How the EU is Managing Trade During the Coronavirus Pandemic

By now, you’ve probably heard a lot about how the spread of the coronavirus in Europe has caused major disruptions to supply chains. But, you may not have given much consideration to what this means for the European Union. As a borderless collective of countries, you might assume that supply chains within the EU and Europe trade would be operating as normal right now. But, that doesn’t account for the fact that most member states have now closed their borders and are clamping down on cross-border traffic, both of which provide effective trade restrictions. Or the fact that Europe also trades heavily with the rest of the world.

To protect its supply chains and trade, the EU has implemented several initiatives designed to ensure the continuing production of goods and their movement throughout the union. They’ve also made moves to ensure that access to global trade routes is maintained as much as possible within external constraints like low capacity and high air freight rates so that European trade is protected.

European Trade Before COVID-19

Like any other country, the EU is largely sustained by trade, both within its borders and with countries in other regions. German Chancellor Angela Merkel has pointed out that that trade within the EU is crucial to each member state’s survival because the “European single market is based on the division of labor fractured all across Europe.”

Within the EU, Germany is by far the biggest trader on the bloc. In 2019, Germany’s exports were worth over €57.5 billion; its imports were valued at €54.9 billion. Combined, France, Italy, Belgium, and the Netherlands accounted for the bulk of EU internal trade, with each country worth between €30-€50 billion each in net trade.

While the EU sees a lot of trade within its borders, it is also heavily reliant on trade with external countries. Its total imports from non-EU countries were valued at €1.9 trillion in 2019; exports to non-EU states were over €2 trillion. Currently, its biggest trading partner is the USA, which accounts for 15.2% of total EU external trade.

Europe's Top 10 Trading Partners

What’s happening now?

As the COVID-19 pandemic has spread quickly through Europe over the last month, many EU countries have reacted by closing their borders, issuing travel restrictions, and implementing border checks. Germany, Slovakia, and Poland are just a few of the countries that have begun raising barriers that could affect trade.

Additionally, transportation between different countries in the area, which used to flow freely and without any border controls, has now been severely restricted. This has led to some issues with intra-EU supply chains and trade.

For example, at many of the EU’s internal borders, freight transporters are now facing significant wait times that are slowing the flow of trade. This could be an issue not just for the movement of goods, but also for the maintenance of supply chains. Germany’s automobile manufacturers, for example, depend on being able to get components and parts from other European countries.

It’s clear that the pandemic has had a significant impact on the EU’s trade with the wider world, too, particularly on EU trade with China. Rotterdam, in the Netherlands, is one of Europe’s biggest ports and usually processes some 470 million tonnes of goods every year.

By mid-March though, amidst the pandemic, Rotterdam’s traffic from China had fallen 20% compared to the same time the year before. Clearly, this is the result of China’s manufacturing slowdown earlier in the year and the subsequent rise in blank sailings in ocean freight and will have an overall major negative effect on trade routes between Europe and Asia.

European courier operations have also been affected by the pandemic, with many carriers facing route suspensions and delays. However, most consider themselves an essential service and are trying to operate as normally as possible.

You can keep an eye on European courier operations to see how it may affect you. And, you can still access shipping options to, from, and within Europe through the Easyship dashboard, all at affordable rates. You can sign up for a free account now to see how we can help you get your goods through the region.

How are European Couriers Being Affected?

As with trade and all other supply chains, the COVID-19 pandemic is having significant impacts on courier and mail services across Europe. Although it’s considered an essential service and most carriers are trying to maintain normal operations, they’re being restricted by route delays and government restrictions.

For a more detailed breakdown of Europe’s courier impacts, please click here.

What Measures are the EU Taking to Ensure Trade Continues?

Being so heavily reliant on trade - both within its borders and outside them - it’s no surprise that the EU is taking steps to protect its local industries and their supply chains.

Ursula Von der Leyen, President of the European Commission has proposed that measures be put in place to prioritize and ensure the quick delivery of “essential goods.” These would include things that are required in the medical and emergency services and perishable goods.

The Commission has also approved a move to temporarily waive customs duties and VAT on the import of medical devices and protective equipment from non-EU countries to ensure that hospitals and medical staff would have access to whatever they need to fight the pandemic.

Guidelines have also been issued to help minimize customs formalities, making it easier, for example, to import human organs and bone marrow for transplant into the EU or proving the preferential origin of goods.

All countries have also been removed from the list of “marketable risk” countries under a short-term export-credit insurance scheme in a bid to mitigate at least one potential trade restriction. Because many businesses are currently short on cash and facing increasing trade-related financial risks, many private insurers have stopped dealing with short-term export-credit.

By removing countries from the list of “marketable risk” the Commission hopes to allow more companies to access public short-term export-credit insurance that they need to continue trading.

Of course, ensuring that trade remains viable also means making sure that enough goods are being produced. To that end, the Commission has adopted a Temporary Framework that will ensure food security within the EU.

This includes a range of measures such as aid of up to €100,000 per farm, more time to apply for support, and additional flexibility for on-the-spot checks. These food security measures are concentrated in the EU’s agricultural and fishing industries and are designed to ensure enough fresh produce is created to maintain European trade.

What’s Happening with Brexit? What Effect will this have on Trade?

Good question. The transition deadline was extended to December 31, 2020, at which time a new EU-UK trade deal was expected to have been concluded. However, given the pandemic and the fact that key negotiators and figures within the Brexit negotiations have fallen sick, it seems unlikely that a new trade deal will be reached in time for the current transition deadline, leaving the question of UK-Europe trade in limbo.

However, both the European Commission Vice-President, Maros Sefcovic, and UK Senior Minister Michael Gove have stated that a withdrawal agreement [and trade deal] is a key priority, and remain optimistic that they’ll be able to share a draft of a free trade agreement in the “near future.”

That’s because without it, supply chains - and, by extension, many businesses - could face widespread adverse effects, from untenable financial burdens to production issues. A trade agreement will ensure that new tariffs and trade barriers don’t restrict trade between the UK and the EU.

One of the big concerns, however, is the fact that the pandemic is likely to cause a massive long-term shift in cross-border trade and supply chains; we’re already seeing some changes taking place. Thus, it seems unlikely that a new trade deal will be put in place until both the EU and UK can figure out what these changes are and the effects they will have.

During the transition period, the UK will still be considered part of the EU’s single market and customs union. This means that, through December 2020 at least, there will be no trade restrictions - such as tariffs, quotas, or checks - between the EU bloc and the UK. In theory, Europe will trade with the UK as normal.

Of course, before the coronavirus pandemic, the UK was already working furiously to secure trade deals with other countries. So far, they’ve managed to secure 19 deals covering 50 countries or territories, including Jordan, Morocco, South Korea, Lebanon, the Caribbean countries, Israel, Switzerland, and Chile. However, these only account for about 8% of the UK’s total trade.

What Effects will the US Travel Ban on the EU Have on Trade?

The EU was understandably shocked when, on March 11, President Trump announced a travel ban that would bar foreign nationals who had been in Europe in the previous 14 days from entering the US.

This was an unforeseen unilateral move designed to curtail the spread of COVID-19 in the US, and covered popular vacation and business destinations such as Germany, Italy, Belgium, and Switzerland. Many were left wondering about how the US and EU travel bans would result in trade restrictions and blocked supply chains.

However, the President made a point of assuring everyone that trade between the US and EU would continue unchecked as it was an “economic priority.” The President of the European Commission echoed this, saying that the travel restrictions did not apply to goods and cargo and that Europe’s trade links with the US would continue.

How Does China Factor into this?

As previously mentioned, China is the EU’s second-biggest trading partner, accounting for some 13.8% of its Europe’s total trade. As a result of a manufacturing shutdown in China, and the resulting blank sailings for ocean freight and low cargo capacity for air freight, trade between the EU and China has fallen over the last month and will probably fall further in the next weeks.

That’s not to say, though, that both sides aren’t going to try to limit the fallout. Last year, China’s Foreign Minister, Wang Yi, said that an investment agreement between the EU and China was a “top priority,” and while the pandemic may stall negotiations, it’s unlikely to halt them completely.

China will be keen to help Chinese companies get a better foothold in the EU market once the pandemic is over; the 5G sector will be a big part of these plans. It will be interesting to see how this plays out, given that before the pandemic, Europe was largely resistant to the idea of having Chinese 5G technology in the region.

Moving Forward

It’s clear that, like the rest of the world, Europe’s supply chains and trade has been affected by the COVID-19 pandemic. This will be further complicated by geopolitical issues like Brexit and European resistance to Chinese 5G technology. The development of EU trade with China will be interesting to watch. However, it’s clear that the union is taking steps to protect its industries and supply chain amidst the coronavirus pandemic in Europe, and that it is already focusing on efforts to shore these up in the future.