From competition to collaboration: Supporting international trade through a crisis
The COVID 19 pandemic is not only posing threat to humans' lives but also to the economy. This year has been the worst for global trades and new alliances are needed in order to ameliorate supply chain commotions and rift of trade flow.
In the last few months, COVID-19 has expanded from Asia to America and Europe, resulting in an economic shutdown. In every industry, the exporters, importers, manufacturers, and buyers are facing a lot of restrictions and problems.
The impact of this crisis has been sudden and disastrous. In order to break the chain, nations are calling on total shutdown, resulting in economic contraction. The World Economic Outlook, divulged by International Monetary Funds, foreshadows 3% of the global economic contraction in the year 2020.
The World Trade Organization has issued an alert of international trade falling up to the third. There is minimal transparency of improvement, so supply chain partakers are looking for ways to regulate this new normalcy.
The hard copy-based trading industry is facing trouble because 90% of the world's workforce is working from home and this industry runs off original documents. Paperwork cannot be submitted or done during this pandemic scenario and it is quite difficult for the companies to immediately adopt automation and technology.
Earlier in trading, remote capability was never on the priority but now it is at the top of the chart. Now clients are prioritizing their investment in infrastructure and stability. It's not just the banks that come up with a solution, even fintech is also trying to get into some large transactions and flows.
Tech companies, such as Microsoft and IBM have strives to provide equity. Governments are also taking measures to bolster this venture. From the private and public sector, there are serious substantial resorts for the coalition and inflow of money, skill, and reserves.
As this infection grows, every nation's economy faces severe contraction and lack of liquidity. To keep the businesses afloat new ways are needed for growth.
Related news: COVID-19 Crisis Poses Threat to Financial Stability
Supply Chain Finance is a decent solution during stable times but proves to be a boon during tough times. It benefits the constant cycle of commodities that should be maintained. Earlier, it was just a choice to fill out term extensions, but now it is helping the suppliers get finances urgently.
The governor of Incoming Bank of England, Andrew Bailey, indicated that SCF is the solution for the companies who are struggling for liquidity to sustain their supply chain. Even the US Exim also extended its SCF guarantee program for a time being.
The coalition of the public and financial sectors will work to eliminate pressure and difficulties for international trade. UK Export Finance, US Exim and other ECAs have extended their support and stated that they will be the channel from the government to the banks and then the banks can channel the capital to suppliers.