Import and Export Bottlenecks in Global Trade (Group 4) PDF

BASIC MICROECONOMICS (GROUP 4) IMPORT AND EXPORT OF BOTTLENECK INTRODUCTION Import and export bottlenecks are critical challenges in global trade, affecting the flow of goods across borders. These bottlenecks occur due to inefficiencies or obstacles in transportat...

BASIC MICROECONOMICS (GROUP 4) IMPORT AND EXPORT OF BOTTLENECK INTRODUCTION Import and export bottlenecks are critical challenges in global trade, affecting the flow of goods across borders. These bottlenecks occur due to inefficiencies or obstacles in transportation, custom clearance, infrastructure, regulatory frameworks, and supply chain management. For businesses engaged in international trade, these delays and barriers lead to increased costs, reduced competitiveness, and disrupted supply chains. Research in this area seeks to identify the root causes of these bottlenecks, understand their economic impact, and propose solutions for streamlining cross-border trade. Shipping disruptions and input shortages are leading to considerable bottlenecks in global supply chains. During the recovery phase of the coronavirus (COVID-19) pandemic, households increased their purchases of certain products, such as electronics and home improvement equipment, which caused a stronger-than-expected surge in demand, especially in some sectors. This rise in demand coupled with events beyond the reasonable control of suppliers (owing to force majeure), such as coronavirus outbreaks in ports, accidents at plants and adverse weather conditions, led to bottlenecks in the transport sector and caused shortages in specific inputs such as plastics, metals, lumber and semiconductors (Frohm,E 2021). Import and export bottlenecks are critical obstacles that disrupt the smooth flow of goods across international borders, often stemming from a combination of inadequate infrastructure, inefficient customs processes, and logistical challenges. These bottlenecks can occur at various points in the supply chain, such as congested ports, outdated transportation systems, or complex regulatory frameworks, leading to significant delays and increased costs for businesses. Moreover, these disruptions can ripple through global supply chains, causing shortages, price fluctuations, and missed opportunities in international markets, ultimately affecting both exporting and importing countries' economic growth (Hausman, et al. 2005). SUMMARY The Philippines, which is now considered as the world’s biggest importer of rice, also felt the impact of export restriction imposed by India on its non-Basmati rice products through elevated prices of exports from Vietnam and Thailand. Rice prices account for approximately 9 percent of the Consumer Price Index (CPI) of the Southeast Asian country (PNA, 2024). According to the USDA, due to the rising global prices and tighter exportable supplies in Vietnam, the Philippines has shifted some purchases to other suppliers. Buyers in the Philippines chose to pay these elevated prices from Southeast Asian suppliers, which resulted in higher retail prices in the Philippines. The international agency said the decision of the government to slash rice tariffs to 15 percent is expected to pull down landed prices of imported rice, thus easing inflationary pressures while spurring additional Filipino rice consumption. Furthermore, the United Nations’ Food and Agriculture Organization (FAO, 2024) said local rice traders and importers held off on their purchases until the lower rice tariffs take effect. (Arcalas, 2024) The public may start to feel lower rice retail prices next month in August as imported rice with lower tariffs started coming in, the Department of Agriculture (DA) explained. Executive Order (EO) 62, which lowered the tariffs on imported rice from 35 percent to 15 percent, was implemented last July 5th 2024 lasting until 2028. The Philippine Statistics Authority (PSA) said that the Executive Order 62 may help reduce retail prices by PHP6 to PHP7 per kilo. The DA Secretary Arnel De Mesa explained that importers may have waited for the lowered tariff before they applied for sanitary and phytosanitary import clearance (SPSIC), with around 302 applications approved for the entire month of July. (Sevillano, 2024) EXPLANATION According to the Vietnam Trade Office in the Philippines, the country is Vietnam’s largest buyer to date, accounting for over 80 percent of the total rice imported into the Philippine market. (PNA, 2024) But due to the rising global prices, the El Nino Phenomenon, and the 35 percent rice tariffs, the Philippine market felt the rising retail prices of grain. This connects to a critical challenge in global trade, affecting the flow of goods across borders. Specifically this bottleneck happened at this point of the supply chain–which is the complex regulatory system of the Philippines. The 35 percent tariffs and the Philippine governments’ announcement of the Executive Order 62 to lower the tariffs might’ve prompted the importers to wait for it before applying for the sanitary and phytosanitary import clearance (SPSIC) causing delay for the approximate of the whole month of July before the Philippine market can feel the lower prices of goods. The import bottleneck occurred due to obstacles in custom clearance, regulatory framework, and supply chain management. These disruptions caused price fluctuations affecting the country's economic growth. OPINION/RECOMMENDATION The bottleneck in the Philippine rice supply chain, caused by high tariffs, regulatory challenges, and external factors like El Niño and rising global prices, highlights inefficiencies in the country’s trade and regulatory systems. The 35 percent rice tariff, while aimed at protecting local farmers, has contributed to rising retail prices, making a staple commodity less accessible. Delays linked to the anticipated tariff reduction under Executive Order 62 further reveal the sluggishness in the regulatory framework, as importers waited to apply for sanitary and phytosanitary import clearance (SPSIC). These bureaucratic hurdles underscore the need for a more responsive and streamlined system. To resolve these issues, the Philippine government should expedite the implementation of EO 62 and reduce delays in SPSIC issuance, allowing importers to respond quickly to changing market conditions. While reducing tariffs is a step in the right direction, it must be paired with efficient customs processes to prevent future disruptions. Additionally, the Philippines should reassess its trade policies to balance the protection of local industries with the need for food security. A flexible tariff structure that adjusts according to market demands, combined with better infrastructure and coordination at ports, will help mitigate delays and limit price volatility. These reforms, along with improved collaboration between government agencies and importers, will build a more resilient supply chain capable of adapting to global challenges, ultimately ensuring stable rice prices and promoting economic growth. REFERENCES Philippine News Agency. (2024, September 4). DSWD partners with private sector for relief operations. Philippine News Agency. https://www.pna.gov.ph/articles/1229381 Philstar Global. (2024, July 15). USDA hikes rice import forecast for the Philippines.The PhilippineStar. https://www.philstar.com/business /2024/07/15/2370154/ usda-hikes- rice-import-forecast-philippines?fbclid=IwZXh0bgNhZW0CMTAAAR1MdbRrICcO 0IWNylozH CvE-bWyDWycvXspHClxwhoNhamGCwREvxjU1o_aem_ h2kC6l-Gia7Gprj1vZaivw RSM US LLP. (2024). Bottlenecks in the supply chain. RSM US.https://rsmus. com/insights/economics/bottlenecks-in-the-supply-chain.html Philippine News Agency. (2024, September 4). President Marcos urges lawmakers to prioritizebudgetbill. Philippine NewsAgency.https://www.pna.gov.ph /articl es/12 27887?fbclid=IwZXh0bgNhZW0CMTAAAR1dk6ZSIReg8sfGTtApt9 68Hy 4Wm4D_8d1Vp-FFRV15E364BxNDmujk1rQ_aem_JA_w0U3uyx mHkh Erik F., Gullema V., et al. (2021, July). The impact of supply bottlenecks on trade. https: //www.ecb.europa.eu/press/economic-bulletin/focus/2021/html/ecb.ebbo x20210604~63510c70d1.en.html