Getting goods across borders in times of COVID-19
Abstract
This note updates Trade facilitation and the COVID-19 pandemic from April 2020 with insights into the evolution of new border protocols and trade facilitation measures impacting traders since COVID-19 and exploring what more can be done to prepare for the next stages of the pandemic as uncertainty persists. It highlights the importance of transparency and availability of timely trade-related information in mapping bottlenecks and risks, as well as the importance of trade facilitation measures in supporting business recovery and resilience across different goods sectors. Finally, it provides some preliminary insights for trade facilitation with respect to the distribution of vaccines.
As a result of COVID-19, disruptions in cross-border trade have led to a “new world” of trade costs. These include new protocols, additional border controls, and new documentation requirements for shippers and traders. Impacts vary by product, firm size, trade route, mode of transport, and region, affecting the functioning of supply chains in uneven ways across countries and sectors.
At the same time, trade facilitation measures taken at the border have made it possible for supply chains to continue to deliver — by early May 2020, the number of COVID-19-related trade facilitating measures outweighed the new, potentially cost increasing, protocols. Further streamlining of border procedures can also be key for helping economies with the next phases of the COVID-19 pandemic including the global production and distribution of a vaccine.
Digitalisation was key in supporting the many efforts made to facilitate trade during the COVID-19 crisis. Trade facilitating measures included designing “green lanes” for streamlining border controls or exchanging specific trade documents electronically.
More can be done to prepare for the next phases of the pandemic, including by focusing on border procedures for goods that will be needed in manufacturing potential vaccine(s). As uncertainty persists, economies can get a head start by beginning to map trade facilitation measures and regulations needed for the distribution of a potential vaccine and of the inputs it would take to produce it, as well as the coordination of these efforts.
Cross-border co-operation and co-ordination with business can be key for finding the best balance between agility and risk management at the border. When shocks hit, co-ordinated early-warning systems across border posts can alert traders and shippers, allowing them to adjust routes in real-time and effectively prevent supply chain blockages. Economies need to further engage private sector stakeholders in the design of trade facilitation solutions that can best be mobilised when needed to act under pressure and time constraints.
Trade facilitation has helped mitigate disruptions since the start of COVID-19
Transparency highlighted bottlenecks and good practices in streamlining border processes early on
Initiatives to collect and disseminate information on both bottlenecks and good practices at borders (Box 1) have contributed to the smooth functioning of value chain operations during the COVID-19 pandemic.
Information published by governments, international and regional organisations, as well as shippers, highlighted that customs and other border agencies have been reactive in implementing specific actions to facilitate cross-border trade during the crisis. Their actions mainly concerned areas of information availability, simplifying documentation requirements, and streamlining processes and clearance. By early May 2020, new trade facilitating administrative measures at borders outnumbered the new potentially cost increasing protocols that had sometimes been introduced in the early stages of the pandemic (Figure 1).
Information gathering and dissemination enabled governments to react more quickly and implement trade facilitating measures. These included measures like designing “green lanes” for streamlining border controls or employing digital tools for the streamlining of documentary requirements as in the case of electronic sanitary and phytosanitary (SPS) certificates (OECD, 2020[1]).
Note: The information covers COVID-19-specific border measures in 125 jurisdictions across all regions (32 OECD economies, other 9 G20 members and other 84 jurisdictions outside the OECD area) between 1 February and 15 September 2020. Measures across more than one category can be reported for the same jurisdiction.
Source: Own elaboration based on information compiled by the OECD Trade and Agriculture Directorate on administrative measures at the border recorded between 1 February and 15 September 2020, using available sources referenced in Box 1.
Facilitated access to information on bottlenecks and good practices at borders– which has been changing rapidly and frequently—has been crucial to enhancing awareness and understanding of the actions undertaken.
Throughout this period, governments have also made numerous pledges in favour of transparency of market supplies and regulations to maintain in particular trade flows in agro-food and medical goods, followed by different co-operation initiatives to share such information (WTO, 2020[2]). In the agriculture sector, the Agricultural Market Information System (AMIS) – a G20 initiative created in response to the 2007-08 food price crisis1 - has played a key role in supporting transparency and priorities for policy responses for major staple crops (wheat, maize, rice, and soybeans) since the onset of COVID-19, owing to a consistent monitoring and reporting of policy developments and market indicators (OECD, 2020[3]).
Initiatives1 include, for instance, those from international and regional organisations such as: WTO Trade and trade-related measures and TFA Facility COVID-19 Trade Facilitation Repository, United Nations Supply Chain Inter-Agency Coordination Cell (SCICC), UNCTAD Port practices during COVID-19, How countries can leverage trade facilitation to defeat the COVID-19 pandemic and The role of National Trade Facilitation Committees, UNESCAP Policy Responses to COVID in Asia and the Pacific, International Road Transport Union (IRU) Real-time country updates on COVID-19, European University Institute, Global Trade Alert and World Bank COVID-19 Trade Policy Database: Food and medical products, WCO COVID-19 update, UNCTAD, ITC and WTO Global Trade Help Desk.
Other initiatives2 include platforms from the private sector, such as for example, Nepia Shipping (https://www.nepia.com/industry-news/coronavirus-outbreak-impact-on-shipping/); Bollore Logistics (https://www.bollore-logistics.com/fr/Pages/news/Coronavirus_Impact_Update.aspx); Kuehne+Nagel (https://home.kuehne-nagel.com/-/knowledge/updates-corona-virus-covid-19); Agility (https://www.agility.com/insights/COVID19/homepage/).
Understanding how the flow of safe cross-border trade was maintained during the pandemic helps put things into perspective and identify bottlenecks. Comparing information across different sectors and combining different types of information is also necessary to obtain the full picture.
The list of initiatives covered does not aim to be exhaustive.
The list of initiatives covered does not aim to be exhaustive.
Relaxing some standards and regulations helped trade channels remain operational
Information on COVID-19-related measures submitted to the WTO by member economies highlights that they streamlined several authorisations and other procedures for medical goods allowing a wider range of products to enter the market more quickly, while still ensuring continued health and safety protection (WTO, 2020[4]). A number of WTO members notified that they were temporarily relaxing certain aspects of technical regulations for selected food products, while still ensuring health protection, which helped ease documentary requirements for many traders (WTO, 2020[5]). Since in many cases relaxation of such regulations was temporary, drawing the lessons on the frameworks that made these endeavours work in practice during the COVID-19 crisis would help to assess whether these frameworks can also work in “normal times”.
There have also been efforts towards improving coherence through the development of common approaches and mutual or unilateral recognition of conformity assessment procedures to speed up procedures and prevent excessive burdens at the border when countries have differing regulations in place. Some governments have thus opted to unilaterally recognise or uphold technical standards for medical devices issued by competent authorities in other jurisdictions. In other cases, co-operation mechanisms were complemented by the possibility of checking compliance with standards and regulations remotely through electronic means (OECD, 2020[6]).
Governments have also reorganised regulatory delivery across several policy areas, including transport2, by: modifying compliance requirements to allow businesses to adjust and prioritise crisis-related activities; adapting a number of administrative procedures as well as inspection activities to account for new health and safety measures; or rolling out communication strategies to guide industry in understanding and complying with regulations in a crisis situation (OECD, 2020[6]).
Facilitating trade in the goods that will be needed in manufacturing potential vaccine(s)
Doing more on trade facilitation could pre-empt and avoid potential disruptions in specific products that will be key in the continued fight against COVID-19, such as those that will support the manufacturing and distribution of vaccines. Manufacturing of a vaccine is a complex process, where specific regulations apply to each stage of the process. In a nutshell, making a vaccine involves purifying raw ingredients; formulating and adding stabilisers, preservatives, and adjuvants (i.e. substances that increase the immune response to a vaccine); packaging doses into vials, and applying those using syringes and needles.
It remains impossible to anticipate which of the vaccines under trial will work best, but vials, rubber stoppers, syringes, plungers and needles will be just as important as the vaccine itself. Going further, manufacturers of these inputs will need other intermediates such as glass tubing for vials, polypropylene for syringes and rubber or silicone for small parts like the stoppers and plungers in these devices.
The ability to distribute potential vaccine(s) will depend on the supply chains that can bring these inputs together in the manufacturing process. Roughly two-thirds of global exports of vials, syringes or needles3 are accounted for by ten economies (Figure 2). Some economies where vaccines currently under trial4 could be produced are major exporters of one input while also being top importers of another (for example, the United States or Belgium for syringes versus vials). Mapping the global interdependencies in these products5 in accordance to the needs of a potential vaccine can help inform and prepare for any required documentation or use of pre-arrival processes, as well for estimating the type and amount of cargo and refrigeration needed in transportation.
Business reporting already points towards the need to start planning the transportation, refrigeration6 and necessary documentation for the transportation of fragile vials of medicine in unprecedented quantities.7 Indeed, a completely new product will not only require a range of different inputs but also potentially require new trade documents, as well as targeted controls, safety or health checks.8
Note: ‘Vials’ refers to Harmonised System (HS) code 701090 (Serum bottles, vials and other pharmaceutical containers of glass); ‘syringes’ refers to HS 901831 (Syringes); ‘needles’ refer to HS 901839 (Needles, catheters, cannulae, etc. (medical)).
Source: Own calculations using CEPII BACI data, 2018.
In which areas can governments act to support businesses move their products flexibly when the shocks hit?
The COVID-19 crisis has shown that in an ecosystem where traders and shippers operate in multi-hub9 and multi-modal routes, it is not sufficient for a single country to be prepared or react. Many of the new COVID-19 protocols and related restrictions can create disruptions and delays not just in the country imposing them, but in all of its trading partners within a supply chain. Smaller and less central ports or airports in the shipping network typically have fewer capacities to address such disruptions.
When shocks hit, regional and international co-operation is key. Coordinated early-warning systems across border posts can alert traders and shippers, allowing them to adjust routes in real-time and effectively prevent supply chain blockages. The adoption of common protocols and information exchange systems between border agencies would provide the necessary “circuit breakers”10 for ports experiencing temporary difficulties: by sharing information on challenges faced, ports would be able to prevent choke points in supply chains and redirect goods towards other points of entry/exit for clearance or warehousing before the problem can shut the system down.
But reliable and robust co-ordination mechanisms can only be made possible if trade facilitation performance gaps between economies are identified and addressed. Bridging gaps in trade facilitation areas like automation and streamlining of border processes will help countries design co-ordinated and flexible approaches between their respective points of entry/exit to prevent choke points. Further efforts in expanding the scope of co-ordination to include private sector stakeholders – whether traders, shippers, logistics operators, or customs brokers – can help set up a system of ‘chain reaction’ to respond to shocks.
Bridging trade facilitation performance gaps can also help spur new trade relationships, which will be equally important if firms look out to diversify their input supply or exporters aim to respond to demand in new markets. Even small efforts in reducing gaps in transparency, automation or border agency co-operation – as measured by the OECD Trade Facilitation Indicators (TFIs) – can lead to increased trade in agro-food, pharmaceuticals, and manufacturing goods by between 1% and 4% (Figure 3).11
Note: The estimations rely on a structural gravity trade model with country-year and sector fixed effects for the period 2012-18. Performance distance is calculated as the absolute difference between the exporter and importer OECD Trade Facilitation Indicators value for selected areas. The percentage increases in sectoral trade are estimated assuming a 0.1 points reduction in the performance distance by area.
Source: Own calculations using CEPII BACI (trade at HS 2-digit level and gravity variables), Regional Trade Agreements Database from https://www.ewf.uni-bayreuth.de/en/research/RTA-data/index.html, and OECD Trade Facilitation Indicators data.
Trade facilitation measures can provide trade(rs) with the reinforcement needed throughout the different stages of the COVID-19 pandemic
Every sector and firm has had to adapt to operating during the COVID-19 crisis. New health-related restrictions since October 2020, particularly as COVID-19 cases have been rising again in Europe and North America, uphold the high degree of uncertainty in both demand and supply dynamics. Firms continue to be in the best position to fine-tune their risk management and resilience strategies. Surveys since COVID-1912 highlight that businesses – including MSMEs – are placing a key priority in increasing control of their supply chain; in this sense, they would not plan to shrink their geographic footprint, but rather expand their supplier base for more diversity regionally (HSBC, 2020[7]) (McKinsey, 2020[8]) (International Trade Center, 2020[9]).
Against this background, trade facilitation measures can, more than ever, support businesses in their strategies to diversify suppliers as well as to enhance the transparency of supply chains13, thereby increasing predictability.
Throughout “normal” and crisis times, transparency and availability of information can not only help map out bottlenecks and risks, but also highlight and transmit good practices.
More transparency is needed along the entire supply chain – this could be achieved through better linking at-the-border with behind-the-border issues as well as with transportation aspects in order to respond to global challenges and better mitigate disruptions.
Expanding the scope of co-ordination with private sector stakeholders is needed to devise solutions that can best be mobilised when needed to act under pressure and time constraints.
As uncertainty persists, trade facilitation can help prepare for the next stages of the COVID-19 pandemic, including in the distribution of potential vaccine(s).
International co-operation, with continued impetus towards the sustained implementation of the WTO Trade Facilitation Agreement, is as important today as it has ever been. This will be particularly important in planning for the distribution of a potential vaccine and of the inputs it would take to produce it (such as vials, syringes, needles and others).
Bridging gaps in trade facilitation performance will ensure reliable and robust co-ordination mechanisms and help businesses address risks and enhance agility.
Further reducing gaps in areas like automation and streamlining of border processes will support the design of co-ordinated approaches between points of entry/exit in responding to shocks and disruptions. Co-ordinated early-warning systems across border posts can alert traders and shippers, allowing them to adjust routes in real-time and effectively prevent supply chain blockages. As digitalisation has been key during COVID-19, better understanding the policies that supported the increased use of digital tools in exchanging trade documents can help with addressing existing regulatory challenges in the automation of other documentation requirements.
Reducing trade facilitation gaps will support firms in their resilience strategies and help the logistics of trade to rapidly adjust capacity, diversify routes, enhance network agility, and cut costs. Estimates suggest that further bridging gaps on issues such as transparency and predictability as well as in streamlining and automating border processes can increase trade by 1-4% in agro-food, pharmaceutical, machinery and other manufacturing sectors.
References
[10] Derviş, K. and S. Strauss (2020), What COVID-19 means for international cooperation, https://www.brookings.edu/opinions/what-covid-19-means-for-international-cooperation/.
[13] Heiland, I. and K. Ulltveit-Moe (2020), An unintended crisis: COVID-19 restrictions hit sea transportation, https://voxeu.org/article/covid-19-restrictions-hit-sea-transportation.
[7] HSBC (2020), Navigator – Resilience: Building Back Better, https://www.business.hsbc.com/navigator/resilience.
[9] International Trade Center (2020), “SME Competitiveness Outlook 2020”, COVID-19: The Great Lockdown and its Impact of Small Business, https://www.intracen.org/uploadedFiles/intracenorg/Content/Publications/ITCSMECO2020.pdf.
[8] McKinsey (2020), Resetting supply chains for the next normal, https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Operations/Our%20Insights/Resetting%20supply%20chains%20for%20the%20next%20normal/Resetting-supply-chains-for-the-next-normal.pdf.
[1] OECD (2020), Leveraging digital trade to fight the consequences of COVID-19, https://www.oecd.org/coronavirus/policy-responses/leveraging-digital-trade-to-fight-the-consequences-of-covid-19-f712f404/.
[6] OECD (2020), No policy maker is an island: the international regulatory co-operation response to the COVID-19 crisis, http://www.oecd.org/coronavirus/policy-responses/no-policy-maker-is-an-island-the-international-regulatory-co-operation-response-to-the-covid-19-crisis-3011ccd0/.
[3] OECD (2020), The role of transparency in avoiding a COVID-19 induced food crisis, http://www.oecd.org/coronavirus/policy-responses/the-role-of-transparency-in-avoiding-a-covid-19-induced-food-crisis-d6a37aeb/.
[12] OECD (2020), Trade interdependencies in Covid-19 goods, http://www.oecd.org/coronavirus/policy-responses/trade-interdependencies-in-covid-19-goods-79aaa1d6/.
[11] PwC (2020), Connected and autonomous supply chain ecosystems 2025, https://www.pwc.com/gx/en/industries/industrial-manufacturing/digital-supply-chain.html.
[2] WTO (2020), How WTO members have used trade measures to expedite access to COVID-19 critical medical goods and services.
[4] WTO (2020), How WTO members have used trade measures to expedite access to COVID-19 critical medical goods and services, https://www.wto.org/english/tratop_e/covid19_e/services_report_16092020_e.pdf.
[5] WTO (2020), Standards, regulations and COVID-19 – What actions taken by WTO members?, https://www.wto.org/english/tratop_e/covid19_e/standards_report_e.pdf.
Contact
Silvia SORESCU (✉mailto:[email protected])
Notes
The AMIS Secretariat consists of ten international organisations: FAO, GEOGLAM, IFPRI, IFAD, IGC, OECD, UNCTAD, the World Bank, WFP, and WTO.
For instance, in the European Union, members progressively agreed to a temporary and limited relaxation of rules on driving hours, aimed at helping commercial drivers navigate traffic jams and longer waiting times during the outbreak (see Euractiv, “Coronavirus relaxes driving rules across Europe”, https://www.euractiv.com/section/transport/news/coronavirus-relaxes-driving-rules-across-europe/). However, challenges were noted around the heterogeneity of quarantine requirements or testing procedures for truck drivers.
OECD (2020[12]) highlights also that global exports of COVID-19 related goods are concentrated in a few, mostly OECD, countries: over 86% of global exports are from just 20 countries. Similar patterns emerge for imports, where the top 20 countries represent 76% of trade in COVID-19 related goods.
In line with OECD (2020[12]) analysis on COVID-19-related goods.
Time and temperature sensitivity are likely to vary for different vaccines. In July 2020, express carriers have initiated coordination plans for refrigerated storage and transportation with potential vaccines producers. For instance, UPS has been setting up ‘freezer farms’ close to its hubs which are waiting for US Food and Drug Administration approval; these can store a total of as many as 14.4 million glass vials with a two 2 ml capacity (see Bloomberg, https://www.bloomberg.com/amp/news/articles/2020-08-03/ups-readies-freezer-farms-to-ship-virus-vaccine-if-we-get-one)
See Bloomberg https://www.bloomberg.com/news/articles/2020-07-25/the-supply-chain-to-save-the-world-is-unprepared-for-a-vaccine?sref=kl8fK3TM; Bloomberg https://www.bloomberg.com/features/2020-covid-vaccine-manufacturing-essentials/?sref=kl8fK3TM; New York Times https://www.nytimes.com/2020/05/01/health/coronavirus-vaccine-supplies.html; and Foreign Affairs https://www.foreignaffairs.com/articles/united-states/2020-07-27/vaccine-nationalism-pandemic.
More than half of all country-to-country connections involving more than two stops at intermediate seaports (Heiland and Ulltveit-Moe, 2020[13]).
As identified by Dervis and Strauss (2020[10]) in crafting internationally coordinated protocols for temporary travel and trade restrictions in the event of potential pandemics.
Performance distance is calculated as the absolute difference between the exporter and importer OECD Trade Facilitation Indicators value. Estimates show that, all other things being equal, countries with more similar trade facilitation profiles can trade more intensively between them. Therefore, economies with lower TFIs scores can increase their trade links with countries having a better performance by improving their own performance.
See Bloomberg https://www.bloomberg.com/news/articles/2020-07-20/-reshaping-pips-reshoring-of-supply-chains-hsbc-survey-says?sref=kl8fK3TM or McKinsey https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Operations/Our%20Insights/Resetting%20supply%20chains%20for%20the%20next%20normal/Resetting-supply-chains-for-the-next-normal.pdf
Scale also matters – larger enterprises implementing transparency have more visibility over their supply chains in real-time than do smaller companies (PwC, 2020[11]).
