Key Factors Responsible for the Chaos
Intermittent Lockdowns
The first and foremost factor that has dented the shipping industry’s progress has been the implementation of intermittent lockdowns around the world. These lockdowns have resulted in economic activity declining sharply in most parts of the world. In addition to this, such lockdowns have also caused restrictions in the movement of labor. These conditions have made it extremely hard for the industry to find the workforce needed to load and unload goods. Similarly, numerous international warehouses have closed, leading to a shortage of raw materials.
Cross-Border Demand
The ongoing pandemic has had a majorly negative impact on the cross-border demand for goods and services. This decline has caused significant damage to the shipping industry as vessels had to be docked for months, as they did not have permission to transport goods.
Border Closures
There has been a significant rise in nationalist sentiment, and several countries have closed their borders to protect the interest of their people. Others have decided to increase the number of checks undertaken to clamp down on the spread of the virus within their country. At the same time, vessels that continued to sail were unable to utilize their maximum capacity due to lower demand for international goods. The nature of this pandemic is such that customers are now hesitant about purchasing products from unknown overseas manufacturers.
Ongoing Trade War
Another factor that has caused damage to the prospects of the shipping industry is that certain countries are in the middle of a trade war. For instance, the U.S. and China are in ongoing tariff disputes, which has resulted in large-scale tariffs on imports from each other. Similarly, Australia and China have also announced new tariffs on certain products sourced from each other. Other countries such as the UK also continue to face significant trade challenges in the current post-Brexit environment. These trade issues have resulted in a situation where the shipping industry cannot realize its true potential.
Conclusion
In conclusion, the current chaos in the global shipping industry is driven by factors such as intermittent lockdowns, increased border checks, as well as compliance challenges. However, whilst there are still significant challenges to navigate, the industry is expected to bounce back during the second half of 2021, opening up more trading opportunities.
If you need external assistance related to your trade compliance program, OCR’s global trade management software ensures that your business is fully compliant with all trade regulations. For more information, please contact us.
