In the past year, global trade has rapidly gained momentum. According to the World Trade Organization (WTO), “the resurgence of global economic activity in the first half of 2021 lifted merchandise trade above its pre-pandemic peak.” As a result, WTO economists have upgraded their international trade predictions for this year and next.
There is little doubt that business leaders will remember 2021 through the lens of the pandemic and its persistent effects. They will recall slowdowns in manufacturing, along with rapid shifts in consumer demand and the resulting supply chain disruptions and delays that are with us today. But they will also view it as a defining year for global e-commerce, and one marked by strong cross-border B2C and B2B demand.
What does 2022 have in store? Let’s take a closer look:
Supply Chain Challenges
Making global trade work in 2022 will be especially important for small and medium-sized enterprises (SMEs) that seek new customers to grow and thrive. According to the Office of the U.S. Trade Representative, “small businesses which export grow faster, add jobs faster, and pay higher wages, accounting for 98 percent of all identified U.S. exporters and supporting nearly four million jobs in communities across America through both direct and indirect exports.”
One of the biggest challenges for SMEs in the next year will be the continuing strain on global supply chains, as well as the continuing uncertainty posed by COVID-19. Even now, many manufacturers are still recovering from operational shutdowns, labor market shifts, and interruptions caused by the pandemic. At the same time, a resurgence in global demand has created transportation bottlenecks, including a shortage in shipping containers and truck chassis, for instance. In 2022, some of these pandemic-related challenges will likely be addressed, such as the cost of moving freight over the ocean, but with COVID-19 variants expected for example, uncertainty will remain a central part of the equation.
In fact, supply chains were already facing significant challenges before COVID-19 arrived, and consumer buying habits have likely shifted permanently, putting e-commerce into overdrive and changing the degree and nature of global shipping demands. In the coming year, it is expected that policymakers in countries around the world will move to address supply chain issues in a significant way. In the U.S., for instance, many bipartisan legislative proposals have been introduced in Congress in an effort to study supply chain challenges, help manage disruptions, and promote resiliency. In Europe, business experts are warning that supply chain disruptions will continue to be significant in 2022, and EU policymakers are seeking ways to assist, including measures to secure Europe’s supply of semiconductor microchips.
Your company would be well-advised to closely monitor new legislative and regulatory proposals and assess their potential impact.
Key Trade Sectors for 2022
During the pandemic, medical and health supplies have constituted a reliably important sector for global trade. Initiatives to simplify trade rules and customs processes in order to ensure effective transport of medicine and equipment – along with complex logistics strategies and investments in cold-storage to move vaccine doses quickly across borders – have demonstrated the importance of commitment by governments to policies that promote trade facilitation. At DHL, we have been on the front lines in these efforts, delivering more than 1 billion COVID-19 vaccine doses to more than 160 countries since December 2020, and our commitment to the global vaccination effort won’t stop there.
Moving forward in 2022, medical countermeasures and supplies will remain a robust area for global trade. At the same time, trade facilitation itself will continue to be a focal point for logistics leaders, policymakers and customs officials. Expect to see the continued move to paperless trading, automation, trusted trader programs, and other mechanisms that remove barriers and boost speed through customs.
In addition, businesses should expect an increasing focus on sustainability and the environment in trade and logistics next year. Growing concerns about climate change and consumer interest in sustainable business practices mean that your company must consider the environmental impact of your global trade and supply chain strategies. In fact, for most organizations, embracing green logistics practices like those pioneered by DHL, represents the most direct route to establishing a broader sustainability commitment.
2022 should also see more attention to trade issues specifically related to SMEs. The United States-Mexico-Canada Agreement (USMCA), enacted in 2020, was the first free trade agreement to put the interests of smaller companies front and center with dedicated provisions designed for their needs. The pandemic has put a spotlight on trade, and many small businesses in North America will need to re-examine how they can take advantage of USMCA provisions and other measures designed to boost SME participation in regional and global trade.
Assessing U.S. Trade Policy
Business leaders are actively trying to predict how continued trade frictions between the U.S. and China will play out. The Biden Administration to date has kept existing tariffs on Chinese goods in place, and offered little indication of a significant policy shift on the part of the U.S. Instead, the Administration has framed out a “new approach” to the bilateral economic relationship. Under this strategy, detailed by USTR Ambassador Katherine Tai, the U.S. will place a larger focus on collaborating with allies and partners, review existing tariffs, enforce the terms of the “Phase One” deal, and address other Chinese policies and practices not covered by the “Phase One” deal. Companies with trade interests in China should closely monitor developments.
For 2022, there is still no clear sign of the U.S. moving to begin negotiations on comprehensive free trade agreements with new trading partners. Existing trade negotiations between the U.S. and the UK and the U.S. and Kenya remain on hold for the time being. With the EU, a recent announcement regarding large civilian aircraft subsidies and steel and aluminum tariffs has eased trade tensions and opened the door to additional collaboration on a variety of policy fronts.
Finally, the Biden Administration has suggested that additional tariff relief from the prior Administration’s policies might be forthcoming in addition to the pursuit of more narrow trade agreements – possibly focused on digital trade – with like-minded partners. The U.S. has indicated that while it still does not intend to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), it will instead seek a new framework for trade in the Asia-Pacific region.
How is your company preparing for global trade in 2022? Let us know on Twitter at @DHLUS.