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THE “HOMEBODY ECONOMY” AND TRADE

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THE “HOMEBODY ECONOMY” AND TRADE

Mindful Spending

An estimated 2.6 billion people – one-third of the world’s population – continue to live under some form of quarantine conditions. These are trying circumstances for individuals and businesses. From a consumer demand perspective, the longer we all engage in some form of quarantine or social isolation, the more likely our new habits will take hold.

The emergence of this “homebody economy” is becoming apparent in consumer spending. Only China seems to be rebounding in consumer spending – the rest of us are still cutting back on discretionary spending. We are focused on essentials, being cost-conscious and cutting back on services and travel. We are even spending less on apparel and footwear, which impacts millions of jobs worldwide as workers in global value chains face uncertainty in their employment.

According to the International Labor Organization (ILO), 93 percent of the world’s workers live in countries experiencing workplace closures due to COVID-19. ILO estimated the reduction in working-hours for the second quarter of 2020 as equivalent to the loss of 400 million full-time jobs. Job losses, reduced hours and foregone income are having a clear dampening effect on spending habits and demand in international trade, which in turn creates more job insecurity.

No Contact

In most countries, the vast majority of people have turned to e-commerce and other digital or contactless services such as curbside pickup and drive-throughs. Many consumers are likely to delay resuming “normal” shopping and other behaviors until after a vaccine is widely available. That includes, unfortunately, the resumption of preventative healthcare. The hidden health impacts of foregoing routine health screenings and other interventions will be felt in national economies for years to come.

On top of all this, we know that the impacts of recession – layoffs, loss of income and the growing effects of income equality are closely correlated with reduced health outcomes and life expectancy. The World Health Organization has cautioned about the long-term consequences of lockdowns and isolation on mental and physical health, noting that depression and anxiety under normal circumstances cost the global economy an estimated $1 trillion per year in lost productivity.

No doubt we’re all feeling some level of anxiety, mood swings, and changes in sleep patterns. McKinsey’s consumer sentiment survey shows, in another twist of cruel circularity, that people are spending more time inactively, consuming digital content, which could have negative implications for people’s happiness.


Trade Antidote for the Irritable, Anxious and Exhausted Among Us

Lest we leave you further depressed, might trade in some goods and services provide a much-needed antidote to the mental and physical wear and tear of COVID-19? We think so. Here are some ideas.

Yoga – Global demand for PVC has been hit hard with a major drop in demand in China. So, why not do your small part by buying yourself a fresh, new vinyl mat. The PVC-based mats are cushy, which might be nice for your next savasana. If you’ve gained a little weight during the lockdown, you can rely on American textile engineers – the same ones medical personnel turn to for durable emergency wear – to also deliver yoga pants that will hold your belly in place as you stretch in downward dog.

Guided Meditation – Evidence of meditation practice dates back to approximately 1500 years BCE, but we generally thank Chinese Taoists and Indian Buddhists from the 6th to 4th centuries BCE for developing forms of practice that spread throughout the world. These days, Andy Puddicome, a Brit who studied meditation in the Himalayas and became ordained as a Tibetan Buddhist monk in Northern India, can be credited for making meditation accessible, modern – and available online – for the masses through his app, Headspace. Through Headspace and others, you can have guided meditation through an app on your phone, a service traded across borders thanks to the Internet.

incense

Incense – The use of incense can be traced back to ancient Egypt where it was used by priests for fumigating ceremonies and tombs. It was thought to hinder the presence of demons and served as an offering to their gods during worship and ritual, which is how incense came to be used in India and throughout southern Asia and China. Resin-based incense such as frankincense traveled to Europe and the Mediterranean along a trading route known as the Incense Route. Today, you can buy very high end and exotic incense like the brand, Astier de Villatte, which is handmade on the Japanese island of Awaji by masters of aroma who have been honing their craft and handing it down for hundreds of years. Also popular is incense made from palo santo (which means holy wood), a tree that grows along the coast of South America.

A Cleanse – If you’ve tried any form of keto, paleo or cleanse diet these days, chances are you had to look online to find far-flung ingredients from around the world. Popular ingredients include Maca powder derived from root vegetables grown in the Andes mountains in Peru, carob, which is native to the eastern Mediterranean region, and the Schisandra berry, which comes from mountainous regions throughout China. Another exotic ingredient is moringa, a nutrient-rich plant derived from “the miracle tree” native to North India. If your diet has you cutting back on caffeine, you can also try teas that taste like coffee, such as from Teecino. Their herbal teas use herbs and nuts like ramón seeds harvested in rural communities in Guatemala through programs that support educational and nutritional programs for women and children in Central America.

inredients

The Struggle is Real, Trade Can Help

The WTO issued a news release in June that estimated an 18.5 percent decline in merchandise trade in the second quarter of 2020 as compared to the same period last year. By any measure, the impact on trade, on livelihoods, and on our well-being has been profoundly negative. But as we work toward collective resilience, one thing you can do is to work on being healthy at home. And, with all of the products and services available to us through trade, we have lots of ways to do just that.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program. 

This article originally appeared on TradeVistas.org. Republished with permission.

toilet

TOILET PAPER: A UNIQUELY AMERICAN OBSESSION

The sight of barren grocery store shelves in the first few weeks of the coronavirus crisis sent thousands of shoppers scrambling for basic supplies – including, in the United States, toilet paper. As of April 1, bathroom tissue remained a sought-after commodity nationwide, out of stock at big-box retailers like Costco and Walmart, and even online at Amazon.

This sudden scarcity has made toilet paper as valuable as any other paper currency. Neighbors using the NextDoor app are bartering toilet paper for eggs and other household essentials, reports Bloomberg, and a recently viral Tik-Tok video showed a man tipping delivery drivers with rolls of toilet paper instead of cash. There’s even been a wave of toilet-paper-related crime. In North Carolina, for instance, sheriff’s deputies found a stolen tractor-trailer carrying 18,000 pounds of bathroom issue, while in Florida, police arrested a man for stealing 66 rolls from a Marriott hotel. A surging number of price-gouging investigations have also focused on the exploitation of desperate shoppers; some chain stores, for example, have reportedly demanded $10 a roll, along with $26 thermometers and $40 for a single pair of face masks.

Americans, however, might be unique in their fixation on toilet paper, despite reports of toilet paper panic-buying in other parts of the world. Americans are not only the world’s largest producers of toilet paper, they are also its most prolific users. In fact in many places globally, toilet paper – along with basic sanitation – is an unimaginable luxury. Toilet paper shortages, it turns out, are truly a first-world worry.

In global toilet paper usage, Americans are on a roll

According to Tissue World Magazine (yes, there is such a thing), North American consumers used an average of 25 kilograms of toilet paper per person in 2018 – or the equivalent of 144 Charmin Mega-Rolls – far outstripping the average global per capita usage of just 5 kilograms a year. By comparison, consumers in western Europe and Japan used only about 15 kilograms per person, while toilet paper usage is close to negligible in Africa, the Middle East and many parts of Asia.

Who Uses the Most Tissue

The vast bulk of the toilet paper Americans use is domestically produced. According to the market forecasting firm IndexBox, just 7.5 percent of Americans’ bathroom tissue is imported. Even so, the United States is still the world’s largest importer of toilet tissue, accounting for 9.4 percent of global imports, according to MIT Media Lab’s Observatory of Economic Complexity (OEC). China, meanwhile is the world’s largest exporter, followed by Germany, Japan, Poland and Italy. China, does not, however, export much of its toilet paper to the United States; rather, 80 percent of Chinese exports end up in other parts of Asia, Africa and Europe. What toilet paper the United States does import comes primarily from Canada and Mexico.

TP imports

Unlike with other categories of consumer goods, Americans don’t rely on foreign toilet paper because its domestic production is so strong. Among the nation’s top manufacturers are global consumer products giants such as Kimberly-Clark (maker of Cottonelle and Scott); Procter & Gamble (the maker of Charmin and creator of Mr. Whipple); and Koch Industries’ Georgia-Pacific (maker of Quilted Northern and Angel Soft). Clearwater Paper Corporation, which reportedly operates one of the world’s largest toilet paper factories in Lewiston, Idaho, is the nation’s biggest maker of store-brand toilet paper, such as for the grocery chain Kroger and for Costco. (According to the Idaho Statesman, each of the factory’s 1300 workers received 36 free rolls of toilet paper, as well as 24 rolls of paper towels, in what another local news outlet described as a “pandemic bonus.”)

Why the world isn’t flush with toilet paper

Global trade in toilet paper totaled $24.4 billion in 2018 – a relatively small figure compared to other consumer goods such as cosmetics ($44.5 billion), shoes ($99.6 billion) or refrigerators ($43.1 billion). International trade accounts for about 22 percent of global tissue consumption, according to one market analysis.

One reason that toilet paper-dependent countries like the United States rely on domestic production is that it’s the cheapest option. The United States, for instance, has plentiful supplies of both virgin and recycled wood pulp, which are the raw materials for toilet paper. And because of its bulk, toilet paper is also expensive to transport, which means that foreign toilet paper would be more costly by comparison – at least as a finished product. In fact, more than a third of the global trade in toilet paper is in so-called “parent rolls” of tissue – giant rolls that are converted by paper mills into smaller rolls and then packaged into the plastic-wrapped six-packs you would (normally) find on the shelf.

But there are other reasons why there is no vast global market for toilet paper, despite the central role it seemingly plays in Americans’ everyday lives. One is the popularity of bidets in many parts of the industrialized world, including in Europe and especially in Asia. As Tissue World Magazine points out, today’s high-tech bidets are stiff competition for low-tech toilet paper. In Japan, for instance, “high-tech toilets based on water and/or air jetting with several additional functions, including automatic lid opening, music, ozone deodorant systems and urinalysis, seem to have had some negative impact on toilet tissue consumption.” Among the most popular of these luxury bidets is the Washlet “personal cleaning system,” manufactured by Japan’s TOTO. In October 2019, the company celebrated its 50 millionth sale of the Washlet.

Bidets are potentially even catching on in the United States – perhaps in part to the current toilet paper panic as well-heeled consumers look for ways to do without toilet paper altogether. Wired, for example, recently reported a spike in Americans’ interest in bidets, including a deluge of calls to domestic bidet manufacturing startup Tushy. “This could be the tipping point that finally gets Americans to adopt the bidet,” CEO Jason Ojalvo told the magazine.

But perhaps the most significant reason the rest of the world doesn’t share Americans’ attachment to toilet paper is that this most basic of human rights – access to sanitation – does not exist in vast swathes of the globe. Not only is toilet paper unavailable, so are toilets.

A global crisis in sanitation

According to the United Nations, more than half the global population – 4.2 billion people – live without access to “safely managed” sanitation, which the UN defines as access to a “hygienic, private toilet that safely disposes of people’s waste.” As many as 673 million resort to “open defecation,” which contributes enormously to the transmission of disease. More than 2 billion people drink water contaminated by feces, the UN further reports.

One tragic result is that 432,000 people die each year from diarrheal diseases as a result of inadequate sanitation, according to the UN, including 297,000 children under the age of five. According to Rose George, author of The Big Necessity: The Unmentionable World of Human Waste and Why It Matters, diarrhea kills a child every 15 seconds. In contrast, she writes, “Modern sanitation has added 20 years to the average human life.”

Unfortunately, just 40 out of 152 countries that have pledged to provide universal sanitation by 2030 are on track to reach this goal, the result of funding shortfalls, increasing water pollution, poor governance and conflict. The current global crisis with COVID-19, certain to ravage the developing world, will set back this progress even more. In fact, the lack of sanitation – including access to clean water for hand hygiene – could accelerate the spread of disease in many parts of the world, adding to the pandemic’s already shocking human toll.

While it’s only a matter of time before U.S. grocery store shelves are stocked again with what Americans consider the most basic of staples, many more nations have far to go before they can experience the luxury of that deprivation.

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Anne Kim is a contributing editor to Washington Monthly and the author of Abandoned: America’s Lost Youth and the Crisis of Disconnection, forthcoming in 2020 from the New Press. Her writings on economic opportunity, social policy, and higher education have appeared in numerous national outlets, including the Washington Monthly, the Washington Post, Governing and Atlantic.com, among others. She is a veteran of the think tanks the Progressive Policy Institute and Third Way as well as of Capitol Hill, where she worked for Rep. Jim Cooper (D-TN). Anne has a law degree from Duke University and a bachelor’s in journalism from the University of Missouri-Columbia.

This article originally appeared on TradeVistas.org. Republished with permission.

COVID-19

The Human Factor of the Novel Coronavirus (COVID-19) and Corruption

With the explosive spread of Coronavirus (COVID-19) hospitals, healthcare providers and all citizens are finding a shortage of goods and services and employees are under increased pressure to preserve and excel in their current roles.

Unfortunately, in this time of crisis corruption is thriving and some aim to profit from others’ misfortune and push companies to the brink to maintain profits.

Around the world, countries are reporting shortages in both medicines and medical supplies due to COVID-19. All of these factors put additional strain on already fragile procurement processes and increases the risk that suppliers, knowing that government and individuals have little choice but to pay, demand higher prices.

In these challenging times having open and transparent contracting processes in place helps mitigate these risks. With nowhere to hide, corrupt actors are unable to practice price gouging and must charge governments and individuals reasonable prices.

The stockpiling of supplies such as masks, gloves, and hand sanitizers are also contributing to shortages in medical supplies. In attempts to profit from public panic, some traders have been inflating prices for ordinary consumers.

After pressure from the Department of Justice, Amazon has implemented an effort to remove tens of thousands of deals from merchants that it said attempted to price-gouge customers. The world’s largest online retailer has faced scrutiny over the health-related offers on its platform, and earlier this week, Italy launched a probe into surging prices around the internet for sanitizing gels and hygiene masks. At the same time, Italy battles the biggest outbreak in Europe.

There are lessons to be learned in health-sector Corruption elsewhere from prior epidemics such as Ebola and SARS where procurement and contracting wrongdoing led to deadly consequences. In prior epidemics, Corruption compromised containment efforts, when corrupt actors used petty bribes and other favors to avoid quarantines, roadblocks, and safe body collection procedures. Even ventilators and other medical oxygen-related equipment have been the subject of bribes and kickbacks, sometimes leading to the tragic deaths of patients. These examples demonstrate the worst case of what can happen without resilient anti-corruption policies.

In the first federal action against fraud involving the coronavirus outbreak, the DOJ obtained a temporary restraining order against a website selling a bogus vaccine.

The DOJ said Sunday, March 21st, that operators of the website “coronavirusmedicalkit.com” were engaging in an alleged wire fraud scheme to profit from the confusion and fear surrounding COVID-19.

The website claimed to offer customers access to the World Health Organization (WHO) vaccine kits in exchange for a shipping charge of $4.95. There are currently no legitimate COVID-19 vaccines, and the WHO is not distributing any such vaccine.

Besides compliance issues with third party business practices with goods and services, companies are experiencing enormous business pressure. Many companies have salespeople who cannot travel due to precautions taken, canceled flights, or, worse, quarantines. They cannot visit customers or partners, leading to slower sales. Global supply chains are disrupted, with shortages of parts and products. Company events and conferences are being canceled, resulting in fewer opportunities to build relationships with customers and market products. Customer demand for company products may be falling, and companies may be declining to make revenue projections during this time of uncertainty about the spread and effects of the coronavirus.

These disruptions can increase the pressure on salespeople to meet their sales targets. Salespeople may feel additional pressure now, when sales may be sluggish, and again when business gets back to normal, and they want to make up for the time lost. That pressure can lead some people to make the wrong choices—to engage in bribery or other misconduct—to generate business. Besides, the heightened emphasis on business priorities due to the losses from the coronavirus can push anti-corruption compliance further down on the priority list.

If/when the DOJ and SEC discover bribery or Corruption, they assuredly will not be accepting a “coronavirus defense” from companies. Compliance officers should be aware of situations like the coronavirus that could raise corruption risks and try to guard against them. Compliance officers should refer explicitly to the disruption caused by the coronavirus and emphasize that the company is committed to complying with anti-corruption laws. The communications must be to the employees who need to see them, such as salespeople who interact with customers, or “gatekeeper” functions like finance who review financial transactions.

Most importantly, senior executives and the board, if appropriate, need to make sure that the business pressures resulting from the coronavirus do not overshadow the company’s commitment to compliance and that values and ethics are maintained.

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For more information or questions, please contact Frank Orlowski at frank@ationadvisory.com or +1917-821-2147 and please visit our website at www.ationadvisory.com

Special Report: How to Keep Shipments Moving Forward During a Global Health Emergency

Delayed start to the new year
The coronavirus outbreak has prompted an official global health emergency that is severely affecting business operations not only in China but also around the globe. With any kind of widespread health outbreak, global importers and exporters are dealing with unpredictable logistics concerns that require a proactive approach to keep business running as usual.

It’s important to note that any cargo from the Wuhan, Hubei Province (the origin of the outbreak), and other quarantine zones, are restricted from leaving the province, which includes full container loads (FCL), less than container loads (LCL), as well as air freight. There will also be delays in factories re-opening, and a reduction of exports from China due to Wuhan residents not returning to work until February 17th, 2020 and other municipalities extending Chinese New Year until February 9th, 2020, including:

-Shanghai Municipality

-Chongqing Municipality

-Jiangsu Province

-Zhejiang Province

-Guangdong Province

-Fujian Province

The latest in air and ocean travel

In general, there has been an increased reduction in travel in and out of China. In areas where travel is permitted, strict health checks are causing significant delays at main air and ocean terminals, to ensure the safety of all travelers and workers. While the Wuhan port is closed, the other ports continue to operate. We also continue to see several airlines canceling flights in and out of China which can have an impact on cargo capacity.

Below are important considerations that will help keep your supply chain moving and better navigate any shipping challenges associated with the latest travel restrictions and schedule shifts.

Assessment of inventory levels

Having an accurate assessment of your inventory is expected, but it’s important to understand how restrictions on imports from China will impact your current inventory and regular shipping cadence. Look ahead to determine if the demand for your product may change in the next few weeks and if you have a need for expedited shipping. Starting those conversations now and establishing a plan are important as air capacity falls due to canceled passenger flights and higher demand.

Planning ahead in production

There are numerous variables to consider when planning for production. Working through these with a supply chain expert will help you be prepared and proactive as the uncertainty around the virus continues.

-What will production look like and has there been any discussion with the vendors and factories?

-How are existing inventories compared to sales projections?

-What plans are in place in case there is a shortage of workers in China or the demands are not being met within a specific window of time?

-Has there been a discussion about how the backlog will be addressed?

Backup sourcing options

When there is any kind of delayed start to production, keeping up with the workload poses a challenge, and so you may need to consider backup sources. Backup sourcing options are not always easy to find and keeping up with the sheer demand and quality controls can be a challenge. Connecting with a global supply chain expert to vet reliable options is important to ensure success.

While we may not know how long this global health emergency will last, C.H. Robinson’s global network of experts are dedicated to helping you get your shipments where they need to be. We continue to closely monitor the situation and provide updates through our client advisories as needed.