Dealing with commercial costs: how to reduce them?

(MENAFN-Caribbean News Global)

      • Trade is expensive amid crisis and disruption. Here are three recommendations from APEC analysts for pain relief.

By the APEC Secretariat

ASIA PACIFIC – There has been no shortage of economic news over the past two months – rising food and energy prices, high borrowing costs, a climate-related energy crisis, widening trade deficits posted by the major poles of the region, production shifts, inflation, warnings of an oversupply of semiconductors – it’s getting hard for observers to keep up.

Amid uncertainty and disruption, one thing is clear: the days of stable and reliable global supply chain hubs at the heart of trade networks are over. These commercial hubs were an underrated goose. They have proven to be effective, efficient and reassuring. But the convenience of a centralized trading network overlooks the risk and fragility it inherently poses.

It was the hope this year that businesses and social activities could slowly return to some sort of normality. The pandemic has made a huge dent in economic activity and it has transformed the world as we know it, changed the way we live, challenged the status quo and shaken the traditional architecture of global trade and supply chains. supply.

In a report by the APEC Policy Support Unit (PSU), analysts presented two different views on global trade and supply chains under COVID-19. While it has withstood the pandemic relatively well, global trade is currently undergoing a profound reconfiguration to regain its rhythm.

“Global trade is conducted through a network of value chains,” explained PSU senior analyst Dr. Akhmad Bayhaqi. “Like a complex circulatory system, when value chains are functioning well, they rarely become the center of attention. However, since the start of the pandemic, supply chains have loomed large in people’s minds and decision makers.”

“Just in the early stages of the pandemic, global trade collapsed by almost 16%,” he added. “The outlook is concerning, especially without tangible measures to combat rising trade costs and facilitate complex supply chain networks.”

To put the narrative into perspective, Dr. Bayhaqi and his co-authors, Nguyen Thu Quynh and Emmanuel San Andres, reviewed the costs of trade within APEC over the past two decades. Between 2000 and 2018, the average APEC economy declined by 8.5%, from 129% to 118% in terms of ad valorem tariff equivalent. As global trade costs soared in 2009 and 2020, the APEC region has shown some resilience, with its trade costs rising more slowly than the world as a whole.

This could be attributed in part to APEC’s ongoing trade facilitation efforts – 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 other administrative procedures that hinder, delay or increase the cost of transporting goods across international borders.

“The cost of trade is a critical determinant of trade,” Dr. Bayhaqi said. “With global trade now dominated by trade in intermediate goods, lower trade costs could facilitate global supply chain participation and growth.”

Despite some resilience, trade costs in the APEC region remain at risk, especially with additional inflationary pressures. Keeping trade costs relatively low while continuing to facilitate supply chain networks to be more resilient is key to a robust economic recovery.

The first recommendation made in the report is to invest in trade facilitation reforms and facilities to address supply chain bottlenecks. Implementing trade facilitation measures under the WTO Trade Facilitation Agreement, streamlining trade processes and customs clearance requirements, improving access to transport infrastructure as well as facilitation of dynamic national logistics providers are some concrete actions to consider.

The second recommendation aimed at reducing trade costs and improving the resilience of supply chain networks aimed to prevent disruptions to the supply chain of essential products such as chemicals, medical supplies, protective equipment individual and medical equipment. Member economies may consider supporting supplier diversification; take steps to ensure a reliable and rules-based business environment; and creating a responsive regulatory environment. It becomes especially important for governments to help companies diversify their supplier portfolio in times of disruption.

The last recommendation of the Policy Support Unit is to strengthen regional coordination and cooperation when adopting economic policy. Relocating production, promoting self-sufficiency and dismantling trade integration may seem like the best options, but it can backfire and create unwanted spillovers into other economies.

“Ensuring transparency and predictability in trade policies will facilitate coordination and cooperation as it helps traders minimize costs and anticipate sudden policy changes,” Dr. Bayhaqi concluded.

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