World trade in toys is a highly cyclical business. Every year, just as everyone is putting their Halloween masks away, Chinese exports of toys drop back, and by March the following year they will typically be nearly 60 per cent lower. For the last four years, October’s peak has been getting progressively lower. Since the pandemic, the drop has been particularly sharp. China accounts for over a half of all toy exports globally, so unless we kidnap the Chinese Santa, there will be a lot of disappointment this Christmas.
Toys are a microcosm of a much bigger problem affecting supply chains globally and there are several factors driving it: the pandemic’s sustained impact on production, misallocated containers and shipping caused by the pandemic, the Suez Canal accident, driver shortages globally and disruption to the transport documentation, tariffs, certification, product labelling and VAT post-Brexit for good travelling to the EU via the UK. But while these are all important, if we focus our attention on a longer time period, then the events of the last 18 months are just highlighting patterns that pre-existed the pandemic.
Take computer games, for example. Chinese exports have fallen by 33 per cent since October 2017. They rely heavily on semi-conductor imports and in July 2018 the US imposed tariffs of 25 per cent on Chinese semi-conductor exports. Between December 2017 and December 2018, Chinese imports of semi-conductors halved as it started to accelerate self-sufficiency in production so that it was less reliant on semi-conductors imports from elsewhere. Small wonder that toy exports have slowed.
Computer games themselves were a symbol of the pandemic – as the world locked down, individuals were thrown online for work and leisure purposes. Demand for semi-conductors soared, exacerbating pre-existing shortages. So too did demand for delivery meals, online shopping, online meetings and even online exercise classes.
All of this is well-documented. It represents another fundamental shift in the global labour market that was accelerated by the pandemic. This shift has long been recognised and formed the basis of Germany’s industrial strategy and, perhaps ironically, China’s ‘Made In China 2025’ strategy as well. Both approaches recognise the threats to mid-tier jobs, the balance between leisure and work time, the increasing importance of distributed supply chains and self-sufficiency and cyber security threats as we move to a more connected existence.
What is happening now is the impact on the labour market unfolding. There are new types of skills shortages – where we used to talk about shortages of engineers and scientists, we are now talking about global labour shortages in sectors like hospitality, health care, distribution and construction. Where we used to talk about education and training for life-long learning, we are now talking about re-training to take jobs as lorry drivers. Where we used to promote free movement of people across borders globally, we are now talking about “levelling up” within countries.
Nowhere is this clearer than in the UK of course. Nando’s, KFC and Greggs say that there aren’t enough lorry drivers to deliver peri-peri sauce and processed chicken. The ONS estimates that there are around 364,000 fewer EU nationals in the UK by the third quarter of 2020 compared to a year earlier contributing at least in part to the current problems that the country faces.
But like elsewhere, the evidence suggests that this has been going on for longer than just the period since Brexit. The average age of a lorry driver is getting older, the benefits of overseas workers taking these roles has diminished because of changes in taxation for agency workers, and a backlog of driving tests waiting to be completed all make a rapid solution to the problem hard to find.
The Covid pandemic was the point where these bigger shifts in our lives was made evident. By way of example, the UK’s imports of chicken and peri-peri sauce more than doubled between January 2020 and May 2020. There is no sign of the growth slowing after that. The pandemic finally made us realise that we want our food delivered to our door already cooked.
We are witnessing a recalibration of the way the world trades. This change is driven by technology and geopolitics; it was made obvious by the pandemic. We need to take this change seriously and adapt quickly if this year’s supply chain nightmare before Christmas is not to cause real long term hardship for ordinary people as prices rise and jobs disappear without a plan to turn this into an opportunity rather than the threat that it currently is.