This commentary appeared in the print edition of the Jan. 6, 2020, Journal of Commerce Annual Review and Outlook.
Things used to be so straightforward. The phenomenal achievements of global supply chain management were developed in an era of growing trade volumes, shrinking communication costs, and a presumption in favor of simplifying cross-border trade. Shippers’ main challenges were how to get ever more goods to and from an increasing range of markets, in shorter time, for less money.
In 2020, the countervailing pressures of shrinking economies, growing protectionism, and environmental populism will challenge much traditional thinking.
Whether due to tariff wars, use of trade policy as a political weapon, or faltering national economic performances, the forecasts are for lower trade volumes in 2020 than many carriers and asset owners were expecting. This will put even greater downward pressures on rates as carriers seek to fill space almost at any cost. That’s seemingly good news for their shipper customers, perhaps, but the route to carrier profitability will lie through ever more supplementary surcharges, so expect some heated exchanges about their legitimacy and size at the negotiating table, and probably in the trade media, too.
Environmental pressures will provide new excuses for surcharging, with IMO’s global restrictions on sulfur emissions from ships being the headline act. But 2020 will also be the year the shipping and aviation sectors need to get their greenhouse gas reduction plans together to show the world that a credible contribution to targets can be made without stifling the flows of goods that feed, clothe, and satisfy so many of them.
Championing the benefits to citizens of easier international trade will be even more urgent in 2020 as the traditional assumptions and structures come under pressure from new political, environmental, and populist dogmas. Supply chains join the dots between what people want and what they can produce. We in commerce need to work harder on getting that bigger picture better understood and appreciated.