TradeWindow: Digital trade provides hope through challenging times

It won’t come as a surprise to many people to hear that we remain in a very challenging situation when it comes to global business. Our exporters are operating in an environment that is difficult to navigate due to continuing uncertainties – the seemingly endless pandemic and the war in Ukraine are causing all manner of increasing geopolitical tensions, energy shortages and food insecurity around the world. 

Because of ongoing supply chain disruptions, we are continuing to experience expensive shipping costs, delays at ports and import shortages of certain materials and goods. When you add global inflation to the mix, it’s no wonder that havoc is being wreaked across our global markets. 

This perfect storm has been on the horizon for a number of years, brought somewhat forward by the Covid-19 pandemic. And although trade has still performed strongly for New Zealand over last few years, volumes are now starting to dip due to labour shortages – despite values holding up reasonably well given strong commodity prices. 

The good news is that it’s not 2020, which is to say we’re not back at square one like we were at the beginning of the pandemic. We’ve learned a lot since then, with governments realising they must take effective action to address some of the lingering economic problems. As a result, we are likely to see better policies flowing through and fewer knee-jerk or even protectionist reactions that make things worse. Despite the well-evidenced supply chain disruptions, we are also seeing proof that exporters with strong relationships can continue to do business effectively. 

While we haven’t yet been able to break through protectionism in some overseas dairy and meat markets, as the recently negotiated NZ EU free trade agreement shows, other FTAs in both New Zealand and Australia are beginning to open up new and exciting markets, while also signalling significant investment into new arrangements to provide better frameworks for digital trade. New Zealand is pursuing this through the Digital Economy Partnership Agreement (DEPA), which is attracting interest around the region, and Australia through new and ground-breaking agreements it is forging with Singapore and others.

At their best FTAs can open previously closed markets and keep them open, while putting in place effective rules which allow trade to flow freely and minimise compliance costs, outcomes which are of vital interest to the Australasian region as a whole, but a lot depends on implementation.

One of the key elements of the digital economy, which will have the greatest impact on trade, is the implementation of end-to-end secure and trusted paperless trade. While universal adoption of this is still far off, a start has been made.  Reducing the vast amount of paper documents is not only good for the environment, it can reduce costs and assist in moving goods more quickly through supply chains.

To have our world economies work together in this way will require regulatory and legislative changes being made first to our own systems. To date this has been somewhat disjointed and further implementation is needed to make it work seamlessly, but we are getting there. 

There is hope on the horizon amidst what has turned out to be an immensely challenging time for players in the import, export, and logistics industries. If we can move the agenda for digitalisation forward at pace, we may be able to cushion industries from future global supply chain shocks similar to those that have been experienced in recent times. 

This post was originally published by TradeWindow, and written by Stephen Jacobi – Managing Director, Jacobi Consulting Limited and Executive Director, NZ International Business Forum Inc.