Global Supply Chain Disruptions : Competition Policy Implications
This note complements prior World Bank work analyzing the technical drivers of supply chain disruptions from 2021 onwards. The focus of this note is to shed light on the role of market structure and dynamics by: (a) analyzing how market dynamics an...
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| Format: | Report |
| Language: | English |
| Published: |
Washington, DC
2022
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| Online Access: | http://documents.worldbank.org/curated/en/099548205272263182/IDU0cd8b1e1a0e97604b5b09fdf08385d6d7cdb2 http://hdl.handle.net/10986/37507 |
| Summary: | This note complements prior World
Bank work analyzing the technical drivers of supply chain
disruptions from 2021 onwards. The focus of this note is to
shed light on the role of market structure and dynamics by:
(a) analyzing how market dynamics and industry structure may
have contributed to the current situation; (b) outlining
implications for value chains in developing countries; and
(c) suggesting further policy and research priorities. On
the demand side unexpected demand spikes in the United
States have created disruptions due to the sheer volume of
logistics throughput needed and the sudden, unexpected
rebound in demand that is contributing to the “bullwhip
effect.” On the supply side, capacity constraints with
respect to port-hinterland connections have been the main
bottleneck rather than maritime shipping per se. However,
this note raises the concern that industry structure and
alliance practices within the maritime shipping,
shipbuilding, and container manufacturing sectors may be
contributing to the extreme reaction of shipping prices. In
the short term, policy makers in developing countries can
help mitigate the effects of rising shipping costs and
decreasing service levels by extending the timeframes of
trade finance and removing barriers to overland trade.
Although there is little that governments outside of China,
Europe, and the United States can do to directly solve the
process bottlenecks, market characteristics suggest that the
global logistics industry may be susceptible to collusive
outcomes, which exacerbate price spikes. Thus, governments
could pay closer attention to potential anticompetitive
behavior, especially in maritime shipping and hinterland
logistics. In the medium to long term, policy makers,
regulators, and researchers should more carefully consider
efficiency–resilience tradeoffs in the global logistics
industry. Key topics to explore include investigations into
potential anticompetitive behavior by shipping lines and
increased scrutiny over mergers and alliance practices among
logistics service providers and the supplying manufacturing
industries. Public-private and private initiatives to
facilitate data sharing may also help improve forecasting,
which could help mitigate the effects of demand volatility.
This note was predominantly prepared before the invasion of
Ukraine by the Russian Federation, which started in February
2022. In the short term, the war is likely to exacerbate the
congestion at European ports and disrupt Asia-Europe rail
links, potentially leading to higher shipping prices. In the
long term, it remains to be seen whether decreases in global
demand due to the war will lower shipping demand and prices.
Nevertheless, the long-term structural constraints to
competition in the sector highlighted in this note remain
the same overall. |
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