While some are saying the disruption of COVID-19 is going to convince businesses to turn away from just-in-time approaches (see 2005190050), the chief economist at Flexport thinks those predictions are overblown. “Resiliency is a great thing if you can achieve it. The question is, at what cost,” Phil Levy said. Just-in-time inventory management “came from cost pressures. Businesses were facing cost pressures. I don’t think those pressures are going to abate.”
Even as UPS officials warned traders that the date of entry into force for the U.S.-Mexico-Canada Agreement will not be postponed because of the COVID-19 pandemic responses, they said all the details needed to comply won't be ready by July 1. Penny Naas, senior vice president for international public affairs at UPS, said it's not just the auto rules of origin that are “going to be provisional” in USMCA. She said that government officials will still be working on some other areas after it goes into effect. The global shipping company is in close contact with the Office of the U.S. Trade Representative.
The complexity of the auto rules of origin in both NAFTA and the U.S.-Mexico-Canada Agreement are the result of what one observer calls the "political preoccupation" with retaining domestic auto manufacturing. Eric Miller, president of Rideau Potomac Strategy Group, noted that in NAFTA, that resulted in the tracing list, and in USMCA, that resulted in the labor value content and higher North American value targets, including for specific parts.
Countries should be coordinating how drugs will be distributed once they are proven to work, drug industry representatives say. Senior officials at the trade group for biologic drugs and the trade group for generics, along with the head of Pfizer's global trade policy, were speaking on a Washington International Trade Association webinar May 14 about the global supply chain for pharmaceuticals and the search for a COVID-19 cure.
Incentives are strong for China and the U.S. to retain the phase one trade deal, an economist at S&P Global wrote May 14, in a report called “U.S. and China Kick Trade Deal Can Down The Road.” While the report's author said it's possible the Trump administration would hike tariffs on China to punish that country for COVID-19, “we have long thought that, from an economic perspective, technology not trade is the core issue in the U.S.-China relationship. Technology has been and will continue to be the key driver of growth in China. It is at the heart of intellectual property, market access, and level playing field debates.” Chief Economist Shaun Roche said the two countries are on a path toward technological decoupling, no matter how the purchases shake out that are promised in the phase one deal.
Dockworkers' strikes, hurricanes and the trade war have all been major problems for importers and exporters at various points in the last 20 years, but the impact of COVID-19 dwarfs them all, panelists and listeners said on a webinar during the National Association of Foreign-Trade Zones virtual conference May 13.
The value of global trade next quarter is projected to fall 27% compared with the second quarter of 2019, according to a new report coordinated by the United Nations Conference on Trade and Development. The UN was joined by the International Monetary Fund, the European Central Bank, the Organization for Economic Cooperation and Development, the World Trade Organization and the World Bank, among others, to produce the report. Some of that projected drop is due to lower volume of goods, and some of it is due to the price of oil plummeting. The report also found that almost half of international mail is stranded, and that customs clearance times for small packages is taking 32 times as long -- jumping from an average of two hours to 64 hours. The report attributed the slowing of clearance to “availability of labor.”
Trade groups that have been active in pushing for different intellectual property approaches in India have formed a new coalition called the Alliance for Trade Enforcement, they announced May 13. Brian Pomper, a former Senate Finance Committee chief trade counsel, is the AFTE executive director. The group includes manufacturing trade groups, pharmaceutical interests, software and telecom interests, and the National Foreign Trade Council and U.S. Council for International Business. They noted that the Special 301 Report recently released by the Office of the U.S. Trade Representative identified 33 countries that don't adequately protect IP rights, and said “many of those countries are repeat offenders.” Pomper said AFTE will work with the administration and Congress to dismantle trade barriers such as high tariffs, complex and opaque taxes targeting imports, and laws that do not give intellectual property the protection that USTR says is proper.
While the U.S.-Mexico-Canada Agreement allows importers to certify goods as deserving tariff benefits -- not just producers or exporters -- KPMG warned webcast listeners that if the importer and producer aren't related parties, it could be a mistake. Andrew Doornaert told listeners on May 11, “It would be a risk if you’re just relying on the exporter’s old NAFTA certificate.”
Imports at major U.S. retail container ports are expected to decline by double digits this spring and summer “as the economic effects of the coronavirus pandemic continue,” the National Retail Federation said May 8. Factories in China are “largely back online” and stores that closed in the U.S. are starting to reopen, “but volume is far lower than what we would see in a ‘normal’ year,” NRF said. “Shoppers will come back and there is still a need for essential items, but the economic recovery will be gradual and retailers will adjust the amount of merchandise they import to meet demand.” U.S. ports handled 1.37 million 20-foot-long cargo containers or their equivalents in March, down 14.8% from a year earlier and the lowest monthly volume in four years, NRF said. It’s estimating April was down 13.4% from a year ago, and that the monthly declines will average nearly 16% through September.