The effects of COVID-19 on our foreign trade

Updated: Oct 1, 2020

According to the World Health Organization report on March 15, more than 150 thousand people worldwide have been diagnosed with Covid-19 (coronavirus). While nearly half of these cases are in China, the remaining half is in other countries of the world. In our country, the Minister of Health last week. Following the explanation of the detection of the first case of Mr. Fahrettin KOCA this morning (March 18), it was expressed as Turkey's found in 98 cases.

When the subject is so common, it affects every area of life. After the last measures taken by the Ministry of Health, many organizations, seminars, and meetings were postponed. Many companies switched to working from home. The business world is now trying to work with remote meetings. When it comes to health, it comes first. The first precaution taken in customs operations was to ensure entry of the country after the disinfection of imports from China. Even this created a waiting cost on the products imported from China in the first place.

Too early to look at it as an opportunity for foreign trade

In a study published in the Financial Times with the idea that the disease will be in China, the effect of a 1% decrease in the Chinese GDP (GDP) on other countries was investigated. In this study, the results for our country differ significantly from other countries. China to other countries in the shrinkage Despite the negative impact, the positive sense that Turkey is foreseen to be effective in growth. It has been evaluated that the most negative effect will occur in Korea.

In this study, Turkey Exporters Assembly (TIM) for consideration by the exporters thought to be an opportunity and a study made in this direction. A demand shift is expected, especially in products we compete with China. At the beginning of these are ready-to-wear. The expectation in this direction for apparel is estimated at 2 billion USD. A similar expectation was also envisaged for the automotive industry.

Production and planning flexibility is not very high in the short term. In the medium and long term and in situations that have a permanent impact, it is necessary to consider that such unforeseen risks will have an impact on direct investment and production. In other words, if demand shifts persist, it would be correct to say that such effects are an opportunity.

A global epidemic is a threat to everyone

Until February, studies were based on the prediction that this epidemic will only remain as a local epidemic in China. By March, the outbreak, unfortunately, ceased to be a local issue and became a global one. While only China is spoken, this virus is seriously affecting business and social and cultural life in all European Union (EU) countries, especially Italy. Quarantine cities suspend both demand and production processes. This prevents the supply chain from functioning properly.

Maybe it's worth mentioning a topic here. In such global problems, the main problem arises in supply, not logistics. Because products cannot be supplied in countries. In China, which has one of the strongest logistics infrastructures, this seems very clear. Since there is no production (due to quarantine), many factories have to stop their production.

When this threat becomes global in March, the opportunity analyzes are replaced by negative impact analyzes. Because every country is looking for a way not to be negatively affected by this situation. According to an estimate published by UNCTAD on March 4, the slowdown in production caused by the new type of coronavirus (COVID-19) in China has seriously damaged global trade and may result in a drop of $ 50 billion in global supply chains in exports.

Due to the fact that many companies' global operations and production centers are located in China, a decline in Chinese production also affects other countries. The decrease in China's intermediate goods input exports affects the production capacity of any country, and thus the amount of exports, and the amount of this effect is directly proportional to the level of dependence of the sectors in that country on products from China.

Among the countries where the current situation will be most affected; European Union (15.6 billion USD), USA (5.8 billion USD), Japan (5.2 billion USD), South Korea (3.8 billion USD), Taiwan (2.6 billion USD) and Vietnam (2 3 billion USD).

Turkey is among the countries that will be adversely affected by the fall in production in China. However, our country will be more negatively affected by the negative impact on the EU. Since half of our foreign trade is with the EU, a contraction or negative developments in this market is more important for us.

What should be done

It is our greatest desire that this virus epidemic, which is a global threat first, ends immediately and without causing any more casualties. It is the most important issue to comply with the measures taken by the Ministry of Health in order to avoid further loss of life. We must follow the process patiently and calmly for a while.

It is clear that the global epidemic will have an impact on the EU, which will negatively affect our export market. Because 50% of our exports are made to EU countries. The decrease in demand in these countries will directly affect us. Although the process continues for a long time, it will be an important step to look for new export markets.

As a country whose exports, production, and employment depend on imports, this negative atmosphere in countries where we buy raw materials will affect us negatively. Every negativity in raw material supply affects both our production and export negatively. In particular, about 10 billion USD of direct imports from China are products for production such as raw materials and machinery. We also have imported for production from the EU. At this point, restructuring is required according to the new risk factor for the supply chain. Fast supplier finding technologies (agile scouting) and systems must be put into use for alternative suppliers.

Sinan Dayioglu

Sales and Export Responsible



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