In the aftermath of a global pandemic and with the context of shifting geopolitical landscapes nations struggle with what looks like slowing trade. In this article we examine the current state of global trade, weighing the optimistic strides made against a backdrop of challenges.

Progress in August

First, the good news – it looks like significant progress in global trade growth was made in August, as several factors appear to support broader international trade – according to the WTO’s August 2023 trade report.

For example, Ukraine has initiated a significant move by opening a “humanitarian corridor” in the Black Sea for cargo ships. It’s a marked change when considering the recent collapse of the Black Sea Grain Initiative: Russia’s exit from the grain initiative and its subsequent blockade on Ukraine.

On a broader trade front, the WTO stated in the same report that services trade is witnessing what looks like more robust growth compared to merchandise trade. This difference is particularly accentuated thanks to export restrictions on key goods, including food and fertilizers.

In fact since 2020, there has been a significant increase in export restrictions. For instance, 63 such restrictions are in place for food, feed, and fertilizers.

Last year, the services trade saw a remarkable 15% boost, decisively outperforming the 2.7% growth in merchandise trade.

When combined, the total trade experienced a 13% surge, accumulating to an impressive $31 trillion.

Challenges in many corners

Diving deeper into global trade intricacies, we see a few pinch points – including a reminder of how physical pinch points such as the Suez and the Panama Canal can restrict global trade.

A severe drought at the Panama Canal is causing significant disruptions to global trade. In practice cargo ships have waited for extended periods, sometimes several weeks, to traverse the canal – which delayed cargo significantly, and led to a build-up of vessels.

The Panama Canal Authority (ACP) has had to limit the number of vessels using the canal and impose restrictions on ships’ depth, limiting the cargo they can carry, due to water scarcity. The ongoing drought situation is described as presenting “unprecedented challenges”.

The canal, which connects almost 2,000 ports across 170 countries, is pivotal for international trade, with major traffic from across the globe but in particular countries such as the United States, China, and Japan.

The drought’s impact on the canal emphasizes the increasingly disruptive consequences of the climate crisis on global supply chains.

Trade volume under policy pressure

China, a major player in the world’s economic scenario, registered a sharp decline in both exports, by 14.5%, and imports, by 12.4%, in July. One event that may have contributed is the US decision to curtail its investments in some pivotal Chinese tech sectors.

Also in the East, Japan and Qatar are keenly focused on strengthening their trade ties, but there’s a cloud of uncertainty between Japan and the US due to disagreements over whaling practices.

The changing global climate has also been exerting pressure on trade. Rising temperatures have escalated food prices, with soybeans, olive oil, and rice facing severe shortages.

The emphasis on climate-aligned foreign direct investment (FDI) is now seen arguably at the core of sustainable growth of developing nations.

A noteworthy development from the West is the recent downgrading of the US’s long-term credit rating, which poses intriguing questions about the behemoth economy’s future borrowing and investment capabilities.

IMF comment underlines global concerns

In the aftermath of a global pandemic, the world finds itself grappling with unprecedented challenges. Recent research from the Kansas City Federal Reserve paints a challenging picture of the post-pandemic global economy, highlighting issues like soaring government debt, geopolitical tensions, and an unsettling trajectory for technological innovation.

With the backdrop of geopolitical disruptions like the Russian invasion of Ukraine and escalating U.S.-China tensions, global trade appears to stand at a tough crossroads.

Pierre-Olivier Gourinchas, the International Monetary Fund’s chief economist, underscores the fragility of the current state, noting that countries are drained after battling the pandemic, and that policy-driven forces and decoupling between China and the West add further strain.

The looming danger is a possible stagnation where parts of the world fail to progress, leading to demographic and migration pressures. Economists, including Gourinchas, believe that global growth might stagnate around 3%, a disappointing rate compared to the past where China’s rapid development drove figures above 4%.

Existing trends amplified by COVID-19

The impact of the pandemic amplified certain pre-existing trends. A paper by Serkan Arslanalp of the IMF and Barry Eichengreen from the University of California, Berkeley, reveals a troubling statistic: the ratio of public debt to global economic output surged to 60%.

This was largely driven by pandemic spending by governments. Such unsustainable levels of debt threaten to divert vital resources away from developing nations that have burgeoning populations but lack capital.

Recent geopolitical events, notably the Russian aggression against Ukraine, have also fragmented the longstanding belief that trade fosters lasting international partnerships.

COVID-19 had, of course, a huge impact on global trade flows and arguably became a movement where many participants in global trade decided that near-shoring is also the equivalent of de-risking.

It led to a pattern of nearshoring but World Trade Organization Director-General Ngozi Okonjo-Iweala cautions against the current trend of reordering global production patterns. While diversifying trade might seem appealing, it’s essential to extend opportunities to those nations historically sidelined in the global trade arena.

What does global growth look like?

Global economic growth is a natural driver of trade growth. From an economic standpoint, recent economic projections from the IMF shows global growth decelerating, with projections declining from 3.5% in 2022 to 3.0% for 2023 and 2024.

Although inflation in developed economies shows signs of slowing, trade volumes are down. Manufacturing sectors worldwide are experiencing a slowdown, and while services are expanding, there’s noticeable deceleration.

The ripple effects of the pandemic also extend to the future of work, affecting urban economies. Demand for office spaces in major cities like New York, London, and San Francisco is dwindling, with average office attendance dropping significantly.

In general it could be suggested that global growth is somewhat anemic – and there are also signs that China may not offer much support in the near future.

Debt may continue to weigh on trade

Despite the myriad challenges facing global trade, and an ongoing recession threat, it’s worth considering the resilience shown by key economies. Growth in certain sectors, like the services trade, offer a beacon of hope.

The commitment of nations to navigate these complex issues, combined with the need to diversify and include historically sidelined nations, has the potential to reshape and strengthen global trade patterns for a more inclusive and prosperous future.

For organizations dependent on global trade it therefore depends on the ability to harness opportunities – which, though under pressure, will still be out there to harness.

The post Global trade growth is slowing in 2023 as expected – here are the challenges and opportunities appeared first on Trade Ready.

As global warming and climate change continue to serve as threats to humanity, increasing numbers of people want to see green technology used more heavily in global trade.

Those involved in an industry that could soon be radically changed by developments of green technology should know about the latest developments and how they will affect your business. Here are some of the most exciting ways that green technology could change the future of international trade.

1. Taking electric transportation vehicles to a new level of speed and efficiency

Transportation is responsible for roughly 23% of global CO2 emissions. Boats, trucks, and planes mostly rely on fossil fuels like diesel, gasoline, and jet fuel to operate. However, there are major developments currently being made in battery technology which could make transportation more sustainable and reduce CO2 emissions.

The University of Surrey has invented a breakthrough technology called a “very high energy density super-capacitor,” which is capable of being 1,000-10,000 times more powerful than existing electric vehicle batteries. These capacitors could be fully charged in minutes, unlike the current electric vehicle batteries which take hours.

Tesla is already creating a fleet of electric trucks in a project called Tesla Semi, so electric shipping trucks should become more common on the roads in the next few years. Soon, it is possible that these trucks could be outfitted with the super-capacitor technology, or one that resembles it. Once such technology is used on a wider scale, the trucks transporting goods all over the world would see vast improvements in efficiency and produce significantly less CO2.

2. Reducing manufacturing emissions by turning it into fuel and diamonds

Manufacturing is another area of global trade which produces considerable quantities of greenhouse gases, roughly 30% of the world’s CO2 emissions. If significant progress against climate change is going to be made, green technology needs to be developed which can combat manufacturing emissions.

Luckily, such technologies are currently being developed, and have the potential to make an enormous positive impact on CO2 emissions from manufacturing.

One such development is a device made by a Canadian company called Carbon Engineering. They have created a device which is capable of removing one ton of CO2 from the air every single day. These devices  filter air and extract the CO2 directly from it. Carbon engineering even claims to be able to produce fuel from the CO2 that is extracted. Hypothetically, Carbon Engineering could set up their devices right outside of manufacturing plants or on the roofs of other buildings and filter the air to make it cleaner.

A Dutch designer named Daan Roosegaarde has created a similar device to filter out CO2 and be placed near manufacturing plants. Roosegaarde’s device can filter out 30,000 cubic meters of air every hour.

However, unlike Carbon Engineering’s device, Roosegaarde’s 7-meter filter tower compresses the CO2 into diamonds – amazing!

Roosegaarde plans to install his filters in parks and cities across China in the next few years. This could have a dramatic impact on the cleanliness of the air in China, especially in Beijing where air pollution is getting out of control.

3. The future of packaging requires no oil or petroleum products

Another burden on the environment is the immense use of plastics to create packaging. Not only is plastic derived from oil, but many of the plastic products that are created also take long periods of time to biodegrade. Plastic bags, plastic bottles, and plastic containers end up creating pollution in landfills, the ocean, and many other places.

Fortunately, there are a number of breakthroughs which can reduce our dependence on plastics for packing. One company, Be Green Packaging, is offering packaging that is completely biodegradable and made without any petroleum or oil-based resources.

Be Green’s packages are made from natural plant fibers, which are “non-toxic, and biodegrade into compost that is safe and healthy for the environment.” Their packaging products are instead made of plant-based fibers from kenaf, bamboo, rice, wheatstraw, bagasse, and various types of trees.

These packaging innovations are a perfect example of a new green technology that could dramatically reduce the overall carbon footprint of the international trade industry. In the future, if green packaging products by Be Green or similar companies are adopted by large companies such as Amazon or Apple, it could have a dramatic positive environmental impact.

Taking petroleum and oil completely out of packaging could be a major step forward for making companies all over the world greener, and is the exact sort of thing that is needed to fight climate change on a global level.

Adopting green technology is crucial to avoid environmental disaster

If global warming is not fixed, scientists estimate that the average temperature in the United States could increase by 10 degrees Fahrenheit in the next 100 years. This could cause a number of devastating effects. For example, it can lead to longer and more severe droughts, stronger and more frequent hurricanes and tropical storms, flooding of coastal areas, significantly more intense heat waves, and more.

It is also estimated that due to global warming, Antarctica has been losing about 134 billion metric tons of ice per year since 2002. All of this ice melting and going into the ocean causes sea levels to rise. Rising sea levels would eventually cause flooding in coastal areas and cities such as Miami, New York, and Boston. This would be devastating for the people who live in these areas.

Essentially, global warming and climate change are a major threat to humanity, and will put countless lives at danger in the next few decades. All of the innovations listed above could help to make the international trade industry significantly greener. This could help importers, exporters, manufacturers, shippers, and packagers reduce their carbon footprint and do their part to help fight global warming.

The post 3 types of green technology that will change the future of international trade appeared first on Trade Ready.

As the rate of technological development zooms ahead, and global value chains evolve, companies will need to be ready to open their eyes and minds to the possibilities of new processes and the skills that go with them.

Here, we are predicting the top 8 ways supply chain management will be different in 2018, and how you can keep up.

Check out Part 1 in this series to see the first 4 changes we have forecast in the year ahead.

Read on for 5-8.

5. Self-driving fleets will move from testing to implementation

Recently Tesla has been making headlines with the reveal of their Tesla Semi – the electric car company’s first foray into transport trucks. While there is no clear date for the roll out of the trucks, equipped with advanced autopilot, orders have already started pouring in from big names including Pepsi Co, UPS and Walmart.

Companies that invest in the electric fleets should see a cost savings of 20% over a standard diesel truck, according to Tesla CEO Elon Musk.

Tesla won’t be the first to put a “robotruck” on the road. Daimler’s Freightliner division began testing out its autonomous tractor-trailer in Nevada back in 2015.

But with significant regulatory hurdles, will this new type of vehicle really take off in 2018? The momentum is certainly building, and with good reason. The benefits of autonomous trucks are plenty, and the need to address a rapidly growing demand and diminishing workforce are driving the adoption of the vehicles among the industry’s major players. According to Wired, the trucking industry is now short 50,000 drivers, and as current drivers retire that number could reach as high as 175,000 by 2024.

According to the New York Times, in 2017, companies and investors are on pace to invest $1 billion into self-driving and other trucking technologies – a tenfold increase over 3 years ago. That number is set to increase exponentially over the next few years. Companies of all sizes, including small start-ups are joining Google, Uber and Tesla in developing and testing their own autonomous trucks.

Silicon Valley start-up Embark have partnered with Frigidaire, and have been hauling their refrigerators 650 miles down the I-10 freeway using their robotrucks since October. For now, all automated trips are being supervised by a driver, but Max Fuller, executive chairman of trucking giant U.S. Xpress, has stated that he expects to see Level 4 autonomous vehicles (those that can fully operate without a driver present) to be hitting the roads within in three to four years.

6. Last mile delivery gets disrupted by sharing economy

Thanks to ecommerce pioneers such as Amazon, consumers now expect and demand ever greater control over the delivery of their purchases. Same day delivery has become a reality in major cities all over the world. In order to compete, retailers must now embed logistics into the customer experience from the very beginning.

Lessons learned from the hospitality, staffing, and mobility sectors provide successful examples of how to use sharing across all parts of the logistics value chain. There are infinite ways this can and will transfer over to other parts of the supply chain industry.

Oft-cited giant of the sharing economy, Uber, has taken their ride-sharing service a step further with “UberRUSH”, using GPS enabled apps to connect drivers to ecommerce customers in real time for fast, last-mile delivery. It integrates with ecommerce platforms like Shopify and Bigcommerce.

In urban centres, urban discreet warehousing can enable companies to become more agile in delivering goods on demand.

Logistics providers will need to learn to adopt capacity sharing platforms to remain competitive – or risk losing out to niche companies providing this as a specialty.

The sharing economy also presents new options for businesses to improve efficiency and productivity within their own organization with on-demand staffing (think TaskRabbit, Fiverr and Upwork).

The sharing economy provides endless opportunities for companies of all sizes, and after a few years of proven successes, 2018 will be the year it really explodes into supply chain management.

7. ‘Amazon effect’ moves into industrial manufacturing, high tech and more

Several times a year Amazon makes new announcements about how they are further revolutionizing ecommerce and delivery. The bar continues to be effectively raised and Amazon has become a model to innovative companies who recognize that they must “evolve or die”.

Though it may seem a daunting prospect, omni-channel logistics companies will be looking to rise to the occasion and compete with Amazon head on.

And in order to do that they will have to get on board with some of the best tech tools being developed for business today.

Real-time data collection is now a reality with the adoption of business-ready IoT. Companies that are able to leverage the data they are collecting can better service their customers by not only meeting their needs but anticipating them, and providing convenience through omni-channel ordering from any device.

Now that customers are able to order from anywhere, anytime, the same expectations are raised for delivery. One technology allowing companies to better meet these raised expectations is 3D printing. We talked about 3D printers in our #TradeElite Twitter chat at the end of 2016, and since then the technology has continued to gain momentum in adoption, allowing companies to react quickly to changing customer demands by producing parts in house, as needed.

As mentioned in Part 1 of this article series, AI will also empower companies to become more agile, fast and cost-effective in this post-Amazon era of global logistics. With the adoption of these new technologies into supply chain processes anything is possible.

8. Climate change will increasingly disrupt supply chains

Debate it all you want, but the science is in on climate change. And this global reality is adding risk and complexity to international supply chains. The increasing frequency of extreme weather conditions will continue to disrupt transportation, availability of raw materials and labour.

In the last two decades associated costs from supply chain disruption due to extreme weather events has grown staggeringly, averaging tens of billions of dollars per year.

Particularly susceptible commodities include agriculture products and oil & gas, but all transportable goods will be at increased risk of weather-related supply chain disruptions in 2018. Businesses need to be prepared to weather these storms. Building more resilient supply chains with built in safeguards is no longer an option. Companies can do this by diversifying their supply chain with alternative suppliers to lessen the impact from one disrupted vendor, or suppliers concentrated in one region.

In contingency plans, supply chain managers should also look at different transportation options and determine how goods would travel if one method of transport was disrupted. Having backup routes and transport options available at the ready will allow companies to act fast in the case of disruption and reduce the financial and consumer impacts.

We would be remiss to talk about the effects of climate change without mentioning the efforts being made to reduce them. Joining big names such as Unilever, Procter & Gamble, PepsiCo and General Mills in incorporating sustainable practices in your supply chain can save you money on packaging, waste and logistics and reduce your company’s impact on the environment.

That will look good on your ledger and your global reputation in 2018.

The post 8 Ways Supply Chain Management will change in 2018 (Part 2/2) appeared first on Trade Ready.

Going green seems to be one of the most fashionable trends these days. It gets reflected not only in the mentality of individual consumers but also in the mentality of political, economic and financial leaders and their agendas.

In the past three to five years, the concept of sustainable and environmentally friendly “green supply chain management” (or GSCM) has experienced quite a lot of turbulence, partially because business managers never agree on its true meaning and core features.

Unfortunately, negative stereotypes existing around GSCM prevent us from recognizing a true value of “going green”. The rejection of GSCM practices often goes hand-in-hand with a well-spread myth about their negative impact on organizational performance. In addition to that, a lot of companies are not willing to spend their time and money on things like sustainability that do not produce immediate, visible and concrete results.

It’s time to challenge these and many other myths about GSCM practices. First of all, Mother Nature is begging for more environmental responsibility by threatening us with climate change and other environmental risks. Doing what we can to mitigate these risks is becoming vitally important.

Another reason for battling GSCM stereotypes is the existing empirical evidence of a positive correlation between green strategies and a corporate growth.

For example, when a company faces a decline in organizational performance, implementation of GSCM practices into its distribution activities in many cases serves as the most effective solution. So, let’s go over the most important reasons to stop being afraid of GSCM and to consider adopting it.

Gain a better marketing position

First of all, the number of corporations that would not get positive attention on the market from adopting environmentally-friendly practices is incredibly low.  This trend is explained by the human nature of a consumer.

As human beings, we all care about our own safety which starts with things like clean air, water, and soil. This gets reflected in our habit to consume responsibly and to make safe choices –  popular examples include organic coffee, paper bags, and free-range chicken eggs. Thus, the greener your supply chain management goes, the more endorsement it gets from the public, and such endorsement always leads to a better position of your business on the market.

Among the companies that get a significant competitive advantage by going green and sustainable are IKEA, Johnson and Johnson, The Hershey Company, UPS, etc.

Add profitable “green” revenue streams

It is truly baffling how many pathways for creating a surplus revenue are ignored by modern businesses. GSCM alone offers dozens of them. Let’s mention a few.

One of the most extreme investments would be developing innovative solutions to sustainability issues that prevail in your industry. At the very least, you can create a better image of your business on the market by developing such solutions. But you can also make profits from selling those to your competitors.

In fact, easy and ready-to-use tools for GSCM are always in demand, since they save companies both time and money.

Be the first one to create value for your competitors and leverage from it while conducting your primary business at the same time.

What some companies do is really amazing. For example, they come up with entirely new green-focused brands that end up bringing in millions of dollars in revenue. Such brands become responsible for supporting a ‘green’ and ‘sustainable’ image of their parent companies which might be involved in destroying the planet, polluting the air and affecting animals’ natural habitats.

However, as an honest person, I am much more attracted to an ethically conducted business. That is why I am not going to spend too much time talking about deceiving practices realized through GSCM. Instead, I will point at another method of an effective surplus revenue generation by the means of fair GSCM activities. This method lies in selling waste that your business produces. As I previously mentioned, sustainability and environmental responsibility are a huge trend at the moment. As a result, we start having more companies that produce their goods and services by utilizing recycled waste. So, you could kill two birds with one stone and help those companies to obtain raw materials, while financially benefiting from it.

Lower energy costs

Power and fuel are not endless resources. It’s not rocket science to understand that the fewer resources we have on the planet, the more costly it gets to support global supply chains. Green alternatives to mainstream power sources and fuels are, surprisingly enough, way more cost effective, if not free (e.g.: recycling your own waste, using solar energy or wind power). In fact, the ability to come up with alternatives like these is the essence of business sustainability.

Thus, going green and sustainable saves your business money; and vice versa – saving money makes your business more sustainable.

The truth of the modern economy is that we stop caring about things that keep us alive unless they contribute to the process of capital accumulation. But fortunately, many of us have come to a realization that this pattern is life-threatening. One of the advantages of GSCM practices is in its power to appeal to both environment-oriented and business-oriented managers. It can be absolutely beneficial to consider green strategies from the perspective of economic gain – a perspective that modern businesses are naturally so comfortable with.

The post When your supply chain goes green, so does your wallet appeared first on Trade Ready.

Having long been on the outside of global movements for cleaner technologies and methods to address climate change, India made a landmark decision during the Paris climate change negotiations late last year to put its support behind renewable energy.

The Indian government vowed that by 2022, the country would increase its renewable energy generation five-fold, producing 100 gigawatts of solar power, 60 GW of wind-powered energy and 15 GW generated by other forms of renewable energy.

With these increases, renewable energy would account for nearly 40% of India’s installed capacity by 2030.

Renewable energy currently accounts for 13% of installed capacity.

U.S. dispute over sourcing

However, a decision by the World Trade Organization on Feb. 24 may derail, or at least temporarily delay, parts of India’s implementation of this renewable energy plan.

The WTO ruled against India, instead siding with the U.S. over India’s National Solar Mission directive to source solar panels domestically.

The U.S. brought the case to the WTO in February 2013, and lodged a second challenge to the plan in February 2014.

In the Feb. 24 ruling, the WTO found that the requirement violated key terms of the General Agreement on Tariffs and Trade of 1994, as well as the Agreement on Trade-Related Investment Measures, agreed in that same year. The TRIMS agreement stipulates that domestic regulations apply to foreign investors.

Support from Greenpeace

India has protested, arguing that aiding the growth of its own renewable industries will aid global competition and improve services and pricing.

Greenpeace USA has also announced it is supporting India in the dispute.

Greenpeace India campaigner Pujarini Sen said in a statement issued by the organization:

The WTO ruling – and the U.S. decision to pursue it – is a setback to India’s renewable energy ambitions.

“The Indian government is demonstrating commitment to India’s fledgling solar manufacturing sector, which needs initial support to enable it to compete with the price of imported products and to its own roadmap for a green economy solution to global climate change.”

The U.S., however, argues that Indian solar panel manufacturers are receiving benefits from the Indian government that are not available to foreign manufacturers, thus violating trade law.

“The United States strongly supports the rapid deployment of solar energy around the world – including in India,” U.S. Trade Representative Michael Froman said in a statement.

“But discriminatory policies in the clean energy space in fact undermine our efforts to promote clean energy by requiring the use of more expensive and less efficient equipment, raising the cost of generating clean energy and making it more difficult for clean energy sources to be competitive.”

Setback won’t stop renewable energy plan

India had said in late January that it would modify its solar program to assuage U.S. concerns as a means to avoiding an unfavourable WTO ruling. This appears to have been unsuccessful.

However, one analyst pointed out that the National Solar Mission was but a bit part in an otherwise massive program to get India’s renewable strategy up and running.

The NSM only accounted for 5,000 megawatts (5 GW) of power in total, a mere 5% of the total 100 GW plan.

“What was isolated in this was an industrial policy instrument,” Ilaria Espa, a senior research fellow at the Bern-based World Trade Institute, told Climate Change News.

India has said it will appeal the ruling.

Do you think the WTO ruling is fair?

The post WTO decision cuts down part of India’s massive solar power plan appeared first on Trade Ready.

Some policies included in the TPP have critics and proponents more divided than others.

In getting to the bottom of the issues that matter, we bring you the main arguments for and against one of the most controversial provisions in the agreement – the Investor State Dispute Settlement and Investment Chapter.

ISDS: Peaceful conflict resolution mechanism or threat to domestic policy?

According to the Office of the United States Trade Representative (USTR), the ISDS included in the TPP aims to provide an “impartial, law-based approach to resolve conflicts.”

The USTR points out that there are ISDS policies in more than 3,000 trade agreements currently in existence.

“Because of the safeguards in U.S. agreements and because of the high standards of our legal system, foreign investors rarely pursue arbitration against the United States and have never been successful when they have done so…We believe that providing a neutral international forum to resolve investment disputes under international law mitigates conflicts and protects our citizens,” The USTR website claims.

Further, the USTR states that the ISDS in the TPP agreement will ensure freedom from discrimination for Americans doing business abroad, protection against property theft by foreign governments, protection against denial of justice for investors, and the right to transfer capital freely.

However, these protections for investors may come at a steep price for domestic policy, including environmental, health, and financial policies, and cost at least some of the nations involved in the TPP a lot of money in dispute settlement payouts.

An article released in The Globe and Mail shortly after the TPP text was published summed up the concerns:

“Negotiating partners assured the stakeholders that the TPP’s investment chapter would respond to the legitimate concerns about expansive investor protections and ISDS. The actual text, however, when made public, showed the opposite: a further evisceration of the role of domestic policy, institutions, and constituents.”

“In their current form, the TPP’s substantive investment protections and ISDS pose significant potential costs to the domestic legal frameworks of the US and the other TPP parties without providing corresponding benefits.”

1. TPP’s ISDS chapter allows foreign investors to sue governments over policies that harm their interests – thereby perpetuating a private justice system that overrides democracy

In support of ISDS: Proponents of the ISDS emphasize that the TPP text improves upon the language in previous agreements, such as NAFTA, making sure that nations will still maintain the ability to make policy decisions based on what’s best for the citizens, rather than foreign investors.

The USTR states that “New TPP language underscores that countries retain the right to regulate in the public interest, including on health, safety, the financial sector, and the environment.”

The Canadian government has issued the following statement:

“International arbitration does not restrict any level of government from legitimately regulating in the public interest. This includes regulations with respect to health, social, environmental and national security issues. Disputes are a normal part of every trade relationship. However, they represent a very small portion of the billions of dollars in investments that Canada attracts and the billions of dollars that Canadian companies invest abroad.”

Global Affairs Canada (GAC) also states that the TPP:

Provides access to an independent international investor-state dispute settlement (ISDS) mechanism that is prompt, fair and transparent, and subject to appropriate safeguards.

Opposed to ISDS: According to a report by the Columbia Institute on Sustainable Investment (a joint venture between Columbia University’s law school and environmental institute):

“Unfortunately, while the TPP might ‘underscore’ that countries retain the right to regulate in the public interest, the agreement does not actually protect that right. In article 9.15, the TPP states, ‘Nothing in [the Investment Chapter] shall be construed to prevent a Party from adopting, maintaining, or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental, health or other regulatory objectives.’”

2. All disputes should be solved in domestic courts

In support of ISDS: The USTR argues that the domestic courts are far more costly to U.S. government.

“Though the U.S. government regularly loses cases in domestic court, we have never once lost an ISDS case and, in a number of instances, panels have awarded the United States attorneys’ fees after the United States successfully defended frivolous or otherwise non-meritorious claims.  The U.S. federal government defends challenges to U.S. state or local government measures in ISDS disputes.”

Opposed to ISDS: Lise Johnson and Lisa Sachs, coauthors of the Columbia Institute of Sustainable Investment report, stated in a their article in The Globe and Mail:

“A forthcoming analysis shows that less than 20 per cent of the 34 claims filed against Canada under NAFTA would have any case for damages in domestic courts, and only half of those would have had an arguable case for the equivalent damages.”

3. ISDS clauses cost governments millions from settlement payoffs

In support of ISDS: USTR: “The United States has never lost an ISDS case. We have had only 13 cases brought to conclusion against us, and the United States has prevailed in every case. And in part because we have continued to raise standards through each agreement, in recent years we have seen a drop in ISDS claims, despite increased levels of cross-border investment.

More than half of the companies that initiate ISDS cases are small- and medium-sized businesses or individual investors, so the millions of American workers they employ stand to potentially benefit from strong ISDS protections.

Global Affairs Canada: “Investment is a key driving force for economic growth and competitiveness in Canada. It plays a crucial role in spurring innovation and linking Canada to global value chains. Canada has a clear interest in ensuring the stability, transparency, predictability, non-discrimination and protection of Canadian individuals and companies that invest abroad.”

Opposed to ISDS: While ISDS chapters in other trade agreements haven’t brought many dispute claims against the U.S., the same cannot be said of Canada.

“The dozens of times that Canada has already been sued, largely under the North American free-trade agreement, show that private arbitrators have been very willing to second-guess Canadian policy-makers and administrative enforcement, extracting damage awards. While Canadian governments have insisted that the tribunals have gotten it wrong on many issues, they have had little recourse,” Johnson and Sachs explain.

According to the Canadian Council on Policy Alternatives, Canada is the most sued government in the industrialized world. In an article for the Public Policy and Governance Review, Jordann Thirgood states:

“Since 2005, over 70 per cent of NAFTA claims have been made against our government. We have paid out $172 million in damages, with 35 outstanding cases that could add up to another $6 billion.

4. Disputes are often frivolous

In support of ISDS: The USTR states that fears over unfounded, frivolous disputes will be brought to governments’ doorsteps any time corporations feel a decision has been made against their interests are unfounded under the TPP’s provisions.

“The Mechanism for expedited review and dismissal of frivolous claims and claims outside the tribunal’s jurisdiction: This mechanism enables respondent countries, on an extremely expedited basis, to move to dismiss (1) frivolous or otherwise unmeritorious claims (akin to provisions under the Federal Rules of Civil Procedure) and (2) claims the tribunal is not empowered to resolve.”

Opposed to ISDS: Jake Schmidt, director of the Natural Resources Defense Council’s international program says:

There are other legal risks that TPP raises, regardless of its improvements over NAFTA. Because TPP is a more widespread deal, it gives more companies more grounds to sue if a participating government interferes with their projects.

“Even if the United States ends up winning under those circumstances, it still provides another avenue for companies to pursue if they don’t get what they want. Even if you made ISDS perfect, you’re doubling the number of companies that have the potential to bring lawsuits,” Schmidt was quoted in an article on morningconsult.com.

5. Disputes through ISDS brought against developing countries can be devastating to their government coffers, and often target environmental, health care and safety policies

In support of ISDS: According to the Canadian Government, The ISDS “Preserves the full rights of governments to legislate and regulate in the public interest, including for public health and environmental reasons.”

Opposed to ISDS: Rachel Wellhausen, author of Recent Trends in Investor-State Dispute Settlement argues:

The possibility of being sued by a major corporation through ISDS might create a chilling effect, especially among poor countries already at a disadvantage when it comes to cutting back pollution. Governments might think twice about updating regulations in order to avoid getting sued.

In support of ISDS: However, last word on this issue goes to Ezra Klein from his article on Vox.com:

“This is a key point, and it’s worth stopping on for a moment: ISDS agreements are there because developing countries, in many cases, want ISDS systems. They may have corrupt court systems or unpredictable local governments, and that makes it hard for them to attract the foreign investment necessary to level up their economy.”

Do you think ISDS provisions are beneficial to the countries who sign on to them through trade deals? Does the incentive to invest outweigh the risk of being sued?

The post FACE OFF: Two sides of the TPP – Investor State Dispute Settlement (ISDS) appeared first on Trade Ready.

The horrific events in Paris were very much in the hearts of participants, and even in that sadness there was a palpable sense of determination, particularly among several French delegates with whom I interacted over the summit weekend.

One gentleman, whose wife is a medical professional at a hospital near one of the hardest hit areas, reminded us that it was France that brought the aspiration of “Liberté, Egalité, Fraternité” to the world.

The heartfelt comments of IMF Managing Director Christine Lagarde on a panel at the B20 session were equally moving in their reminder of the value of even an expression of support and concern for friends and colleagues across France.

The words to inspire us all

The parallel tone of the event, and the privilege of being “in the room” at the B20 was brought sharply into focus for me in Frankfurt, just before leaving for Turkey. It transpired that a woman behind a cash register whom I spoke with briefly had just been to Antalya.

Her parting words, “do your best for the rest of us,” echoed in my mind several times over the next few days, even though I did not have the opportunity to express to this citizen approaching her retirement that my involvement was very narrow, peripheral and limited.

Her words should, however, resonate with those leaders in Antalya in the business community, and certainly in the political leadership, as well as various complementary streams of activity.

The privilege of true leadership should come with a compelling sense of duty to ‘do the best for the rest of us’ and a determination to deliver substantively, even on the toughest issues.

Today’s strong leadership is looking at the bigger picture

As an unabashedly proud Canadian, it was excellent to see our new Prime Minister make his international debut at the B20 session in Antalya, very warmly received by top business leaders and the heads of various international organizations who shared the podium with Prime Minister Trudeau.

It was good to hear Financial Stability Board Chair and Governor of the Bank of England Mark Carney (another fellow Canadian) speak with focus and authority on the efforts underway to assure long term stability in the global financial and economic system.

And from the perspective of the work of our Task Force, it was inspiring to hear Governor Carney specifically mention trade finance in his remarks.

Trade finance is an esoteric domain, the critical importance of which is increasingly appreciated in business and political circles today.

Business leaders, including the CEOs of Coca Cola, Nestlé, SEB Bank, Sabanci and numerous others, were in attendance, as were the heads of the IMF, the WTO, the OECD and the International Chamber of Commerce. One striking undercurrent in the formal remarks, and in the exchanges which followed, is a sense among even the most hard-core business leaders that we need to start thinking more, and more seriously, about the bigger picture.

Numerous interventions reflected notions around the social responsibility of business, the role of commerce in international development, poverty reduction and peace and security. Chief among them was the imperative for executives to think long-term, and to think strategically about issues like sustainability and climate change.

This discussion is crucial, even as some sectors struggle with post-crisis regulatory issues, inconsistent legal standards across borders and issues like skills gaps and labour mobility.

Critical role of international trade in economics and sustainability a common thread

A cynical view might suggest that such musings are shaped by the context, and by the high visibility of the B20/G20 event. However, the sincere non-verbal cues – of certain speakers in particular – were undeniable, and the global nature of the gathering ensures a wide range of perspectives, reference points and ideological leanings.

All of it was underpinning a far-reaching exchange of ideas, even for the business-focused stream of the B20.

Several senior business leaders advocated directly and energetically for ratification of the WTO Trade Facilitation Agreement, and WTO Director General Azevedo, also a promoter of the importance of trade financing (as shown in his remarks at the Conference for Financing and Development in Addis Ababa last July) invited business leaders to engage more directly with the WTO going forward.

The crucial role of trade in the creation of economic value, reflected in part by the growth of global GDP, was specifically addressed by OECD Secretary General Angel Gurria.

Financial and economic inclusion, as well as the importance of small business, were also recurring themes, addressed directly or through advocacy for the Trade Facilitation Agreement by delegates like Guler Sabanci, Chair, Sabanci Holdings and Sunil Bharti Mittal, Chairman and CEO, Bharti Group, and Vice Chair, International Chamber of Commerce.

The critical role of small business in underpinning economic growth was widely acknowledged, not only at the Antalya Summit, but in the year-long work of the various B20 Task Forces, and the reports and recommendations produced by each task force.

Turning ideas into action

The dialogue and deliberations of the B20 Summit touched on numerous important points, and reflected a high degree of alignment on several major business-related themes, even those with wider and more complex implications, and a focus on the tag line “Business Diplomacy at its Best”.

The Turkish Presidency explicitly sought to maintain continuity with the efforts of the B20 Australia summit in 2014, and directed task forces to focus on the generation of implementable ideas and implementation.

Even with this focus and alignment, it is understood that one of the objectives of the business stream – gaining the attention and support of the most senior political leadership of the G20 – is a very difficult task, given the many highly sensitive priorities vying for attention.

The channel is very narrow, and demands a short, focused message, even with the support of organizations like the International Chamber of Commerce and many others actively and strongly supporting such efforts.

While reaching the G20 is an important objective of the B20 (and other parallel) processes, in the end, the research, analysis and recommendations of a series of task forces with world-class chairs and knowledge partners, stands on its own merits.

The year-long work of task force members serves as an excellent global basis for the development, sharing and dissemination of transformational business policy and practices.

Preparations are already underway for the next G20 and B20 events under the Presidency of China in 2016, with the official handover completed in Antalya.

It is incumbent upon all of us, however, to ensure that the work completed over the past year becomes part of an iterative, evolving process and contributes meaningfully to doing “the best for the rest of us”.

What else does Alexander do?

Learn more about the intricacies of Trade Finance from one of the leading subject market experts on the topic. His critically acclaimed book Financing Trade and International Supply Chains will give you deeper insights into nature of trade finance at its core, and of the versatility of this discipline in enabling trade flows involving businesses of all sizes.

The post Reflections After the 2015 B20 Summit: “Do Your Best for the Rest of Us” appeared first on Trade Ready.

The Trans-Pacific Partnership was finalized in October, and has since been a topic of intense debate.

However, due to the size of the final document and its many specifics concerning tariff liberalization, customs, trade facilitation, competition, and other critical topics, it’s understandably taking time for all of the new stipulations to be digested by the larger public.

As environmental groups and analysts make headway with reading through and analyzing the agreement, some groups have come out resolutely against the agreement, arguing that tying these economies together more tightly will make it harder to pass more stringent environmental regulations in the future.

Environmental regulations don’t go far enough

One U.S. law professor pointed out that this is the first multilateral treaty in recent years which required the adoption of only one multilateral environmental agreement, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).

Previous trade treaties required constituent parties to abide by seven of these types of agreements.

Moreover, environmental groups point out that according to the terms of the trade agreement, a state will not be in violation of these regulations if it fails to comply with the stipulations set out in the agreement.

Violating an environmental aspect of the TPP requires proof that the measures taken by the country in question not only go against the environmental rules, but also affect trade and investment with other signatory states.

Complete silence on climate change

Environmentalists are also upset by the treaty’s lack of regulations on Japan’s whaling trade or Singapore’s trade in shark fins, and are particularly concerned that the trade agreement fails to mention climate change or global warming at all.

“Beyond making no effort to combat climate disruption, the TPP would actually fuel the climate crisis,” the Sierra Club said in its report, “A Dirty Deal,” released earlier in December.

If approved, the pact would increase greenhouse gas emissions and undermine efforts to transition to clean energy.

The organization also maintains that the deal would open up avenues for oil and gas firms to overturn energy policies in trade dispute tribunals, and increase greenhouse gas emissions by spurring companies to move their manufacturing hubs to less environmentally friendly economies.

Overfishing provisions the one bright spot

It’s not all doom and gloom for the environment, however, with specific regulations attached to try to stem overfishing.

The environmental chapter includes provisions that prohibit signatory nations from providing subsidies to fishing practices which promote or support overfishing of marine species deemed to be in danger by national governments, regional fishery management organizations, or scientific evidence.

Moreover, TPP participant nations are now prohibited from extending existing subsidies that would endanger low stocks of endangered fish.

Countries are also required to notify trade partners of fishing subsidies which are part of their policies, as well as additional information about the state of the fish population.

The measure is significant, as participants in the TPP trade agreement – which encompasses 12 nations, or an estimated 40% of the world’s economy – account for eight of the top 20 global fishing nations.

Mixed opinions sparking conversations about next steps

Though the Sierra Club is decidedly disappointed in the agreement, the World Wildlife Fund is encouraged.

“No major trade agreement before this one has gone so far to address growing pressures on natural resources like overexploited fish, wildlife, and forests,” WWF-US President and CEO Carter Roberts said in October, shortly after the talks were completed.

With the right implementation and compliance procedures, the conservation commitments in this trade agreement could be game-changers.

Roberts added that each nation will have to individually undertake the appropriate policies to comply with the regulations.

While some environmental groups claim the TPP agreement will make it harder to implement new, more ambitious environmental regulations, one lawyer pointed out that the agreement is an important step to ensure that countries which fail to comply with existing environmental regulations will catch up to their peers.

Furthermore, making it harder for participant nations to introduce new economic policies is not as dangerous as some environmental groups make it seem.

Governments have used environmental policies to limit foreign competition, which has led to protectionist policies, resulting in domestic industries continuing to violate existing environmental protocols.

Do you think the TPP agreement goes far enough to address environmental issues?

The post Environmental groups are unhappy about TPP’s failure to address climate change appeared first on Trade Ready.

This agreement means that for the first time, the three largest emitters of greenhouse gases (GHGs), the European Union, the U.S., and China, have publicly committed to emissions targets.

Commitments from the world’s 3 largest economic powers

The EU commitment is a 40 percent reduction below 1990 levels by the year 2030. It’s already about halfway there.

By comparison, the new U.S. agreement is to reduce its CO2 emissions to between 26-28% below 2005 levels by 2025. China has agreed prevent its carbon emissions from growing after 2030.

The latter is significant given that China’s current growth in emissions is at an exponential rate, fueled by its rapidly growing middle class, and its efforts to raise millions out of poverty.

These are significant targets that will have wide-ranging impacts on all of us.

How will these targets affect SMEs?

But where will the reductions come from? How will agreements affect small and medium enterprises (SMEs)? What role will SMEs play in making these commitments a reality?

These answers are not entirely clear to us yet.

However, it is becoming clearer that the survival of many SMEs may depend on them. The primary reasons lies in how the global economy connects SMEs to larger systems.

We have already begun to see the impacts of climate change-related extreme weather events on supply chains and economies near and far.

Here are some examples of the kind of far-reaching impacts that climate change-related events can have:

• A drought in China and Russian bush fires fueled increases in bread prices and decreases in availability that gave rise to the Arab Spring; a drought in Syria gave rise to civil war.
• A drought in Texas caused the closing of a meat packing plant in Plainview, eliminating 2300 jobs in one day and destroying the local community’s economy.
• Water scarcity in India forced Coca Cola to walk away from a bottling plant; drought in California caused Starbucks to move sourcing and manufacturing of Ethos Water to Pennsylvania.

Situations of scarcity like these, and the impending transition away from carbon-based fuels and products will impact SMEs. So will resulting changes in pricing of the resources an SME relies on for its business operations.

Preparing for the sustainable future

It’s clear that we need to avoid the costly events and conditions that result from climate change. The cost of continuing down our current path is indeed risky business, and ultimately more costly than meeting the new targets for GHG emissions reductions.

It’s also clear that the transition from our carbon-based economy will have winners and losers. Are there losers in your supply chain? In your customer base? Is your business currently on the loser end of the spectrum?

The good news is that answering these questions and creating a plan to transition to a low carbon economy can convert a loser into a winner. It takes hard work and planning ahead, starting now, to make the transition successfully.

Forward-looking businesses are not waiting for the governments of the EU, the U.S., and China to legislate what the transition looks like if these countries are to make good on their commitments to make this transition.

Many companies, large and small, are taking action now to assess and innovate away from their carbon dependencies in an orderly way.

As part of this, it behooves an SME to think about its entire value chain. Where do your resources come from? How will price increases for carbon-based commodities affect your sourcing?

What dependencies do your customers have? Will they have continued buying power as a low carbon economy emerges?

What products and services will be in demand or out of style in a low carbon economy? As some current products become unprofitable, what new opportunities will emerge and take their place?

According to a recent study by Cox Conserves, more than half of all SMEs in the U.S. will have a sustainability program within five years, and more than 60 percent within ten years.

A greater percentage of U.S. companies on the West Coast already have sustainability programs than businesses on the East Coast.

There are many lessons learned that SMEs who are just getting started can benefit from. Which group is your business in?

Transitioning to a sustainable business model is easier than ever

Several years ago I heard Ray Anderson talk about his sustainability journey as CEO of Interface Carpet.

When the company finished gathering the information it needed to understand its negative social and environmental impacts, Ray knew that it would take the company several years to make the needed transitions.

It took more than ten.

But that was before sustainability became a regular topic in the news. Nowadays, SMEs looking to make the transition to this “new normal” will benefit from the innovations of people like Ray Anderson.

You can transition your company to a sustainable business model more quickly now, because there are more sustainable products and services in the marketplace and more sustainable businesses with whom to partner.

It’s gotten easier to prepare now for future customer and government requirements, so that they are not a severe shock to your company’s system. SMEs have been empowered to do this themselves, without the cost of hiring an expert, using online applications for sustainability management.

More and more information is coming out about the connections between outsourcing and negative impacts like GHG emissions and pollution.

These types of arrangements may be targets for government action to reduce emissions.

What is your company doing to prepare for climate change-related impacts to your business?

The post Why the survival of global trading SMEs may depend on sustainability programs appeared first on Trade Ready.