Multiple options for G7 business managers to address supply constraints

Texas News Today

FILE PHOTO: On April 7, 2021, a shipping container is unloaded from a ship at the container terminal of the Port of Long Beach-Los Angeles Harbor Complex in Los Angeles, California, USA. Reuters / Lucini Corson

21 October 2021

David Loader

WASHINGTON (Reuters) – Business managers in developed economies gathered on Friday have few options for quickly solving supply chain problems that cause inflation and squeeze growth, trade experts say. A problem arising from market power that is out of reach.

US Trade Representative Catherine Tai said on Thursday that supply chain turmoil is a “major concern” for global trade officials, and the topic is a constant theme among G7 democracies, WTO members and bilateral talks. He said that it has been taken.

“We are all working on ways to improve the system in the long run, because in the short term these are issues that are affecting the lives of ordinary people,” Thai said. I told reporters.

The G7 trade ministers meeting in London may call for improved infrastructure to accelerate product launches and diversify sources of key components such as semiconductors, including increased domestic production. ..

But these are all long term solutions. Market power, which has created excessive demand for goods, may be on its way to fixing the problem.

Harry Brodman, managing director and former US trade executive at Berkeley Research Group, said: “It’s ultimately driven by consumer demand.”

With supply and demand out of sync and logistics struggling to catch up, it could take up to six months to address market power and many product shortages brought on by the private sector. He said that many changes are filling this gap. ..

Last week, President Joe Biden announced a new 24-hour port operation in Los Angeles, asking private logistics companies to ramp up product shelving with major retailers like Targetcorp and Wal-Mart Inc. Christmas holiday time.

However, logistics experts, economists and trade unions warn that the effort may only be a step-by-step -to-snarled-biden-christmas-fix-expert-say-2021-10-14 Opening the backlog.

Some of the most critical supply chain needs will take time to meet, said William Rensch, a trade expert at the Center for Strategic and International Studies and a former export official at the Department of Commerce.

Adding domestic semiconductor capacity to reduce dependence on some Asian countries will take years, and upgrading port infrastructure to improve efficiency and throughput is also a long-term effort, he said. where did it go.

Alfred Kemmer, director of the International Monetary Fund’s European Bureau, said policymakers can take steps to ease transport barriers, but invest in infrastructure and sources of key components to strengthen supply chains. Said diversification is needed.

He said the impact of current inflation due to supply chain turmoil and energy shortages should ease in Europe next year.

“It will be a very complex issue. The market will address some of it, but government policy may also favor coordination, especially on the infrastructure side.”

too much money

Many of the current problems have been compounded during strong demand anomalies for commodities fueled by a pandemic blockade of supplies constrained by coronavirus aid checks and production interruptions, declining inventories and labor shortages. This is a savings.

US Treasury Secretary Janet Yellen described the incident as a “very unusual setback” and removed spending from services such as travel, accommodation and restaurants.

“Instead, we’ve swallowed a product or products we’ve never seen before,” Jellen told MSNBC in an interview -discusses-economic-broadcast on wednesday-recovery-effort-after-very-unusual-shock-covid-pandemic-124029509961.

UK Finance Minister Rishi Sunak told the G7 government last week that from Asked. Together to deal with supply chain disruptions.

However, UBS’s chief economist said the consumer boom, which slashed US consumer spending on durable goods by more than 25% this year, will not last long and is likely to be replaced by abnormal demand in 2022. , Paul Donovan said in a memo to the customer. This will slow down GDP growth and pacify inflation.

“Once the demand submitted is met, you need not spend any more. If you bought a new washing machine this year, you wouldn’t be in a rush to buy a new washing machine next year,” Donovan wrote.

extreme crisis?

Jefferies Equity analysts say the supply chain crisis is peaking as holiday goods have already passed the mid-October shipping deadline and released capacity to “baseline” transportation of machinery, automotive supplies and furniture. . He said he had sex.

“We are showing signs of an extreme pinch, and analysts at Jeffrey expect significant improvement by the second half of 2022,” the company said in a research report.

Data from TradeShift, a digital platform that facilitates and processes business-to-business transactions, shows that supply and demand equilibration is already underway.

GROUP INDEX – Quarterly Orders Volume fell 24 points to 85 from the second quarter, well below forecasts of a pre-pandemic trend of 100 points.

“Buyers have begun to question the prudence of placing new orders in the system,” TradeShift CEO Christian Lang said in a statement. said. “The longer this situation lasts, the greater the likelihood of a long-term reversal towards 2022.”

(Reporting by David Lauder, Additional reporting by Philippe Blenkinsop and Andrea Schallal, Edited by Dan Burns, Chizu Nomiyama, Peter Cooney)


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