Supply Lines: Travel bans’ trade toll

Supply Lines
Bloomberg

The collapse in global goods trade is casting a long shadow over prospects for the world economy. Restrictions on the movement of people are also having a punishing impact on jobs and firms —  despite teleconferencing.

The barriers for jet-setting workers that sprung up with the outbreak of the coronavirus pandemic have tended to remain in place, even as national lockdown measures have eased. As countries implement quarantines on arrivals from some countries, that's also hitting business travel.

In a scenario where a country shuts out passengers while still allowing freight, restrictions could raise the cost of service trade by 8% to 16%, according to the OECD.

"This can wipe the profit of some businesses and lead them to reconsider their projects involving trade,'' OECD Chief Economist Laurence Boone said. "Without this business, in some cases firms or activities may need to close, and that could trigger job losses."

As she presented the OECD's updated economic outlook, Boone also had a word of warning for countries looking to repatriate production: global supply chains might not be the problem.

In the case of face masks to protect against the spread of the virus, Boone said the shortages were due to a surge in demand that outweighed the global capacity to supply — not because of supply chains malfunctioning. Instead of reshoring, she urged countries to diversify their sourcing and reevaluate the level of stocks.

"The more you put up barriers to trade, the more you demand visas, licenses and complex and unjustified regulations, the more difficult you make trade complex and the more some firms will say this business isn't worth it," Boone said.

William Horobin in Paris

Charted Territory

Global trade has staged a comeback, but a lot needs to go right to keep up the momentum for a sustainable and broader economic recovery. All 10 gauges on the Bloomberg Trade Tracker fit in their "normal" ranges in early September. 

Today's Must Reads

  • Warning bells | Democratic presidential nominee Joe Biden said a U.K.-U.S. trade agreement depends on the continued respect for the Northern Ireland peace process, a warning to Boris Johnson as he moves to break international law over Brexit.
  • Chip ahoy | The U.S. chip industry said as much as $50 billion in federal incentives will be needed to halt a decades-long trend of manufacturing moving overseas as China spends heavily to become a leading semiconductor producer.

  • Mutual distrust | Two-way investment between the U.S. and China slumped to the lowest in almost nine years during the first half of 2020 as relations between the world's biggest two economies deteriorated.

  • Port problem | August may have been a record month on many fronts for the port of Los Angeles as volumes recover from the initial shock of the Covid-19 pandemic, but the long-term trends at the U.S.'s busiest container hub show the nation's trade imbalances have deepened, its executive director said.

  • Sweet and sour | Australia's food exporters are facing a challenging year, with the value of shipments set to drop by 10%, as the country grapples with souring Chinese ties, shrinking meat sales and a virus-driven downturn in demand.
  • Singapore boost | Singapore's export growth quickened in August, buoyed by rising demand from China and a pickup in key electronic shipments. 
  • Economic shield | As countries around the world struggle to shelter their economies from the effects of Covid-19, Taiwan is seeing the opposite as firms shift some of their manufacturing back home from China, as well as increased demand for its products from the U.S.

On the Bloomberg Terminal

  • Taking stock | Warehouse demand is sufficiently strong, aided by a Covid-19-driven jump in online shopping, to extend rent growth for industrial REITs — even with the growing threat of department stores being turned into fulfillment centers, Bloomberg Intelligence says.
  • Ban U-turn | The Department of Commerce and the USDA were hit with a Freedom of Information Act suit Wednesday seeking records of communications with Thailand before that country reversed its plan to ban glyphosate and other pesticides, Bloomberg Law writes.
  • Use the AHOY function to track global commodities trade flows.
  • Click HERE for automated stories about supply chains.
  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
  • Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.

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