Global supply chain problems could drag on for “several months” as shipping companies struggle to bridge a “supply-demand mismatch” and counter a persistent shortage of containers, the head of the World Trade Organization has said.
Trillions of dollars of pandemic-related stimulus were feeding into a surge in consumer demand, said Ngozi Okonjo-Iweala, prompting businesses to hoard hard-to-come-by inventory.
“When I speak to some business people, there’s a bit of panic this year that their supply chain is going to be impacted,” the WTO director-general said in an interview at the FT Africa Summit.
Shipping companies had not anticipated the strength of the recovery, she added. “They cut down on the availability of containers, which were left in the wrong places, so now there’s a container shortage.”
As the festive season approached in many parts of the world, these difficulties were likely to persist, she said.
Differing rates of vaccination were compounding the problems, Okonjo-Iweala said, creating a two-tier global recovery as some economies roared back to life but others were left floundering.
Rich countries that have “vaccinated more than 50 per cent of their population and have implemented very strong fiscal stimulus of billions of dollars are on a better recovery path than the poorer countries who have no fiscal space and who also have very little access to vaccines”, she said.
“The fact that 60 per cent or more of people in many rich countries have been vaccinated versus slightly below 2 per cent in poor countries just gives you the rate of divergence.”
She added that there had been a failure of global leadership in ensuring that vaccines were more equitably distributed around the world.
“We have the technology to save lives and yet we can’t seem to get it to where it’s needed,” she said. Rich countries had pledged hundreds of millions of doses to poorer ones, but “they’re just not translating into distribution” to where they are needed.
However, Okonjo-Iweala played down concerns that a trade war between China and the US could lead to a decoupling of global trade that would damage growth. “When you listen to the rhetoric from both countries, we can have this decoupling, but the evidence we see on the ground with respect to trade does not support this decoupling theory,” she added.
Trade between the EU and China was strong, she said. “Statistics on merchandise trade between the big powers are very robust.” Even if they wanted to, countries would not be able to decouple as much as they might like. “It’s not so easy to unwind supply chains, they’re very complicated for many products.”
Okonjo-Iweala said the African Continental Free Trade Area, which comprises 54 countries and went into effect this year, had the power to transform the continent’s trade and industrial potential. Africa accounts for only about 4 per cent of global trade and most of its exports go outside of the continent in unprocessed form.
Although the free trade area would need significant improvements in regulatory frameworks as well as physical infrastructure between countries, she said, the creation of a single market of 1.3bn people had huge potential to reverse decades of deindustrialisation.