Tensions between superpowers and a global health crisis have left international trade in a precarious place. Graham Bright at Euro Exim Bank looks at where we go from here
We have become all too aware of the impact of Covid-19: unprecedented economic disruption, excessive levels of sovereign debt, threats to employment and wealth creation, as well as infringements on our most basic freedoms.
The fractious nature of Joe Biden’s US presidential victory – with unsubstantiated charges of voter fraud amid a whirl of disinformation – reflects the tumultuous nature of global geopolitics in 2020. Uncertainty rules, and with Brexit still a work in progress, consensus and clarity look more unlikely by the day. At the time of writing, we don’t know how this will all play out; a possible vaccine for Covid-19 has just been announced, hopefully this might be the catalyst for a more settled outlook.
Despite this upheaval, trade remains essential to the global economy and must continue, even if volumes have suffered through the year so far. This reduction is not exactly a surprise, principally due to long-standing trade tensions between the US and China causing a general economic slowdown.
Today, rebuilding supply chains and reenergising trade with an efficient and cost-competitive flow of goods can only be achieved through international cooperation.
Whilst a number of well-intentioned free trade agreements are in place, the movement of ethically sourced goods, fit for purpose and without sanction is a high priority.
However, if threats of trade barriers, isolationism and a constantly shifting stance from superpowers on tariffs continues to play out, this may seriously derail the efforts of emerging economies from achieving sustained economic health and future competitiveness.
Marine traffic, the lifeblood of trade has also been heavily impacted. Rather than free movement of goods, additional measures such as quarantine and closures have added layers of administration. Ships and containers are often in the wrong place, the staff to handle them are on furlough, or required to wear expensive PPE – it all adds cost and time.
The travel industry, in particular air transport, has been hit hard. Fewer planes means less cargo space, with the price of air cargo and hence delivery of cost-effective goods rising up to 60% on some routes. This has especially impacted the supply and demand of health-related items. Now is the perfect time to push aside isolationism, nationalism, protectionism, tariffs and tax barriers, all of which hinder global trade.
Can technology resolve the issues of failing confidence, maintain supply flows, ease export restrictions and serve customers without vested interests? Will blockchain and AI-enabled solutions satisfy the immediate and long-term demands of global industry?
Technology for technology’s sake will not miraculously reenergise commerce. It will not boost confidence, bring back footfall to the failing high streets or spark a boom in international trade. However, there are specific areas where technology and innovation can make a real difference, one of which is combatting counterfeiting and fraud.
Crime of this nature is highly sophisticated, and costs industry millions – yet in no way is it a new phenomenon. Records from 300BC document a failed attempt to sink a barge of corn and claim for insurance! To the present day, and it’s fake antibody testing, useless PPE and medical supplies that are impacting lives and hurting the economy.
Covid-19 has brought about an era of remote working – but not always through secure networks. With more time than ever spent online, we are witnessing significant increases in credit card and investment scams, identity theft and even fraudulent furlough pay-outs through the creation of fake companies. Unfortunately, it is not a case of “if” security will be breached, but “when”.
Embracing new technology
Renowned for our technological capabilities and awarded for our constant innovation, Euro Exim Bank has always embraced new technologies.
We took early steps implementing blockchain capabilities inside our trade platform. This was enhanced further through participation with Ripple and its secure, frictionless distributed ledger payments capabilities, xCurrent and ODL – their on-demand liquidity services. This uses XRP digital assets rather than costly fiat currency in the exchange process between local currencies.
The complexity of the trade ecosystem, with constant changes in regulation, governance, and compliance, continues to directly affect the rate and success of implementation of technologies to cost-effectively rationalise, standardise and re-use processes.
And remember, globally, it is not large corporates but 150 million micro-, small- and medium-sized businesses that account for 99% of import enterprises and 98% of export enterprises. One can only speculate at the level of automation present in these firms, or indeed their capacity to adopt new technology.
The benefits of technology in trade cannot be understated, especially where it can fundamentally assist in removing administrative inefficiencies and easing flow of goods through:
- Digitisation of trusted documents;
- Standardisation of cross-border processes;
- Faster sharing of certification, inspection, insurance, forwarding and bill of lading documents;
- Streamlined customs clearance with less delay
Furthermore, e-contracts and electronic signatures on application, indemnity forms, and access to cost-effective electronic payments will create value across multiple jurisdictions, increasing efficiency throughout the network of global transactions.
It’s fair to say that technology, especially when considering blockchain, has not yet reached the extent of its possible application.
At Euro Exim Bank we firmly believe that global trade will continue and flourish. Our institution stands ready to support all initiatives and participants to ensure this happens and, whether its cybercrime or a health crisis, we will work in partnership to overcome the many challenges that lie before us.