GLOBAL TRADE AND SUPPLY CHAIN DISRUPTIONS

 Aftermath of Covid19 pandemic persisting US China trade tensions, Russian invasion of Ukraine and consequent Imposition of sanctions by Western Countries resulting multiple bottlenecks caused havoc in both global supply chains and free and fair trade.Supply chain refers to the network between a firm/company and its suppliers to produce and distribute a specific product or service. Management of supply chain or flow of goods and services comprise of all processes transforming raw materials into final product  which involves streamlining of procurement of inputs, manufacturing materials into basic parts assembling basic parts into finished product, selling and delivering finished products to consumers or end users.Free trade on the other hand refers to absence of any tariff or Non tariff walls to international trade. Champions of free trade highlights access to low - priced ,high quality goods, greater efficiency and innovation in production, increase in economic growth ,development and higher standard of living as the merit.

The era of rapid globalisation and liberalisation that sweeped  since 1990s boosted economic growth and reduced extreme poverty to great extent and also changed their livelihood and lifestyle patterns in many countries. Accordingly consumers in many economies  got affordability and access to gadgets like smartphones, computers, and other electronic items . Trade with low wage countries in turn impacted goods prices and wages in advanced economies benefitting both consumers in these countries and workers in exporting countries.China has emerged as the indisputable manufacturing hub or "World's factory " and sustained for more than three decades, operating as the centre of  global supply chains. On the other hand western governments became increasingly concerned about competition with China's alleged  'unfair trade practices' like use of subsidies domestically, but at the same time restrictions were imposed on companies seeking access to Chinese market. Smaller economies like Srilanka were hit harder by COVID-19 due to persistent disruption in global tourism.Russian invasion of Ukraine and the global monetary tightening cycle adversely affected  growth of many low income countries. They are much vulnerable to shocks due to factors like heavy dependence on imports of essential goods,high indebtedness, reliance on external financing, natural disasters and climate change.Imports of food and fuel account for a major share of GDP in small countries than in other emerging market and developing economies (EMDEs).Obviously in this context the global community can provide a helping hand to small countries by assisting to preserve debt sustainability, facilitating trade and supporting climate change adaptation measures.

Unfortunately global powers who have built and sustained relatively free trade system are currently changing their priorities pushing emerging market and developing economies to a vulnerable position.Both US and China are changing the system and making other countries to choose sides in the growing geostrategic rivalry.At a time of increasing global uncertainty regional trade blocks are acting less for integration and more for discrimination in their approach. From a mere 50 in 1990s number of regional trade agreements dramatically shot up to 350 today .Some agreements like Trans-Pacific Partnership and African Continental Free Trade Agreement  are Mega -regional grouping.Analysts observed that best strategy might well be non alignment for other countries but some could not restrain due to certain compulsions. Currently the global trading system is largely shaped by US and China, impact of war in Ukraine and cooperation or noncooperation of member countries of WTO( World Trade Organisation).  WTO already forecasted a decline in global trade. In recent times lot of movements are taking place about improving supply chains .It may be noted here that around half of the global output is supplied through global supply chain especially by multinational companies. Reorganization of global value chain has to address recessionary trends, banking crisis, rising interest rates and tight labour markets.Many believe that regionalism and multilateralism are contradictory and global tensions are weakening multilateral trading system.Both protectionism and hyper nationalism will inevitably push governments towards stronger regional agreements. As a part of dedolarisation in the context of sanctions imposed by Western Countries in July 2022 RBI had set up rupee trade settlement mechanism. This required Indian traders to use special Vostro Accounts for settlement of rupee denominated trade invoices.Vostro account is essentially a rupee account held by a foreign bank with a bank in India as rupee transaction is credited to the Vostro account of partner country. We were much benefited from this rupee trade system mainly by enhancing oil and defence equipment imports from Russia.Currently Russia is not keen on rupee settlement. They prefer Indian oil refineries to pay in Chinese Yuan or UAE Dirhams. In May India's crude imports from Russia valued $8.5 billion. If Russia continues to settle payments in Indian rupee it can make investment of its surplus either in Indian Government bonds or in investment in Sunrise sectors but they are disinterested to invest. It is heartening to note that both RBI of India and Central bank of UAE signed two MOUs mutually agreeing to accept their respective currencies for transactions along with agreement to link UPI transactions. 

Present trend towards strengthening ties with friendly countries and loosening ties with non friends may reignite regional discrimination leading to more protectionist barriers, that includes subsidies,  local content requirements etc. In this context it is relevant to recall the contributions made by WTO despite its limitations. World Trade Organisation was evolved after nearly five decades of consultation and negotiation with the objective of progressively reducing barriers to trade.Organisation has to tackle obstacles to trade where countries have faced trade barriers and wanted them to be lowered .WTO is to help us in providing non- discrimination, opening trade,fair competition,inclusive trade, support for less developed countries, supporting digital trade. environment protection, predictability and transparency and global partnership.When trade disputes with conflicting interests crops up the most important harmonious way to settle the differences is through neutral procedure  based on and agreed legal foundation.It may be recalled that WTO'S Dispute settlement system is more fair and robust which is popularly known as the 'Jewel of WTO' needs to be effectively utilised in the case of trade disputes.