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The Future of Global Supply Chains: What are the Implications for International Trade?

LenaH February 25, 2021

We live in a hyper-connected world where the majority of the world’s regions are no longer self-sufficient. This is mostly because they can rely on global trade to provide them with goods that aren’t cost-effectively manufactured in their own respective regions. However, in moments like these, when things start going south, it’s quite easy to see the downsides of this system. Now, in order to revert back to the self-sufficient system for each region would be quite a lengthy and costly process; not to mention that it would be quite regressive in the long-run. So, the only thing remaining is to make the global supply chain more resilient, thus also changing the global trade.

The trade paths will shift

One of the biggest issues regarding international trade in the nearest future lies in the fact that the global supply chains might shift quite drastically. Even when the world finally recovers (in terms of total global trade value), the supply chain definitely won’t be rerouted in the same way like before. For instance, the US-China and EU-China trade is expected to drop in volume. On the other hand, the Southeast Asia region is expected to be the biggest winner of this power shift. All in all, this will cause all sorts of logistical shifts that will affect the rest of the globe, as well.

When can recovery be expected?

In order to understand when can recovery is expected, we need to start by defining the recovery itself. You see, the value of global trade in 2019 was at $18 trillion. At the moment, the projections indicate that global trade may reach these figures once again by the year 2023. This is a significant time-frame but it is also not a set date. There are so many things that can go right or wrong by that time, which is why one should always be careful when making these estimates.

The logistics

The logistics of international trade may be completely changed, as well. First of all, it’s important to mention that the current COVID-19 pandemic caused a long list of strict rules and regulations. These rules are meant to prevent the spread from areas with higher infection rates to places of lower infection rates. It is also there to protect the workforce in the logistics industry, which is not nearly as simple as it sounds (in these trying times). This is why more and more companies will increase criteria when looking for 3PL partners. This is relatively high on the general priority list and it is not something to be downplayed or underestimated.

Carbon emission

Regardless of the global pandemic, one of the biggest concerns for the global transportation industry (and the freighting industry as its integral part) is the carbon emission caused by it. Now, there are a lot of reports about the pollution levels dropping due to lockdowns, curfews and overall drop in traffic in urban areas. Alas, this is just not enough to single-handedly fix this problem. This is why, in the nearest future, new rules and regulations are expected in order to fix the problem. How this will affect global trade remains to be seen.

Technology to the rescue

Another thing that should always be taken into consideration is the importance of technology in this field. For instance, global trade has greatly advanced thanks to things like Internet-of-Things (IoT), blockchain technology and all sorts of analytical data. A lot of analysts and experts underestimate these methods, seeing as how they failed to make global trade even more resilient. Still, what would have happened if this crisis occurred in a world prior to these technologies?

The circulation of money

One of the biggest problems you need to understand is that the money keeps circulating. Those who produce the goods need someone to sell these goods to and those who need the goods will always look for the supplier. For instance, while it is expected that the number of goods sold by China to the US to drops, it is quite likely that China will increase its export to developing countries. This way, while the global supply streams may be redirected, the amount of traded goods and money in circulation might remain virtually unphased by these events.

In conclusion

In the end, the key thing worth keeping in mind is that these supply chains need to function in order for our society to keep working properly. In other words, it’s one aspect of today’s world that simply can’t fail. This means that the necessary adjustments will be made in order for these chains to keep operating. Whether or not every region/country and company will be able to adjust and embrace these changes in time is something else entirely.

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