Europe runs enormous trade surpluses with the rest of the world so is not well placed to set the terms of trade with its customers. Nonetheless, various European politicians large and small have been ruminating on the future of trade policy after the crisis of COVID-19. The latest has been the EU trade commissioner Philip Hogan, who has told the Financial Times newspaper that “strategic autonomy does not mean that we should aim for self-sufficiency…given the complexity of supply chains to the European Union, this would be an unattainable goal…we have to look at how to build resilience based on how we can diversify, not be totally reliant on one geographical entity for supplies of everything”.
The background to this statement was squabbling with the EU bureaucracy about trade policy. Thierry Breton, ‘Internal Market Commissioner’ has been making strong statements about “Europe having gone too far in globalisation” which may not be too surprising for a French politician. However, this was followed up by the president of the EU, Ursula von der Leyen, talking about “investing in strategic value chains”. Even the cautious German Chancellor, Angela Merkel, has been talking about “pillars of domestic production”.
All this suggests that there will be an attempt to change trade policy emerging from the continental European States, although it is unclear how this will not backfire on a country such as Germany which depends on exports.
Yet for all the chatter emerging from Berlin, Paris or Brussels, the economy that really matters in issues of trade is the US. Not only because of the size of its economy but also because of the size of its trade deficit. American politicians have made less specific statements about trade policy recently but have been loud in their demands that China should pay some sort of price for its perceived role in the outbreak of COVID-19.
All of this points to continuing pressure for change in both supply chain management policy and for logistics markets. Whilst there is a great deal of uninformed noise around issues such as JIT, the position of China in the global trading system is clearly now an issue that cannot be ignored by either supply chain managers or logistics service providers.
For more than twenty years China has been at the centre of both the supply chains of a number of sectors and pivotal to the global shipping and air freight markets. This may be beginning to change.
Source: Transport Intelligence, April 23, 2020
Author: Thomas Cullen