How COVID-19 Changed International Business Operations

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Just over a year ago, it was hard to guess how the world would look after the COVID-19 pandemic. With 3.7 million deaths worldwide and nearly 600,000 in the United States alone, it’s clear that many lives will not be the same. Although the pandemic continues, some aspects of life are approaching a more normal pace, aided by the surge of 2.3 billion vaccine doses. This increasing pace does not mean that things are back to how they were pre-pandemic, especially in the world of international business. To say COVID-19 changed international business is an understatement.

When lockdowns began last year, many international businesses experienced disruption across supply chains and in their systems. The pandemic walloped international business. Rutledge Press recently published a book Covid-19 and International Business: Change of Era, examining the enormous impact of the pandemic on international business. Although no blog can treat the subject in-depth, let’s look at the overarching themes on pandemic shifts in international business.

 

COVID-19 Changed International Business: Broadened and Restricted Labor Pools

The COVID-19 pandemic had divergent effects on the labor pools on which international business depends. Last year, for much of the first and second quarter, numerous countries worldwide went into lockdown as COVID-19 was identified first as an epidemic and then as a pandemic. From a very basic perspective, this lockdown led to a decrease in international travel, as meetings shifted to video conferencing software to connect teams across the globe. Many businesses saved time and the associated expenses as a result.

In some ways, the pandemic’s video-conferencing revolution broadened the pool of potential employees. No longer does it matter if your newest employee is in China, England, or India. When everyone can meet remotely, there’s a greater opportunity for talent and expertise. Given these benefits, it’s hard to know when—or even if—businesses will return to the same amount of business travel and in-person meetings.

While the past year has demonstrated the benefits of remote meetings, it remains to be seen whether or not the loss of in-person connection will have a lasting impact on international business agreements and contracts.

For those companies where location is relevant—for example, in a manufacturing facility—the ability to obtain work visas for immigrants or ex-pats may be more challenging even after COVID-19 travel restrictions are no longer in place. Countries may continue to uphold stringent requirements for entry, and with high unemployment rates, the focus may be on providing jobs for local people.

 

The Pandemic Disrupted Globalization of International Business

Globalization has been on the rise for many years. Yet COVID-19 disrupted globalization as the world ground to a halt. Early predictions from last Maywhile inevitably rough at this stage, call for a 13-32% decline in merchandise trade, a 30-40% reduction in foreign direct investment, and a 44-80% drop in international airline passengers in 2020[i]. These numbers imply a major rollback of globalization’s recent gains, but they do not signal a fundamental collapse of international market integration.”

Supply chain disruption played a large role in this interruption. As a result, many companies have looked for ways to shore up their business practices and maintain agility. Re-shoring is a major concern now for many businesses. That’s not to say that all business and manufacturing will return to its country of origin. However, re-shoring may increase to support business continuity. Currently, businesses that want to re-shore have significant leeway as there is no legislation requiring (or even supporting) re-shoring.

 

The Pandemic Accelerated Digital Transformation of International Business

The pandemic also markedly shifted the landscape of international business by forcing companies to integrate digital transformation tools. Although the Industrial Revolution 5.0 was on the horizon, the need for remote work, innovation, and agility launched international business into action. In fact, McKinsey reported that “The great acceleration in the use of technology, digitization, and new forms of working is going to be sustained. Many executives reported that they moved 20 to 25 times faster than they thought possible on things like building supply-chain redundancies, improving data security, and increasing the use of advanced technologies in operations.”

 

COVID-19 Changed International Business: Taxation

Up to this point, we’ve looked at some of the structural impacts across the rules of international business. There are, however, also clear legal implications and adaptations. The Organization for Economic Cooperation and Development, for example, outlines some of the tax ramifications across a variety of jurisdictions. The statement examines circumstances such as creating permanent establishments, concerns related to residency changes, and parameters around income for cross-border workers. The pandemic clearly created unanticipated opportunities and challenges in the tax treatment of international businesses.

 

Pandemic Dynamics Continue to Impact International Business

Although COVID cases in the United States have been dropping over the past months, that is not true throughout the world. Countries with less vaccine access, such as India, have seen drastic rises in the number of cases and deaths. This changes the rules for international business engagement. How will companies proceed when some of their employees are immersed in the ongoing day-to-day ramifications of the pandemic, while others are experiencing what is nearly a “return to normal”?

As time passes, the impact of the pandemic on international business will continue to unfold. It may be years before companies fully appreciate and adjust to how COVID-19 changed international business. It’s critical, however, for international businesses to maintain engagement with the constantly adapting rules; if they do not, they may find that they are left behind as other businesses thrive.

The American Bar Association offers a plethora of resources for international business lawyers to address COVID-19 and International Law. The resources cover topics such as arbitration, in-person signature requirements, and international courts and tribunals. As employees experience more volatility and unpredictability, international businesses will need to adapt organizational practices and processes. And international businesses will need skilled lawyers to do so.

 

Premier International Business Lawyers to Assist You

Here at the Boyer Law Firm, our knowledgeable attorneys have many years of expertise in international law. Cross-border collaboration can be even more complex in today’s pandemic-riddled international business environment. Having a team of experts on your side ensures you have someone by your side every step of the way. Contact us today for a consultation with our legal team.