The COVID-19 pandemic caused various shifts in the already ever-changing and volatile international trade, spurring companies to seriously rethink their global trade management strategies. Aside from dealing with the current impact and implications of the health crisis for their foreign trade processes, businesses should also fortify their enterprise for the aftermath of the pandemic. This requires knowing what lies ahead and what measures can proactively be implemented to thrive during the pandemic and beyond.
Here are the top post-Covid foreign trade challenges businesses should prime themselves for.
- Global value chain reconfiguration.
- China has been a major player in the global value chain, and this is why the outbreak in Wuhan — where the virus has allegedly originated — has dramatically changed the game. Back-shoring, nearshoring, and regionalization have become a major discussion in the global arena. Many global companies had to consider having both local and international suppliers just to ensure resiliency and reliability
- Although some experts say that regionalization will not happen overnight or might take a decade to materialize, this gradual shift will still have a direct and indirect impact on companies playing in the international arena. To minimize the impact of the global restructuring, companies need to be steps ahead and start innovating their processes to prime the entire enterprise for this foreign trade shift.
- Logistics and transportation disruptions.
- During the pandemic, the container shipping sector was “severely affected” by social restrictions and lockdowns. Ports became more congested due to stricter health protocols and reduced manpower, leading to costly delays. Shipping intermediaries such as logistics providers and freight forwarders also suffered reduced business hours.
- Experts, however, say that post-Covid, airlines will increase dedicated air cargo capacity to help address the problem. But heightened cargo inspections and cross-border control protocols will remain a bottleneck going forward. Global players that wish to minimize its impact on their company need to optimize cargo visibility, transparency, and traceability to help streamline the process and curb the risk for costly delays.
- New trade restrictions and agreements.
- According to the World Bank, “COVID-19 has spawned new trade restrictions and threatens to widen old trade divisions.” Modern trade agreements (deep trade agreements) will cover not merely trade but also a range of policy areas — including protection of the environment and intellectual property rights.
- Export bans due to safety concerns could become a long-term challenge as well, particularly on food exports. According to APEC, “the food security situation is stronger now compared to the 2007–2008 global food crisis.”
- Companies that trade globally should be fully aware of these new trade agreements and restrictions (both country- and industry-specific as well as international) to avoid compliance and other risks that can affect the entire business. Automation and standardization of global trade compliance, document creation and filing, and other foreign trade processes can help companies ensure they are always on the right track.
- New sustainability issues.
- Experts foresee that in the near term, nations will implement their individual emissions pricing systems according to their border adjustment mechanisms. A lack of consensus among nations will result in “differently designed CBAMs” or emissions pricing systems that vary from country to country, requiring global players to conscientiously comply with each pricing system imposed by the countries they transact with. Aside from the complexity, this change could also hamper businesses’ efforts to mitigate climate change.
- Finding the right balance between sustainability, cost, and customer experience has never been easy. But armed with new-age foreign trade solutions, companies can at least minimize the impact of issues such as this.
- Digital trade implications.
- As more and more forward-thinking companies are leaning toward adopting digital trade, new foreign trade issues that could lead to diplomatic friction arise. This includes data privacy, integrity, and transparency issues. Experts suggest that new-generation trade agreements should include rules governing data processing to avoid compromise of online sales of goods and services.
- At the enterprise level, companies can help address the issue by automating and standardizing data processing and document management to avoid manual procedures that often lead to data privacy, integrity, and transparency issues.
Successfully Navigate Post-Covid Foreign Trade Challenges
To avoid unnecessary costs and risks due to changes in the foreign trade arena, companies should look to industry experts who can help them implement new-age solutions. At Ropaar, we have helped various companies from across different industries to prime their enterprise for the next normal. We helped them assess their unique landscape and implement cutting-edge SAP global trade solutions to help them execute in the new normal.
By leveraging Ropaar’s years of experience in foreign trade, you can be confident that your organization can overcome current and future global trade challenges. Contact us to learn more about our solutions and services.