The demand shock behind the global bottleneck should ease in a few months: WTO


Brussels — The World Trade Organization’s chief economist said on Monday that the world trade bottleneck is the result of a surge in demand rather than a supply chain disruption, and pressure is likely to ease in the coming months.

The WTO believed that demand for commodities would slow in early 2022. But that was before the Omicron variant of coronavirus led to suppression of activity, including the postponement of the WTO Ministerial Meeting.

Chief economist Robert Coupman said consumers couldn’t or didn’t want to eat out or take vacations, so they continued to bias spending on goods rather than services.

When it comes to commodity trade, Coupman said over-demand is likely to explain two-thirds to three-quarters of the apparent shortage.

“This constitutive change in demand, supported by adequately aggressive and rapid fiscal and monetary policy, has led to this result, which many are writing about supply chain turmoil,” he told Reuters.

The supply turmoil was more apparent to the automotive sector, or to shippers adapting to production shifts from China to Vietnam, Malaysia, Indonesia, etc., he said.

Coupman said key US indicators such as ship backups at ports and used car prices are declining, and throughput at US ports is rising.

“We are confident that inflationary pressures will ease in the next three to four months,” he said, referring to most of the trade goods and assuming no new geopolitical or health shocks.

Nonetheless, some companies warn that trade channels are so tight that it could be next year before the business returns to normal.

The WTO will invite business, government and trade experts to discuss global supply chain issues in March. Even if the problem was alleviated by then, there are still lessons to be learned, Coupman said.

“What we saw was a very rapid financial and financial response. For long-term finely tuned supply chains, the appropriate physical or regulatory infrastructure to adapt so quickly. There wasn’t, “he said.

Reuters

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