Nama : Aditya Ariaguslidinata
NIM : 210910101075
The Covid-19 Pandemic and International Trade: Temporary Turbulences or
Paradigm Shift?
Original Version
3. Long-term consequences of the Covid-19 pandemic The global economy is built on the
specialization of labor across countries. In line with the theory of comparative advantage, which
provides the foundation for the current system of the international exchange of goods and
services, such specialization allows for maximization of the total output and improvement in
welfare. The Covid-19 pandemic has shown, however, that clear benefits of the system come
with costs. As noted by two commentators, “singlesource providers, or regions of the world that
specialize in one particular product, can create unexpected fragility in moments of crisis, causing
supply chains to break down.” 15 Such disruptions can have significant impacts, both on
individual companies and global systems of distribution. For example, China is a dominant
global supplier of active pharmaceutical ingredients for many important medications. In 2018, it
accounted for 95% of the United States imports of ibuprofen, 91% of hydrocortisone, 40-45% of
penicillin, and 40% of heparin.16 Such a situation becomes particularly problematic in times of
crisis when production facilities are not fully operational, while the demand of the domestic
market may require countries to redirect part of the export. This is also true for other sectors,
even if the consequences of possible disruptions are not so dramatic. This newly discovered risk
may eventually lead to profound changes in existing supply chains. The early signs of such a
process have been visible over the last years with the Trump Administration pressuring
American companies (albeit for different reasons) to move their production back to the United
States, or at least outside of China.17 These efforts have been only partially successful, but the
current outbreak may trigger a more strenuous response. Interestingly, it seems that both private
companies and governments may now be interested in introducing such modifications. From the
point of view of private companies, shortening and diversifying supply chains can be a rational
strategy that allows them to ensure smoother operations and eliminates risk of supply shortages.
For governments this may be a way to limit dependence on one country (particularly in
emergency situations) and as a consequence make them better prepared for future crises. This
way of thinking is well illustrated by the recent statement from US Secretary of State Mike
Pompeo during an interview in which he stressed the need to, “fundamentally review our supply
chains and make sure that we know those supply chains and have control over them for moments
just like this.” 18 It seems that this approach will be followed regardless of who wins the
upcoming presidential election. In the past, regulatory initiatives aimed at improving
vulnerabilities with supply chains have attracted bipartisan support in the American Congress. 19
Some commentators argue, drawing on historical parallels, that the consequences of the
pandemic will be even more far-reaching. They forecast a resulting deep and lasting
transformation of the process of globalization.20 The new world, as expected to emerge, will be
characterized by tighter immigration rules, newly erected trade and investment barriers, and
technological decoupling, with a central role reserved for States rather than for international
institutions (as it seems that only States are capable to offer solutions for existential challenges
such as the Covid-19 pandemic).21 The probability of this scenario is further increased by the
various recent developments. It seems that some fundamental reorganization of the global
economy and international order has been actually going for some time. In this context, it is
worth noting that some multilateral institutions have already been marginalized. The WTO may
serve here as a perfect example with its partially paralyzed dispute settlement system.22 In
response to the series of the recent migration crises, immigration rules have also been
strengthened in many countries. Global trade restrictions have been on the rise for last couple of
years, and they are not limited to the economic relations between the United States and China.23
The European Union, which is traditionally very open to international trade, has recently taken a
more assertive stance in its willingness to impose more vigorously its anti-dumping duties,
countervailing measures, and trade sanction as well as to undertake strategic investment
screening.24 Technological decoupling – seen by both China and the United States in terms of
competition for global technological supremacy – has been an important part of their trade
war.25 A series of the recent competition proceedings by the European Commission against
American technological companies also seems to constitute one of the elements of this process.
Whether this will lead to the resurrection of national states (as suggested above) or rather to a
segmentation of the world that will be based on the regional economic blocs around the local
hegemons that compete against each other in the global power game is still an open question.26
Paraphrase
All the people already know that covid brings a lot of bad impact to our life, especially in
economic side. All the countries in this world have felt how covid brokes their economic system
and also their economic plan. But, something that people do not know that covid also bring a
good impact to economic system in long term. How it can happen? How can covid bring a good
impact to economic system in long term? To answer the question, we already know that every
countries in this world is not able to fulfill all their people needs by theirself. Every countries in
this world have their own specialization, we take example from our country Indonesia, we can
produce lot of coffee in a year, so we can fulfill the demand for coffee in our country, and also
we can export our coffee to another country, because we can produce coffee more than the
demand for coffee in our country. This thing is called specialization, the ability of a country to
produce some stuff more than another country can do. But, like something we know before,
every countries can not fulfill all their people needs by theirself, same like Indonesia, in one side
we can produce lot of coffee, but in another side we can not produce some things like electronic
stuffs, because of some reasons, like the cost required, lack of skill, lack of experience, and
another things. So, what something can we do to fulfill the demand of some stuffs that we can
not produce in our country? Yes, we do international trade with another country that can produce
something that we can not produce in our country. Like something already said before, our
country can not produce some electronic stuffs, so we do some agreement with another country
who have specialization in this thing, like Japan, China, and United States. We do some trade
with China, like we let china to sell their phone in our country, because we can not fulfill our
own demand with ourself, but we also do some export to china as the part of the agreement,
example like we export our palm oil to china. So with all of that explanation, we already know
what is specialization in international trade. But, back to the topic, we know that our situation
now is not same like normal situation, the problem is coming when covid brokes all the
economic plan of all the countries in the world, and also gives an impact to international trade.
We know that covid started from china, the first case found in this country, this things make lot
of impact to china, lot of countries blame china as the reason why this disease appeared. All
these things make china’s economic brokes, but we know that china is one of the most powerful
country in this world next to United States. Their economic policy can change worldwide
economic, we know lot of stuffs in this world comes from china. Like something we know
before, every countries have their own specialization, but China not only has one specialization,
but has too many specialization, it becomes a problem when a superpower country like China has
a problem inside their country. When their economic brokes, it means they can not produce all
their specialization with normal, example if normally they can produce 1000 medicine in a year,
but in pandemic they just can produce 500 or even less. So what will happen after that? The big
problem will come, because when china can not produce some stuff with normally, it will broke
international trade. We know that most of stuffs in this world come from China, China fulfill
some worldwide demand of some stuffs, a little example, China export 91% of United States
needs in paracetamol, 95% of ibuprofen, and lot of another medicine. From that fact we already
know how important China’s economic to international trade, because if China’s economic get
broke, it means the production of some stuffs will be decrease, and when it decreases it will
make some demands in some countries that do international trade with China can not be fulfill.
So it will be the part why covid will give a good impact to international trade in the long term.
Like what something we know before, when a country can not fulfill their people needs by
theirself, they will try to do some international trade with another country to fulfill their people
needs, but what something happen now, they can not do international trade, because of the
condition of worldwide economic after pandemic. Because of that reason, every countries in this
world need to find a way to fulfill their people needs without international trade. So they need to
improve their country specialization in the stuff that they can not produce in their country.
Example like Indonesia, we know that our country can not produce a high quality electronic stuff
with low price in a big scale, but with this situation we need to find a way by ourself to improve
it, we can not always depend to another country like China, because their economic also get
broke, we need to improve our people skill, our people experience and another things. This why
we said before that covid can give a good impact to economic thing, especially international
trade, because if all the countries or most of the countries in this world no longer depend to super
power country like China or United States, it can make the international trade will has a better
competition, because the trade will no longer be controlled by super power country. When all the
country can solve their own problem by theirself, it can make the world economy work better
because it is no longer focused or controlled by super power country. But it just can happen
when all the country want to improve their economic system, and they must survive by theirself,
and no longer dependent on other countries, because covid will make them be more independent
as a country. No more dependence on super power country, no more monopoly on international
trade, when it all can happen, worldwide economic will be better, and it all can happen because
covid teach all the country to be more independent.
