Supply Chain Disruptions Moving Countries, Firms to Adapt

Private sector and government leaders from around the world talked about what their firms are doing and how the World Trade Organization could be a forum for creating smoother flowing supply chains.

The three-panel event March 21, hosted by the WTO, also touched on the economic fallout from Russia sanctions. John Denton, secretary general of the International Chamber of Commerce, said the sanctions started affecting countries within three days, and that the unintended consequence was how it affected developing countries. He asked, "Did anyone seriously intend for banana makers in Ecuador to be affected?" But they are, they said, since Russia is an imported export market. He said Sri Lanka can't export tea to Russia now, and urea exports from Russia are being disrupted, which is already being felt in Brazil. Denton said there should be structural adjustment packages from the International Monetary Fund.

"If you want global solidarity, you need to be sure the economic incentives are there," Denton said, and noted that almost 25% of the countries in the United Nations abstained from a vote condemning the invasion of Ukraine.

WTO Director-General Ngozi Okonjo-Iweala also said the Ukraine war is affecting supply chains, but that even before the war, supply chain disruptions were fueling inflation and weighing on global trade. "Many problems … are the result of more goods moving across borders than ever before," she said. She acknowledged that the high shipping costs and delays are lasting "longer than we expected."

Mexico's Economy Secretary Luz Maria de la Mora said that Mexico's full implementation of the WTO trade facilitation plurilateral helped immensely in responding to the pandemic. She said Mexico's single Customs window has been "crucial to the resilience of the supply chain."

De la Mora said that Mexico has developed an appropriate infrastructure for e-commerce, and is working on diversifying its international suppliers. She said that Mexico has reached out to Chile, Peru and Colombia to work on strengthening regional supply chains.

She said that as part of the high-level economic dialogues with the U.S., Mexico has talked about its ambitions to become more of a player in the design of semiconductor chips, testing and advanced packaging. She noted that advanced packaging thus far has been concentrated in Asia. She said that Mexico would begin a similar dialogue with Canada. She said even after the accomplishment of the single window, they continue to work on Customs and border efficiency.

Flexport CEO Ryan Petersen said that efficiency could be better in the freight forwarding business, as he said that getting a pallet from the middle of Vietnam to the middle of the U.S. can involve "as many as 18 companies on a single transaction having to play some role." He said better data sharing among players could optimize routing, eliminate mistakes, and he said, eventually machine learning could lead to machines making the decisions of where freight should go. He questioned the logic of sending goods to Long Beach, when there's a three-week delay there, while there's only a five-day delay in Oakland.

Deputy Director-General Anabel Gonzalez closed the event by saying: "Supply chains have been very resilient, but they are under increasing strain. We don't know what the next shock will be, but it's clear from today's conversation that we need to equip our supply chains to deal better with growing threats. Making supply chains more resilient is not about trading less.

"We need to respond with bold and coordinated actions, not piecemeal tinkering," she said. She said the WTO is in a unique position to bring players together to work toward better trade facilitation. She promised, "You will hear more from us what we are planning."