Geneva DryVan AalstSailors SocietyTMS Awards 2023Bühler GmbHPort of South Louisiana
  • TBA Group
  • Bühler GmbH
  • Cimbria
  • Van Aalst
  • Sailors Society
  • Geneva Dry

WTO issues trade costs increase warning

WTO issues trade costs increase warning

(Posted on 17/08/20)

The World Trade Organization’s (WTO) Secretariat has published a new informational note warning of possible increases in trade costs resulting from disruptions precipitated by the COVID-19 pandemic.

The WTO report examines the pandemic’s impact on key components of trade costs, particularly those concerning trade policy, travel and transport, and uncertainty created by COVID-19.  It also identifies areas where higher costs may persist, even after the pandemic is contained.

The WTO report stated that trade policy barriers and regulatory differences are estimated to account for at least 10 per cent of trade costs in all sectors. These include tariff and non-tariff measures, temporary trade barriers, regulatory differences and the costs of crossing borders, as well as other policies that adversely affect trade, such as a lack of investment facilitation or of intellectual property protection. The report notes that while COVID-19 has motivated both trade-restricting and import-facilitating changes in tariffs and regulatory practices for products needed to combat the pandemic, these measures so far have affected only a small subset of products. A crisis-induced shift toward the digitalization of customs and regulatory procedures to reduce physical contact potentially could reduce the associated trade costs in the long-term, WTO stated.

The WTO report also cited the high levels of uncertainty as a factor that magnifies the impact of existing trade-related costs. This uncertainty results in financial contraction that exacts a “particularly heavy toll” on emerging and developing economies; and “suppresses the willingness of businesses to invest in researching new markets, acquire language skills and prospective partners, and conform with foreign standards,” it said.  The report noted that in the first quarter of 2020, a widely used measure for the global level of uncertainty registered levels 60 per cent greater than those triggered by the Iraq war and the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003. In mid-March, a separate index of financial market volatility came close to highs last seen in 2008 after the failure of Lehman Brothers and the ensuing collapse of financial markets, WTO said.

The WTO report estimated that travel and transport costs account for between 15 to 31 per cent of trade costs, depending upon the sector. Pandemic-related travel restrictions, therefore, are likely to affect trade costs for as long as they remain in place. For example, WTO found that global air cargo capacity shrank by 24.6 per cent in March 2020, as passenger flights account for around half of air cargo volumes. The resulting increase in air freight prices likely will subside only with a rebound in passenger traffic, according to the report. While sea and land transport have not faced comparable price shocks, maritime transport has experienced a decline in numbers of sailings, WTO said, while international land transport has been affected by border closures, sanitary measures and detours. Moreover, business travel, which WTO notes is important for maintaining trading relationships and managing global value chains, in addition to constituting a significant economic activity in its own right, is being disrupted. The quality of information and communications technology (ICT) infrastructure and digital preparedness will be important in determining how well economies can cope, WTO noted.

Looking ahead, the report said that many governments have implemented measures to mitigate pandemic-related disruptions to economic activity, for instance by exempting certain transport crews from travel restrictions, or by enhancing the quality of and the access to ICT. While many of the changes in trade costs can be expected to revert once the pandemic is brought under control, the report observed that some effects may persist. For example, aviation industry consolidation and changes in passengers’ willingness to fly could lead to higher air transport costs going forward. In addition, government policy choices – which either could reduce or increase trade policy uncertainty – will be important in shaping uncertainty-related trade costs in the future, WTO said.

Latest News

Africa’s opportunity to build sustainable logistics networks across mining sector

(Posted on 18/07/24)

Capt. Pappu Sastry, CEO of Adhira Shipping and Logistics (ASL) has said that Africa’s mining sector... Read more


Conditions on Simandou iron ore investment now satisfied

(Posted on 16/07/24)

All conditions have now been satisfied for Rio Tinto’s investment to develop the Simandou high... Read more


ADM offers segregated, traceable soybean meal to European customers

(Posted on 12/07/24)

ADM, a global leader in innovative solutions from nature, has announced that it is offering fully verified... Read more


Rio Tinto to install carbon free aluminium smelting cells

(Posted on 04/07/24)

Rio Tinto will install carbon free aluminium smelting cells at its Arvida smelter in Québec,... Read more


Moonbound appoints ASL for long-term South African lithium logistics project

(Posted on 28/06/24)

Moonbound Mining Ltd. has appointed Adhira Shipping and Logistics (ASL) as its logistics contractor... Read more


ADM and Bayer collaboration help farmers achieve lower carbon emissions

(Posted on 19/06/24)

 ADM and Bayer have announced an extension of their collaboration, working with farmers in a bid... Read more


US House appropriations bill includes reinstatement of NASS reports

(Posted on 14/06/24)

A House appropriations subcommittee in the USA has approved its Fiscal Year 2025 bill that includes... Read more


Rio Tinto to acquire Mitsubishi’s stake in Boyne aluminium smelter

(Posted on 14/06/24)

Rio Tinto has agreed to acquire Mitsubishi Corporation’s 11.65% interest in Boyne Smelters Ltd... Read more


Richards Bay Minerals’ renewable energy agreement

(Posted on 07/06/24)

Richards Bay Minerals (RBM) has signed a renewable power purchase agreement (PPA) with Khangela Emoyeni... Read more


Trafigura half year result show core business strength

(Posted on 07/06/24)

Trafigura Group Pte Ltd, a market leader in the global commodities industry, has released its 2024 Half... Read more


ViganTelestackPort of StocktonCimbriaTBA Group
  • Port of Stockton
  • Vigan
  • Telestack

Subscribe to our newsletter

Keep up to date with the latest global news in bulk cargo handling and shipping