The Globalization of Trade Theory

The Globalization of Trade Theory
The issue of supply chain is relevant to all countries. In an increasingly global economy, each country is depending on another for some goods and services. All countries have symbiotic relationship with each other which is enabled by a global supply chain network. Even the most sanctioned countries in the world have trade partners and or have established covert ways of trading with others. In the 21st century, it is impossible for a country to be self-sufficient. The interconnectedness of the economy follows the Heckscher-Ohlin Model theory. Each country seems to focus on producing and exporting what it can efficiently and plentifully produce CITATION Sub03 \l 1033 (Subasat, 2003). Some countries have developed and absolute advantage of some products and continue to be connected to the other countries through complicated supply chain networks. Therefore, the issue of supply chain and trade is an issue for all countries. However, it is important to note that all countries did not experience the same supply chain challenges. The problem was unique for every country in different ways. A supply chain network to deliver perishable food is different from that delivering manufactured goods. Thus, depending on the reliance of the economy of the country, the supply chain strain would affect the country differently. The lockdown restrictions had an asymmetric effect on the imports and exports for different countries CITATION Soc21 \l 1033 (Socrates & Lashitew, 2021). The global supply chain is a well-oiled machine that has developed over centuries and it remains indispensable to the global economy. Though the pandemic exposed its weak areas, it remained resilient and delivered on its mandate.
Does Covid-19 experience strengthen the need for even more international connectedness of economies, perhaps with more Plan-b’s?
There is need for more international connectedness to avoid similar problems. The problem was not interconnectedness of countries, it was the fragility of the supply chain that had been maximumly tuned for efficiency. The supply chain had been developed to reduce unnecessary inventory and production on demand for many things. Each producer, manufacturer, retailer, distributor and consumer just took enough goods for a short period of time. Most manufacturers adopted a Just-in-time inventory management which was pioneered by Toyota CITATION Nic10 \l 1033 (Radziwill, 2010). Parts are ordered and received just in time for production and therefore the manufacturer does not hold any safety stock. Such systems are efficient and reduce overhead, storage costs and unnecessary stocking of parts. However, this type of inventory could not operate during the pandemic as there were fewer personnel in companies, some countries closed non-essential production of goods among other measures that affected producers that relied heavily on this model CITATION Bay19 \l 1033 (Bayoumi, Barkema, & Cerdeiro, 2019). On the other hand, some goods cannot have such lean production methods i.e perishable food stuffs. Most countries rely on others for some food items and the border closure affected flow of goods between countries. The issue was exacerbated by food hoarding. Some people stocked food anticipating that there would be shortage. The supply chain was not flexible enough to meet such erratic demands. This problem coupled with a global pandemic which affected the production of food affected the supply chain resilience. Countries that rely heavily on imported food grappled with this challenge because the consumption of food remained relatively the same despite the pandemic. The diversity of the economy was largely the determinant in the resilience of any country in managing the challenges that grappled their supply chain during the pandemic CITATION Wei21 \l 1033 (Wei, Jin, & Xu, 2021).
Secondly, interconnectedness of economies is a good thing. It helps the economies involved grow faster and improve the standards of living for the people of the party countries. The economies of mostly-sanctioned countries like South Korea has faltered for decades compared to that of South Korea which has flourished and among the best in the world. Therefore, the problem is not interconnectedness but the resilience of the supply chain to ensure that the goods are cheaper and of good quality to consumer. Every cost of production is passed on to the final consumer which increases the price of goods. Thus, to ensure that goods and services remain affordable, importing from countries that have perfected production of such goods and at very low cost is the best option for all consumers.
COVID-19 strengthen the need for more international connectedness of economies. It showed that all countries heavily depended on others for their survival. Therefore, the circumstances of one economy affected other countries indirectly. For countries that had longer lockdowns held back those who largely had freer restrictions in rebuilding the productive capacity of the economy as the pandemic wore off CITATION Soc21 \l 1033 (Socrates & Lashitew, 2021). More interconnectedness would help other countries to recover from the effect of a pandemic faster. If the economies are heavily interconnected, they would create a bubble or a corridor to ensure that trade thrives even during pandemics. Closer cooperation of economies can help them weather the pandemic effects faster than loose bilateral trade arrangements. Each of the economies would be able to recover faster because they can still trade with its partners. Isolated economies would be battered more by a pandemic and it would take longer to recover. Nationalist approach to supply chain ended up hurting the countries economically because it prompted similar nationalistic policies in other countries. The trade wars that could ensure would be far detrimental to the economy than the pandemic. Therefore, healthier trade cooperation is better than nationalism. The problem is fragility of the supply chain. Most supply chain networks are inflexible to accommodate changes that can last a few weeks to months. COVID-19 exposed this Achilles heel of supply chain built for efficiency and prompted the need to revisit and restructure the model to ensure that it can accommodate huge disruptions in the chain. Manufacturers need to move away from just in time inventory management and have safety stock to even out supply chain disruptions. This would be the perfect Plan-B to accommodate disruptions in supply chain management.
Other ways countries, retailers and manufacturers could build more resilient supply ...