WTO hopes supply chain returns to normal on its own

The Director General of the World Trade Organization (OMC), Ngozi Okonjo-Iweala, stated that he expects the bottleneck generated in the global supply chain to return to normal “by itself” as supply and demand rebalance.

In a talk with the president of the World Bank (WB), David Malpass, in the framework of the annual meeting that the international financial organization holds these days in Washington, Okonjo-Iweala attributed the problems with supplies to a precipitous increase in demand.

“We are seeing an imbalance between supply and demand which in turn results in inflationary pressures. We hope that all this will resolve itself in the coming months, “said the WTO director.

Since restrictions on mobility and economic activity began to be relaxed by the COVID-19 pandemic in much of the world, the demand for goods and services has experienced sudden growth that manufacturers and carriers have not been able to cope with. respond, which has generated a bottleneck.

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One of the best examples of this situation are the ports of Los Angeles and Long Beach in the United States, the two largest in the country and which are experiencing a situation of collapse, with long lines of huge freighters anchoring in front of the docks waiting to be able to dock and unload your goods, a task that can take up to 12 days.

“Our data indicates that 8% of the containers in the world are stopped and are not reaching the ports. That is double what it would be in normal times and increases transportation costs and, consequently, goods costs, ”said the president of the World Bank.

Okonjo-Iweala and Malpass detailed two main factors that have contributed to triggering demand without supply having yet had time to adapt to it: financial stimuli in many of the rich countries and the accumulation of inventory by companies .

In the first case, the generous stimulus programs, which in some countries like the United States consisted directly of sending several checks worth hundreds or thousands of dollars to households, put extra money in the hands of consumers that now, With the economy reopening, they are spending.

As for companies, there is, in the opinion of the WTO director, a situation of self-fulfilling prophecy: entrepreneurs see the current problems in the supply chain, with which they fear that the situation will get worse and decide to protect themselves from this risk with an accumulation of inventory to respond to the future demand of its customers.

This accumulation of inventory, however, increases orders to suppliers and the contracting of logistics services, which further stresses supply chains, thus becoming a fish that bites its tail.

Although Okonjo-Iweala was confident that the supplier crisis will resolve itself, she suggested that the WTO can help in the meantime, with its role in monitoring world trade and promoting the removal of trade barriers.

The Nigerian economist also asked the political and economic leaders of the planet not to be “complacent” with the situation of recovery of trade and production that is being experienced in rich countries, and asked that the poor be helped to access vaccines against COVID-19.

“It is the countries with access to vaccines that are recovering, while those that do not have access to them are lagging behind. As I often say: vaccination policies are trade policies, and vice versa ”, concluded the director of the WTO.