consumer durable goods, notably a rising demand for shipping containers from East-Asia combined with COVID-19 restrictions.

“The COVID-19 pandemic has highlighted both the vulnerability and the resilience of interconnected supply chains,” said DG Okonjo-Iweala. “The evidence from the past year and a half is that global value chains have on the whole held up well. Because governments were mostly restrained in the use of trade protectionism, supply chains were able to resume operations when economies reopened last summer.”

At the same time, the DG noted that supply chain bottlenecks “have emerged as a significant risk weighing on the wider post-pandemic recovery in economic output and trade”.

“We must do everything we can to lessen the trade impacts, especially on small businesses across the world,” Deputy Director-General Anabel González noted. “Doing so is critically important to ensure that all countries, especially the poorest ones, can jump-start the post-pandemic economic recovery. … What is equally important is to draw lessons from COVID in order to prevent similar shipping disruptions in the future. This means that we need to consider how to build the resilience of supply chains and what policies are needed for this purpose.”

Speakers noted the particularly acute impact of rising shipping costs on developing countries’ trading prospects and competitiveness — particularly for small island developing states, net food importing developing countries and landlocked countries. “To the extent that maritime supply chain bottlenecks make it harder for developing countries to tap into external market demand, they will hold back growth and economic recovery from the pandemic,” DG Okonjo-Iweala said.

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