The effects and strain that was placed on our domestic economy due to the COVID-19 global pandemic, economic lock-down, and various practices in our international trade and commerce sector, creating a vacuum that has forever changed our domestic economy.
Despite the the various challenges due to the lock-down and innovative initiatives like the Payment Protection Program (Round 1) attempt to mitigate the immediate economic damage due to the lock-down; nobody could have predicted the staggering amount many small businesses suffered.
Additionally, large retail stores, labs, boutiques, and other entities had to close their doors permanently and/or, restructure their finances (file bankruptcy, lay off employees, furlough, etc.) which resulted in a massive economic strain on our global supply chain.
If the United States does not evaluate and implement proper policy practices ( supporting US businesses first) the United States of America, will risk continuing policy practices that would keep our domestic economy vulnerable in the sector(s) of International Trade and Commerce, while blatantly ignoring the lessons we should never forget from the COVID-19 lock-down.
First, despite the fact we lost countless of small businesses across all sectors in the United States; it was due to one simple platform we weren’t ready to rely on…E-Commerce.
E-Commerce, and the variety of digital financial processing portals for goods and/or services changed tremendously during the lock-down.
It has been well documented that the United States of America has been one of the most important global consumers of international trade; which makes up approximately 25% of the global economy and/or also known as “purchasing power base”, but despite being a dominant consumer of global manufactured products, our domestic economy has not seen the results of that global purchasing power.
During the lock-down the “buy local” initiative was stressed more than ever; but despite this initiative many small businesses (especially many local small businesses) did not have the ability and/or were unable to adequately adapt to an e-commerce platform .
The lack of adaptation ability for our small businesses to transition to e-commerce platforms (mixed with incentives for other business to purchase foreign manufactured products at a lower rate for retail) created a double hit to our small businesses and economy overall.
This quick micro-analysis will address 3 areas where International Trade and Commerce policy must be evaluated.
1.) The rapid growth of various E-Commerce platforms.
2.) Payroll Protection Program (Round 1) set-backs.
3.) Foreign Manufactured Goods vs. U.S. small businesses.
The COVID-19 and national lock-down caused an obvious boom in the e-commerce sector. It resulted in the creation of new businesses and business-to-business consumer entities, and e-commerce purchases surged in both record-breaking and unprecedented levels during the COVID-19 global pandemic / lock-down.
Approximately 37% of our U.S. citizens had decided to utilize only e-commerce platforms for the remainder of their shopping requirements during the lock-down, as well as, that same 37% had the intention of increasing their online spending on e-commerce platforms due to the pandemic.
However after 3 months into the lock-down, due to the COID-19 pandemic, approximately 90% of our US citizens stated they were likely to buy essential items, groceries, and other items online only which thus, put a strain on our domestic economy that was not equipped for these rapid market changes for an e-commerce economy.
Due to this change from our various standards of purchasing practices, utilizing common e-commerce platforms like Amazon quickly surged to becoming the most popular U.S. retail entity in not only the month of March in 2020 (the start of the COVID-19 pandemic lock-down), but continued to gain more and more financial gain from retail reliance as the pandemic continued.
This affected not only Amazon on a positive level on “Wall Street”, but it severely impacted negatively our economy on “Main Street”.
You could see this effect across the country growing more severely each month… driving down the street you could see independently-owned businesses, local businesses, family businesses, and even many large retailers were forced to either close their doors, file bankruptcy, lay off employees, or (if possible) quickly adapt, invest, and operate their businesses on an e-commerce platform to survive (it’s also important to note that many companies that did adapt to an e-commerce economy had to do so at the expense of their employees). This resulted in many companies and small businesses forced to lay off many employees due to the lack of job stability and/or having not enough capital to make the necessary changes to battle the challenges required due to the COVID-19 lock-down.
Payroll Protection Program (Round 1)
Despite the innovative/quick response of the Payroll Protection Program which provided small businesses with economic relief; the SBA placed strict adherence guidelines for businesses to abide by; 60% of all the funds obtained by a business must have been utilized for employee retention, and 40% to be used on operating expenses in order to be in accordance with the Payroll Payment Protection guidelines/relief that were offered by the SBA – in order to be forgiven.
If companies broke either of those (2) percentage threshold requirements, via – employee retention, or via – operating expenses; then the company would be required to payback the amount that it was not in accordance with the guidelines set forth in the Payroll Payment Protection Program.
While the Payroll Payment Protection program was a good short term economic initiative; many employers, small businesses, and large scale retail stores could not utilize the Payroll Payment Protection as their only source of financial relief to keep their business alive (as this program was designed for only 8 weeks and/or 2 months); and, as well all know, the lock-down lasted for much longer than the first round of the PPP relief was attempting to mitigate.
Other challenges small businesses experienced was employers were competing with unemployment benefits, employee-required skillsets that changed, and unexpected overhead costs that the extended lock-down required, was too much for our domestic economy to handle.
When companies were trying to abide by the 40% of the Payroll Payment Protection (Round 1) relief for their required operating expenses, these funds were quickly insufficient as new costs quickly came into play in the new COVID-19 economy. By trying to adapt to this new world, on top of businesses everyday operating expenses, like, rent, insurance, supply chain orders, shipping, employee salaries, benefits (if applicable), and other expenses, the 40% was not sufficient.
Additionally, the SBA was not able to address and/or take into consideration our domestic manufacturing company’s that had many open / “net” payment accounts, left unpaid by- large retail stores, as a result of their closing and/or filing for bankruptcy.
Therefore, without knowing or even being notified by their “big clients” – many large retailers closed, and our small domestic manufacturers/suppliers suffered as they had relied on the forecasted revenue from the various net accounts from reputable and large retail stores.
Foreign Manufacturers and Domestic Distributors vs. US Manufacturing
The United States of America must operate with a common-sense financial and commerce platform that empowers our small businesses and support our domestic economy, promoting innovation that for our US economy.
The United States’ global purchasing power, strength of our currency, and foreign policy platforms/initiatives must hold the WTO, supply chain integrity, and address U.S. distributors (who abuse cheaper foreign manufactured products at the expense of our domestic economy accountable and/or not be incentivized going forward) as foreign goods were responsible for undercutting, targeting /profiting from purchasing “turn-key finished products” from other countries like, China.
This was done at the expense of countless of U.S. small businesses, manufacturers, distributors, and to our domestic supply chain system.
A simple example of the above is explained in something that I personally noticed during the 2020-2021 COVID-19 is below:
During the lock-down, I saw many foreign manufactured goods from China benefiting from the pandemic as many “new” U.S. companies were selling PPE products that were also manufactured in China, despite the fact the company’s were being created in the United States.
Therefore, these “new U.S based company’s” that were created during the pandemic, bought inventory from China (as China had PPE products available for purchase at a much lower rate than our domestic manufacturers), and these foreign manufactured goods that were purchased (benefiting China) was then sold to our U.S. consumers, creating further damage to our domestic economy.
Therefore, China benefited financially from the pandemic lock-down at the expense of established domestic manufacturers, already established small businesses, and the “wild-west,” economy that others used to make quick financial gain.
During the lock-down, the CDC travel guidelines, need for PPE products for our front-line and healthcare workers, and safety practices that were heavily promoted during the lock-down ,increased the demand and/or usage of PPE products (face masks) were the first high volume spike in demand product, that I personally noticed.
With this dramatic demand spike for PPE materials I saw these “New U.S. Businesses” quickly pop-up and capitalized from spike in mask sales, and then expanded in selling a variety of other PPE products such as: hand-sanitizers, test kits, and many other supplemental PPE products, …all from China.
Even more shocking, was that over 75% of these PPE products were purchased from China and other foreign manufacturers, providing these “turn-key finished PPE products, ” to these new “US businesses and distributors.”
It’s not hard to see how China took advantage of this potential opportunity for increased financial gain as it was demonstrated by their stockpiling of PPE products up to 3 months prior to notifying the WHO of the COVID-19 virus.
Lessons Learned / Policy Objectives moving Forward
Responsible Supply Chain Management
The global supply chain will always be required for manufacturing the needs of many company’s across the globe and the United States. But our policy management of how we outsource the global supply chain of our countries goods must be protected. Many U.S. companies require a global supply chain infrastructure to produce items such as semiconductor chips, or other products or “parts of assembly,” that must be done without harming our domestic manufacturing sector and/or intellectual property. It’s no secret our U.S. companies’ intellectual property have been compromised in the past by foreign manufacturers, reverse engineering our products, and without proper policy enforced on our global supply chain partners in the WTO. We must also create/enforce policy platforms that no longer incentivize U.S. based companies to go overseas to purchase, “finished turn-key products,” at the expense of our domestic manufacturers.
We must support U.S. e-commerce companies that manufacture and distribute from U.S. companies that utilize U.S. vendors for their manufacturing and/or “finished tun key products” needs, as opposed to companies that sell “finished turn-key products,” where their orders are filled from foreign manufactured suppliers and/or drop shipped.
This practice has created a proxy-impression to many U.S. consumers, thinking they are buying from U.S. companies, but in reality they are actually buying from company’s oversees, then the product is manufactured, packed, and shipped to you, and the U.S. distributor collects a small royalty fee; anywhere from 5%-12 %.
With the new economy ahead of us, countless lessons we as a country must learn from the national lock-down (due to the COVID-19 global pandemic) – we as a country must adopt U.S. Businesses first policy platforms; and protect our interests across all economic sector(s).