Globalisation, which promised increased gains from global market trading and faster growth on both sides of the income spectrum, also made it possible for economies to be integrated in four fundamental ways – through trade, finance, production and a growing web of treaties and international institutions like the World Trade Organization (WTO).

In fact, in making his case for globalisation and world trade, the economic geographer Peter Dicken argues that falling transport and communication costs make it possible to ‘divide up the value chain’ of production. In other words, different stages of the production process of a product can be carried out in different parts of the world, depending on sites’ comparative advantages. As we know, unbundling production and moving certain manufacturing activities to low-cost centres like China has in fact become a central characteristic of global trading and manufacturing.

Toyota is often credited with popularising this approach to production and masterminding a monumental advance in industrial efficiency – just-in-time manufacturing. Having parts delivered to factories right as they are required, minimises the need to stockpile them and saves on inventory costs, thereby releasing resources to invest in other areas of the business.

Covid-19 disruptions to global trade and exports

When the pandemic came, it therefore met a global trade and production system wherein companies had embraced this just-in-time philosophy to stay nimble in order to be able to adapt to changing market demands while cutting costs.

Covid-19 seriously tested this network and there is a rich tapestry of lessons to be drawn from the experiences of different countries, especially of industry leaders in the South. As the pandemic hampered factory operations around the world due to compulsory shutdowns and stay-at-home regulations, and chaos ensued in global shipping, several markets experienced shortages of a vast range of goods from electronics to lumber to clothing.

Yet the impact on global trade was unevenly distributed among countries, sectors and goods. For example, a country like Brazil experienced an increase in exports of agricultural products like frozen beef (from $464 million a month in April 2020 to $639 million in May) and soya beans, which rose sharply by more than $1 billion on a year-on-year basis in April 2020).

Others took a rather hard knock, for example car exports that went down by billions in Spain, Canada, Japan and the US. American delivery truck exports also fell by more than $1 billion in April and May last year, and reached normal levels only in July, while exports of US aircraft parts declined sharply by more than $6 billion in May and June in 2020.

Bicycle exports (mostly from China), on the other hand, first declined sharply in February and March at the start of the pandemic, but then rebounded with fury during the northern hemisphere summer, up more than 50% year-over-year during June 2020 and July.

How to plan for the next big disruption to trade

It is clear that the pandemic affected countries and industries differently based on global demand for their products and the extent to which their supply chains were disrupted. Besides mitigated market access, trade has been greatly influenced by pre-covid risk assessment and mitigating measures with regard to global production and distribution structures. In some instances, trade prospered and companies made generous profits while those that depended on global supply chains and inputs that are transported from far-off locations experienced delays and a slowdown in production.

As companies move forward and seek to strengthen operations and business resilience, the importance of supply chain resilience and risk management is more apparent than ever. Businesses should prioritise analysing their supply chains now to understand where they might have to make changes or take action to mitigate against future disruptions.

This should include reviewing contractual obligations, assessing force majeure clauses, the tax and employment implications of changes, relocation costs, entry and visa issues for staff, exit possibilities, as well as the option of swiftly reversing changes if needed.

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