Beyond Borders: Connecting Commerce in the Wake of Trade Disasters

As a member of the recently formed Indo-Pacific Economic Framework for Prosperity (IPEF), Vietnam is expected to receive support from nations like the U.S. in order to digitize, streamline, and unify import, export, and transit processes. With the El Niño climate pattern advisory now in effect, countries around the world are strengthening preparations for weather disasters like wildfires, floods, and tropical cyclones. Trade facilitation should play a key role in Vietnam’s disaster preparedness, so as to minimize commerce bottlenecks and ensure fast economic recovery in the wake of trade disasters. Eliminating outdated, manual procedures and pointless red tape also ensures essential aid — like medicine, food, and construction equipment — can be delivered to countries in need without delay.  

The devastating impacts of trade disasters in developing countries

Disaster preparedness should be a priority for governments, businesses, and residents in Vietnam and other developing countries. “189 million people per year have been affected by extreme weather-related events in developing countries since 1991”, Oxfam International reveals. The result of extreme natural disasters equates to a $520 billion loss in annual consumption globally, while also pushing around 26 million people into poverty every year. Vietnam, in particular, has lost 1–1.5% of GDP annually between 1989 and 2008 due to natural disasters, which disrupts social and economic development. Based on the last El Niño event (between 2014-16), potential upcoming trade disasters will impact developing countries disproportionately — and these countries are still experiencing difficulties recovering from the Covid-19 pandemic and soaring inflation. The upcoming El Niño event is expected to cause food insecurity, health issues, damaged infrastructure, inadequate living conditions, and declines in economic activity.  

The impact of natural hazards has also been devastating in the U.S., costing almost $2.6 trillion in total between 1980 and 2023. Since most countries are now expecting natural weather disasters to increase in frequency and intensity, the importance of preparation has never been greater. Addressing flood water risks is a particular priority — storm damage, for example, has resulted in $2.1 trillion in damages between 1980 to 2021. Commercial properties should therefore be equipped with efficient storm drainage, and this is especially important for businesses operating in high-risk flood zones. Regular storm drain maintenance is key for preventing blockages; if debris like leaves and roots are left to build up, flooding will be the inevitable result, which, in turn, can end up damaging the building’s foundation.  

IPEF: the key to trade facilitation in Vietnam 

Trade facilitation is a key tenant of IPEF — launched between Vietnam, the U.S, Australia, New Zealand, Japan, South Korea, Brunei, India, Fiji, Singapore, Indonesia, Malaysia, the Philippines, and Thailand — and has the power to help Vietnam resume global commerce in the wake of natural disasters. These countries account for over 40% of the global economy, and 28% of the global goods and services trade. Since Vietnam’s trade facilitation strategy is under-developed, it can benefit from U.S. technical and capacity-building support. For instance, the U.S. can help Vietnam develop a domestic non-tariff measures database, as well as a repository of trade facilitation best practices. As it stands Vietnam’s existing database is outdated, unfit for purpose, and contains irrelevant information. 

Digitization: simplifying import, export, and transit processes  

As noted by the Observer Research Foundation, countries with a solid digital infrastructure and regulations in place at the border and among “port authorities, shippers, and freight forwarders” were able to cope with recent pandemic-related trade disruptions sparked by lockdowns and border closures far better than countries who still use manual border methods. Digitizing Vietnam’s manual procedures is a key trade reform that can streamline clearance procedures and make trade simpler, faster, transparent, and more cost-effective. “In Vietnam, imported goods are subject to more than 300 legal documents which are issued and maintained by separate government agencies. For traders to comply with these complex trade regulations, they must dedicate significant resources and time which can be especially impactful and sometimes prohibitive for SMEs” the Atlantic Council explains.  

In particular, the U.S. can improve Vietnam’s National Single Window — a trade facilitation platform enabling international traders to upload key documents, permits, and clearances in a unified, standardized format to a single government agency, therefore streamlining the import and export process. Traders, however, are still finding themselves bogged down in excessive administrative processes. By further simplifying Vietnam’s risk management practices for customs clearance, the U.S. can help improve the country’s procedures.

A resilient trade facilitation strategy is essential for connecting commerce beyond borders in the wake of trade disasters. Digitizing Vietnam’s import, export, and transit processes will effectively limit disruption to economic activity which, in turn, puts the country in a better position to cope with future emergencies and adverse events.

Source: Nina Kelly