The true impact of the novel coronavirus on world trade is far from a uniform matter. This briefing looks primarily at the implications for goods trade, where data is more readily available at this stage. A further factsheet will be published shortly containing advice and guidelines for services traders.
For services trade, value chains that depend on face-to-face interaction have unsurprisingly been disrupted significantly, with some service providers in certain sectors able to replicate these interactions in a remote setting thanks to technology in light of the currently extensive travel restrictions worldwide. However, heavily regulated professions in the services sector(s) such as financial services are lagging somewhat behind in their ability to completely duplicate their international activities in the virtual world.
With statistics showing that global air freight traffic fell 10% in February, and projections for the year showing an overall drop of 15%-20%, this has had implications for the cost of commercial freight being transported by air. As airlines all but shut down to passenger traffic, cargo aircraft is continuing apace, but capacity is still being affected due to the many commercial jetliners normally carrying passengers as well as cargo now operating at 10% capacity or lower.
This is having an impact on the cost of air freight for some routes, with cargo rates for routes from China to the UK up to $8 per kilogram. Unfortunately, not many airlines are making exceptions in raising their air freight rates for supplies and stocks that rapidly need replenishing – not even for medical equipment, an issue the IoD will be raising with the government here. In addition, logistics providers and those expecting deliveries into the UK should be aware that many cargo rates are only being quoted once shipments are entirely ready for transportation, as opposed to pre-emptive quotes.
Some airlines are attempting to turn empty passenger flights into cargo-only “makeshift freighters” (Cathay Pacific, Singapore, Korea Air and Delta among others), though have had to jump through some hoops to do so. For example, the EU only recently relaxed rules governing slots to minimise the potential for “ghost flights” – those being run with little to nothing on board for the sole purpose of retaining slots. Businesses relying on air freight wanting more updates and to see a full list of airline options should check www.theloadstar.com for up to date news.
For some time, even with Italy on full lockdown for the past few weeks, road freight was generally working as normal well into the first week or two of March. However, with more and more individual EU countries both putting full border controls in place as well as implementing export restrictions for certain products, the picture for road freight is now more mixed. While there has been a spike in demand for many essential goods (as well non-essentials such as ICT equipment owing to the soaring number of people moving to work and conduct business operations remotely), demand has dropped for many other items particularly with shutdowns of normal business and production activity across Europe. The cancellation of an untold number of events, concerts, tours etc. has driven much of the decreased demand. But panic-buying is meanwhile creating artificial peaks, with many manufacturers in the essential good space working to supply retailers and volumes that far outstrip the busy Christmas period. Planning ahead is more essential than ever for businesses importing and exporting – particularly with respect to Europe.
Whereas the now-closed border between the USA and Canada has seen commercial freight pass through still relatively freely, restrictions on travel across the continent are starting to have an impact, including and especially at the EU’s external frontiers (in particular with Turkey). While border control authorities across Europe are not in the first instance trying to generally increase freight inspections, travel restrictions are impacting the ease with which road haulage drivers can operate as normal.
Even the internal EU border between Poland and Germany has been significantly tightened, as have the Austrian and Hungarian borders. The European Commission has recently issued guidelines to EU member states (and the UK while it remains in the Brexit transition period), a so-called “green lanes” policy, in an attempt to minimise further future congestion. Drivers are also facing restrictions in being able to get out of their vehicles, slowing down processes at some of the internal crossing border points. Some are being forced to quarantine as well, delaying the process even further. Further below you will find links to both the EU guidelines, and a realtime border crossing times across Europe. The latter is particularly important, because at the moment, the EU Commission is only urging national governments to respect these – enforcement may be constrained by the EU’s limited exclusive powers in transport policy.
UK ports are busier than ever, although the draft coronavirus bill currently passing through Parliament does make a provision for UK Border Force to halt imports if staffing levels for border security are significantly affected by the pandemic. However, importers and exporters integrated into wider continental European supply chains should ensure they are working with logistics provider to anticipate delays that may reverberate down from internal EU delays.
EU Commission border management guidelines
Border crossing times across Europe – Realtime
**A further factsheet will be shortly published with a full list of trade and travel restrictions across Europe**
Allie Renison, Head of EU & Trade Policy
Allie Renison is Head of EU and Trade Policy, and leads on devising recommendations and representing the voice of members on EU policy matters both to Westminster and Whitehall and with European institutions. She provides the link between business and Government on increasing international trade and has authored a number of reports on trends in both trade and trade policy, as well as running a number of trade missions for IoD members around the world every year. She also routinely provides advocacy for the IoD on a range of regulatory issues in Brussels.
Allie joined the IoD in April 2014. Prior to this, she was Research Director at Business for Britain, the campaign focused on renegotiating the UK's relationship with the EU. Allie has previously advised a number of parliamentarians in both Houses on EU legislative issues, with particular focus on trade and employment policy areas. She holds a Masters Degree in the political economy of emerging economies in the post-Soviet space.