Standards Driving Trade

Supportive Regulation suggests how different parts of the world see changes in global and local regulation having impact. This looks at the growing preference of regional and bilateral agreements over global WTO pacts and also explores some of the opportunities afforded by proactive actions in specific locations to help make trade more effective and transparent.

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While much new trade regulation aims to cut through red tape and ease bureaucracy, its often piecemeal nature can also constrain international commerce, according to The Future of Trade, a report into the future of global trade by DMCC, the authority on trade, enterprise and commodities.

Governments may seek to lower transport and production costs and boost employment with new laws, but the result can have the opposite effect.

The report cites India, where border tax collection means long distance truckers are parked up to 60 percent of the time. Regulations at land borders across South Asia mean it is often cheaper and faster to ship goods by sea through Dubai.

The report also points out that many of the new rules in international trade are set by the US to project its vision of worldwide free markets but also asks how this can be maintained as the Indian Ocean becomes an economic rival to the Pacific.

In the absence of new global agreements, regional trade agreements have grown from around 70 in 1990 to over 270 today.

This includes the proposed Transatlantic Trade and Investment Partnership between the US and the EU which supporters say will lower prices and cut costs but opponents fear will weaken standards on food testing and car safety.

As an alternative, some countries, like China, who fear these new US-led agreements seek to exclude them, are seeking alternative regional free trade partnerships that do not include the US.

Regulation in international trade in more developed economies is also increasingly moving away from tariff barriers towards environmental and safety standards as a way for countries to protect their own interests.

Alongside new rules, the growing use of automation is streamlining the flow of information between both governments and trading partners. According to the World Bank, automating customs procedures could save as much as US$115 per container.

While reducing paperwork and cutting transaction costs, these technologies also need agreed international standards, and again the US, and American companies, like Cisco and IBM, are in the driving seat.

For the future, global and regional deals will both enable better, faster and safer trade but will also act as non-tariff barriers to restrict trade, defending domestic markets, controlling imports and demonstrating that in reality very few nations really want a completely free market.

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For the last 12 months DMCC, the authority on trade, enterprise and commodities in Dubai, has teamed up with FutureAgenda on an odyssey to discover the future of global trade. We gathered industry leaders, academics and experts in five key cities to discuss how global trade will change in the next decade and how it will drive the global economy into the next phase of growth.

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Standards Driving Trade – Mark Beer

How to End Paperwork and Lower Costs

The key benefits of automation will include reduction of paperwork and lower transaction costs. As different parties all agree the standards for exchanging data, they will gain by, for example, more easily identifying low-risk traders and having increased transparency that will enable more agencies to share data to more easily allow cargo to cross borders. For example, going forward, agencies will be able to easily identify every supplier along a supply chain as well as their locations, financial viability and global relationships. The days of stamping paper documents is fast being replaced by electronic verification via RFID and other M2M and IoT platforms. But to make this work effectively there needs to be clearer, recognised digital standards that allow all parties to collaborate. Here again the US is very much in the driving seat. Sector or regionally focused consortiums such as the IIC (industrial Internet Consortium) formed by AT&T, Cisco, GE, IBM and Intel are a key step forward but the aim is for global standards with scale to be established across all industries all probably using a global unique entity identifier.

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$400bn Food Trade Rules in Spotlight

The proposed TTIP agreement is specifically coming under scrutiny for lowering, rather than raising, food standards. Worth over $400bn, the volume of world food trade is enormous and standards are pivotal. As the TTIP priority will be to maximise trade and there is a proposed shift in power from national governments to a new international trade committee, partnerships including Friends of the Earth and the Centre for Food Safety see the ability of local regions to set robust standards around foods including GMOs, synthetic biology and cloned animals is under threat. As the US regulation around the genetic engineering of plants, animals and microbes is quite light, the argument goes that the TTIP will open the door for such foods to enter the EU, bypassing current regulation and standards. Cloned animals, for example, are not tracked in the US as they are in the EU, so there would be few means of preventing them entering the food supply.

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In the context of legal and regulatory systems and how they will need to adapt to support the needs of global trade we are going to see a struggle. The struggle between sovereignty on the one hand and choice on the other. The struggle between intranational domestic views and international views.

Mark Beer
CEO
DIFC Courts

Key Facts

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The number of regional accords in place today compared with 70 in 1980

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The total value of world food trade and a vast slice of the global trade pie

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44%
of US exports are accounted for by the TPP trade pact with 12 Pacific nations

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2015 Cumulative number of trade agreements in $USDtn
275 Goods & services
140 Goods

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The sum, per container, to be saved under customs automation

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2013 Exports in $USDtn
23 Services
18 Commodities
12 Manufactured goods

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Our Partners for Future of Trade

Download the Whitepaper

For the last 12 months DMCC, the authority on trade, enterprise and commodities in Dubai, has teamed up with FutureAgenda on an odyssey to discover the future of global trade. We gathered industry leaders, academics and experts in five key cities to discuss how global trade will change in the next decade and how it will drive the global economy into the next phase of growth.

Download PDF

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