Businesses saddled with Covid-19 risks this year will soon have to tackle a host of other headaches when the pandemic eventually fades, including a highly fraught debate over what’s fair — or not — in government subsidies.
That’s one of the global trade lessons from a panel of government and business experts hosted last week by Bloomberg and the Asia Society’s Australia chapter. Tariff wars were already roiling the world economy. Now everything from fiscal bailouts to food protectionism may draw scrutiny from institutions like the Geneva-based World Trade Organization that try to enforce rules against unfair public assistance in otherwise free global markets.
“That’s got a long way to go, particularly as countries re-evaluate what they’re doing in their own national interest” to support a particular airline, product, industry or type of manufacturing, said Michael Byrne, Australia’s international freight coordinator-general.
“There will have to be a different framework about what is deemed ‘compliant’ or not, and I think the political class will have to take a fair bit of time looking at that,” said Byrne, whose government-appointed role involves liaising with businesses to ensure the trade lanes remain as smooth as possible amid still-tight mobility restrictions.
Such questions around renewed nationalism exacerbated tensions between open and closed economies during the crisis, said Deborah Elms, founder and executive director of the Singapore-based Asian Trade Centre. That friction is set to worsen, forcing businesses to re-evaluate their supplier bases.
“The default will be: closer to home, regional agreements, bilateral agreements, where firms — if they’re smart — will start leveraging these opportunities,” she said.
Among the other supply-chain lessons the panelists outlined, for the pandemic era and beyond:
- Human relationships count. “The demand signals have been all over the place,” which has made rethinking supply chains hard to do, but having close relationships with all partners has helped, said Nick Mann, managing director of Australia and New Zealand for H&H Group. His business bought raw materials over finished goods this year, to see where demand settled and to better judge supply.
- Supercharge your digitization. Businesses already thrust into a digital revolution have to do more coming out of the pandemic, said Maggie Zhou, managing director of Australia and New Zealand for Alibaba Group. “You will better understand your consumer, and supply better for your consumer” as businesses cater to the digital audience. Alibaba is focusing more on what its 870 million mobile app users want, and making products in response.
- Be wary of the blockchain boom. In response to an audience question, Elms was skeptical that blockchain would catch on widely anytime soon. Governments would either have to approve such a system or at least allow it to happen. “They have no idea what you’re even talking about when you use the word ‘blockchain’ and they don’t understand how it would work, and they’re not convinced this is a good thing,” she said. Businesses are likely to be disappointed by how quickly this can happen, though trade financing or bank transactions between suppliers are likely to sprout first, and then regulation will follow, she said.
—Michelle Jamrisko in Singapore
Charted Territory
Bloomberg Economics scored 135 economies on their propensity to innovate and absorb existing technology, drawing on measures of institutional quality, IT infrastructure, the business climate and human capital. Advanced economies dominate, with Japan, the U.S. and Germany showing the greatest potential. Some emerging markets, including China, aren’t far behind, with Russia and Brazil also making it into the second quintile, while India and South Africa are in the third.
Today’s Must Reads
- No talking | The U.K. rebuffed the European Union’s effort to restart their deadlocked trade negotiations, holding out for more concessions from the bloc before it is prepared to restart talks.
- Sensitive subject | Support is growing within India’s government to start formal talks on a trade deal with Taiwan as both democracies see relations with China deteriorate.
- New wheels | Tesla will start exporting Model 3 cars made at its gigafactory outside of Shanghai to Europe starting this month, and will ship vehicles to more than 10 countries including France and Germany. Meanwhile, General Motors is expected to announce investments in several U.S. plants on Tuesday.
- Border barrier | Canada prolonged its ban on non-essential U.S. travel for another month in an effort to stop the spread of Covid-19, with both countries in the grips of a second wave. The EU plans to restrict visitors from Canada, Tunisia and Georgia, while reopening its doors to travelers from Singapore.
- Spare time | Swiss watch exports dropped for an eighth straight month, extending their decline as the industry becomes even more dependent on the Chinese market.
- Airborne again | The virus-ravaged airline industry reached a daily milestone in the U.S., carrying more than 1 million passengers for the first time in seven months.
On the Bloomberg Terminal
- Aussie tracker | Bloomberg Economics’ tracker of the Australian economy shows demand for public transport in most of the nation’s biggest cities rose in the past week, while consumption and spending climbed as virus-related restrictions ease.
- Try again | The Commerce Department must revisit and possibly lower duty rates on certain imports of steel pipe from South Korea, in part because of problems with how the department calculated the normal value of this merchandise, the U.S. Court of International Trade said.
- 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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