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Kinks in the world’s supply chains may last through this year or even into next year, Ngozi Okonjo-Iweala, director-general of the World Trade Organization (WTO), said in a 1 February Paris speech.
“We thought supply chain disruptions would be temporary,” Okonjo-Iweala said. “We still think that, but they are taking longer to resolve than we expected; maybe by the end of this year or maybe into next year.”
Of special concern: poor countries with small export and import industries could be priced out of the global market as freight costs continue to increase and freight companies give priority to high-volume customers.
Next month, the WTO will convene a meeting of business executives, government officials, and trade experts to strategize ways to get freight moving more quickly, she said.
Last October, Okonjo-Iweala told the Financial Times that logistics kinks would last “several months;” in November, she called the tangles “transitory” and said they would clear before 2023.
Then the Omicron variant appeared.
Now the virus is subsiding and “demand for goods should come down, especially with inflationary pressures and the winding down of support from fiscal measures” related to the COVID War, she predicted.
“Shipping companies are making unprecedented profits and some are investing in capacity,” she noted.
However, structural problems continue to plague the global movement of goods, she added, citing red tape and capacity constraints at U.S. west coast ports.
A pre-COVID supply chain “is unlikely to happen in 2022,” Phil Levy, chief economist at freight forwarder Flexport, told The New York Times. “My crystal ball gets murky further out.”
TREND FORECAST: The word “transitory” now has the same credibility as “the check’s in the mail:” it has been abused to the point of becoming meaningless.
Yes, supply-line blocks will dissolve and prove to be “transitory,” in the sense that they will not be permanent. However, they will take months yet to untangle in any significant way. And if military conflict in the Middle East and Eastern Europe escalates, so too will supply chain problems worsen.
The permanent positive change most likely to result from the supply chain disruption, as we have forecast as one our top trends for 2021 is Self-Sufficiency (“Self-Sufficient Economy” Top Trends of 2022, 30 Nov 2021).
China is doing it with its dual circulation policy and nations that have the human and natural resources to be self-sufficient will have the strongest economies of the 21st century.