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Guest analysis by Mark Garnier

Nearly a quarter of a millennium ago, Adam Smith published his Wealth of Nations. Since then, the world has been on a relentless mission of globalisation through the advantages of free trade.

For the UK, we have been exporting low productivity manufacturing to developing nations, leaving our own workforce free to concentrate on high value output – output that developing nations buy. Smith’s ideas made us one of the richest nations on the planet.

But Smith says nothing about pandemics. It is only now, in our highly sophisticated networks of supply chains and demand patterns, that we are to truly test the effects of pandemic disruption to global trade.

Whilst it is obvious that supply chains are fractured, what is less obvious is how they are fractured due to a variety of policy responses in different countries. A tier three automotive manufacturer may still be churning out, hypothetically, fuel injectors in eastern Europe, but if the borders are closed between here and there, how will these parts get to the UK regions? Air freight may help in the short term, but that hideous extra expense can only be an emergency response.

Much of that cheap manufacturing includes important medical supplies. Rubber gloves, face masks, syringes, aprons – you name it, none of our disposable essentials are manufactured in the UK. Aside from border issues, a country manufacturing medical supplies may well restrict medical exports to meet their own increased demand.

Meanwhile, one of our most successful exports – services – is potentially hampered by restriction on business travel. Video conferencing can only go so far.

The response to this is uncertain, but it will be driven by businesses’ experience of the crisis. One thing is for sure – businesses will be raising the importance of pandemics on their risk registers.

But how they tackle that extra risk will determine trade patterns. For example, it may be better to manufacture those fuel injectors closer to where they are needed, reducing the risk of possible disruption. Similarly, our inability to sell abroad through the crisis offers opportunity to our global competitors. And should we redeploy some of our highly skilled and expensive workforce to manufacturing cheap but essential medical supplies domestically?

We won’t know how this will pan out until a few months and years after coronavirus has become a thing of the past. But what is clear is that a global response to this type of issue is essential.

Whilst the World Health Organisation is leading in the response to the pandemic, the World Trade Organisation (WTO) has been silent. Yet securing a set of co-ordinated responses to trade borders, safeguarding continuity of essential supplies, and ensuring no false barriers to trade are exactly the sort of things the WTO needs to determine. And that is where we must see sound British leadership.

Mark Garnier was Parliamentary Under Secretary of State for International Trade in 2016-18. He has been the Member of Parliament for Wyre Forest since 2010 and is a member of the International Trade Select Committee.

 

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