The Coronavirus: A New Risk of Trade

Over the past three generations, analyses of trade have indicated that speed of innovation and change is supportive of improved living standards. Growth of a country’s international trade has typically been more rapid than growth of the domestic economy. 

There is strong historic support for the benefit of speed. The Roman empire’simpact on thought and development can still be felt today. Its territories, also in the Middle East, were expanded less through armed conflicts, but rather through the speed and improvements offered to its international collaborators. The Pax Romana insured that merchants could travel safely on the roads that were built, maintained, and protected by Roman legions. The common coinage facilitated the speed of business transactions throughout the empire. Central market locations through the foundation of cities and excellent communication systems enabled the development and distribution of innovations. 

But conditions change. On February 2, the U.S. State Department placed China on a travel advisory of ‘Level 4: Do Not Travel’ due to the novel coronavirus (Covid-19) outbreak.  As of February 12, the death toll from the virus is at least 1,113. 

It matters how quickly something can be provided to a specific location. Also needed is control of the speed of distribution combined with the capability to plan for the “what if” question in case a disruption of shipment is required. 

We need to discover and systematically assess possible trouble spots of globalization and highlight the consequences of dependence. It is vital for the formulation of strategic visions to understand the need and capacity for disruption.

In the 1970s, Professor Bernard LaLonde of The Ohio State University expanded his analysis of inventory carrying cost to include the expense of capital tied up in the storage of goods. With interest rates of 17 percent and higher during the Carter presidency, his innovative assessment of expense and risk changed corporate inventory management substantially.  

The speed of Chinese viral contamination sends us a risk signal for trade. We discover that rapid propagation does not just work for incoming and outgoing goods and services. Just as there has been substantial growth in health care tourism, where patients obtain lower cost medical services by traveling abroad, the expansion of viral infection can be hard to contain. 

Rapid distribution outwards and inwards can be deteriorating and distracting. The coronavirus outbreak is our wakeup call to be alert, not just to the benefits but also the risks encountered in international outflows and inflows of services, ideas, thoughts, and goods.

This problematic raises the key issue of how to deal with such risky occurrences. One useful approach is the consultation with experts who have experienced sudden, frequent, and unexpected risk conditions. Such expertise can be sourced best from the Middle East where there have been many past occurrences of uncertainty, scrutiny, and restraint. Local experts may be able to help manage hostile business environments both at home and abroad. They can anticipate repercussions from disruptions and also calm down hyper reactions. And therein lies much of the wheel of fortune: if enough people believe in a condition, their understanding may well become reality. Let us not accept complex issues without expert insights.

Keywords: Coronavirus; Covid – 19; Risk; Global Trade; Outflow; Inflow; Bernard LaLonde; Distribution; State Department; International Trade

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