News / More-diversified supply chains the quickest road to re-globalisation

© Andrii Symonenko |

Post-pandemic “re-globalisation” can only happen with more-diversified supply chains – if world trade is to avoid fragmenting into two competing blocs.

Senior economist at the World Trade Organisation Coleman Nee told delegates at the World Cargo Summit in Abu Dhabi last week the world was facing a choice on how it rebuilds following Covid.

“Re-globalisation requires re-engaging and thinking differently about the supply chains we want, and this means diversifying and embracing countries left out before,” he said.

“The alternative is fragmentation of the globalised supply chain model into two competing trade blocs, which will only serve to slow the rate of GDP growth and prolong the economic problems we are contending with.”

Mr Nee urged greater inclusion of developing countries, which he considered “a fundamental driver for any hopes of long-term economic growth”. And while he welcomed moves towards near-shoring, he also urged restraint.

“Near-shoring is about reducing volatility, but it can also create its own risks if companies consider it as an alternative to global chains, putting all their eggs in one basket,” he explained.

Trade facilitation officer at the International Trade Center Alina Fetisova noted that today, for each $1 it cost to make a product, it cost developing countries a further $2.19 to ship it.

“Take Kenya,” she explained. “It took more than 60 steps to export coffee, but by re-engineering processes and procedures you reduce delays, with each day saved equating to 1% of value.

“This was something we were able to assist with, by helping re-engineer cross-border procedures by reducing the number of documents and processes required to move goods. Time delays reduce trade flows more significantly than tariffs.”

Ms Fetisova urged industry to better engage governments in alleviating the hurdles faced by businesses in developing countries. She said this included development of national facilitation committees that would “allow for different actors to participate in the act of policymaking”.

She added: “SMEs account for 60% of the workforce, and 40% of those are owned by women. We need to see regulation reformulated to reflect the reality of the market. And this can only be achieved through genuine democracy encouraging the buy-in of those that have been historically excluded. Transport and logistics have been male-dominated so we also need programmes to get those running SMEs into leadership positions.”

Mr Nee said he believed the outlook for the global economy was steadily improving and, despite the effects of the invasion of Ukraine, inflation was coming down, adding: “The situation is far less negative now than it was towards the end of 2022.”

The Global Purchasing Manager’s Index may be at its lowest level since 2009, he said, but delivery times were back to pre-pandemic levels as supply chain issues were being resolved. Central banks needed to act to address areas of core inflation, such as food and fuel, he added.