Ways Global Trade Could Change in 2023
Well, it has been quite a decade so far and here we are again—2023. The first month of the year has provided no indication that the complications of global trade will subside any time soon. Whether that is good or bad, the global trade landscape continues to evolve being shaped by technology, increasing competition between major trade powers, questions over the relevancy of the World Trade Organization (WTO), and increased pressure on logistics infrastructure. Let’s break down some of the major conversations and considerations surrounding global trade this year.
U.S. Trade Complications with China
While it has been difficult to predict the impact of the Biden Administration’s trade policies towards China this year, there are a few areas to keep an eye on. First and foremost, the heightened tension between the two countries, most recently a giant balloon floating over the United States, isn’t helping investment flows between the two nations. China may end up responding with its own tariffs and trade measures. Additionally, the increased enforcement of the UFLPA by Customs and Border Protection is uncharted territory for many U.S. businesses, which may provide opportunities for other U.S. trade partners to expand their own exports to the nation.
Relevancy of the WTO
While the WTO plays a major role in regulating international trade, there have been several recent developments questioning the weight of the organization’s role in global trade today. While the Biden administration has stated that it wants to help make the WTO more relevant, the recent ruling surrounding Trump’s tariffs on steel and aluminum has been unapologetically rejected by the U.S. From an article released by Bloomberg, “Needless to say, it’s a negative omen to see the original architect of the global trading system pushing against an organization that’s helped preserve a 75-year era of global peace and prosperity.”
Many feel that the WTO needs to remain responsive to the evolving needs of its members through equal transparency and participation, strengthening dispute settlement, and promoting development in third-world countries so they too can participate fully in the global trading system.
Multilateralism
Stemming off the WTO’s role in global trade, there has been a decline in support for multilateralism in recent years. As a result, the rise of nationalist trade policies is shifting the world towards an era of interconnected trading blocs led by the U.S., EU, and China. This shift has the potential to lead to increased competition and fresh trade agreements between the regions and their partners. Whether this is a good or a bad thing is up for debate, however, this may be one of the most significant changes in global trade that would have major implications for the distribution of economic power in the next decade. While the Trump administration had a ”go-it-alone” attitude in negotiating with China, the current administration is taking a more multilateral approach by working with our allies to address concerns with China.
Infrastructure
It’s no surprise that logistics infrastructure has been front and center since the start of the pandemic. From dated ports to exhausted labor, meeting the demand of today’s trade volume is incredibly important. Poor logistics infrastructure raises costs and decreases the efficiency of trade transactions. It also is a major contributing factor to an increasingly frustrated labor force. More likely than not (fingers crossed), there will be continued threats of strikes on the horizon.
Automation
The rise of automation will have a significant impact on global trade this year. This will reduce manual processes, error, and increase speed in trade transactions. Digitization will also provide real-time visibility into transactions making it easier for businesses and governments to track goods as they move through the supply chain. While this may eliminate some jobs, there will be an opportunity to create new jobs as stated in our article on automation in last month’s Dey Times.
Nearshoring
Moving production or services closer to the source of demand could have a direct impact on global trade due to reduced reliance on lower-cost countries overseas. Nearshoring reduces transportation costs and can increase competition in local markets.
In conclusion, 2023 should be another banner year for trade and we’re excited to see how the world will change. As always, M.E. Dey will provide our partners and customers with the most current news and information on trade, compliance, and logistics. All the best as we move into February!