Global trade is changing, so policy must adapt
Trade, at its heart, is about pragmatism. The link between production, consumption and value of exchange is something we have all experienced and learned about intuitively. From a simple beginning, however, global trade has transformed into a complex network through which increasingly larger numbers of goods, services, capital and ideas are created, valued and flow.
As we look to reset globalisation, it is imperative to make global trade more sustainable, inclusive and efficient, and ultimately build more trust.
There are multiple obstacles to this goal and policy has a crucial role to play in removing them. The four most critical are:
- Distance and time: The further the points of production and consumption the higher the risk. For example, a bushel of bananas is not as valuable if they arrive at their destination over-ripe.
- Standardisation: Sending and receiving standardised widgets is more efficient than one that accommodates uniquely shaped ones. Shipping containers, for instance, had an exponential impact on the efficient movement of goods due to their standardisation. We have a new term for sending and receiving content efficiently across national borders – “interoperability”.
- Transparency and fairness: Customers should have a good understanding of what they’re buying. No one should walk away feeling that they’ve been short-changed.
- Safety: Just the way people will avoid streets if they know there is danger traveling down them, participants in global trade need to believe they are engaging safely.
New technology offers more efficient and possibly safer ways of getting things done, and the recent advancements in trade technology have been transformative. Blockchain-enabled platforms have proven adept at reducing the cost of entry and offering more transparency and transaction security. Beyond blockchain, e-commerce and digital trade systems and corridors are gaining traction, with the ability to enhance both the accessibility and sustainability of global trade. But, if new technology is to make large scale change that is truly impactful for the global community, regulatory trade policy also must adjust in-step.
Some government-led initiatives can show us how to build future-fit trade systems and policies: the TradeTrust framework by Singapore’s Infocomm Media Development Authority harmonises the legal recognition of digital documents such as electronic Bills of Lading across jurisdictions and complements the larger global trade movement by the G7 economies on adopting electronic transferable records. This approach, which ultimately helps make supply chains more resilient and sustainable, requires governments to work together and accept unfamiliar protocols and approaches.
Good policy making is not the role of the government alone. Legislations and governing rules are not done in a vacuum. Market participants have a critical role to play. We have got to be ready to come to the table, with a clear understanding of the problems and workable ideas for the solutions. And for their part, policy makers must listen to the challenges and opportunities that business daily encounters.
It goes back to pragmatism. For trade to happen smoothly and efficiently, it needs to be more than simply one-off transactions; rather it must be a point of connection, a link, a path to familiarity and ultimately to trust. That is why trade policy has such a critical role to play. The rules of engagement are in essence the codification of trust. But to build and maintain, trust it takes time, it takes effort, and it takes everyone to lean in.
We at Standard Chartered believe this is effort well spent, and a debate worth taking a stand for.