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The Future of Trade
ARE WE READY TO EMBRACE
THE OPPORTUNITIES?
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Foreword
Despite cu
ent uncertainty for global
trade, it will continue to be critical for
the future prosperity of Australia and
New Zealand. Trade has evolved beyond
exporting and importing. The effects
of globalisation and technology have
meant that trade is not only a business
exchange, but a cultural exchange
as well. We see this particularly in
the changing landscape of policy on
domestic and international levels
egarding trade and political positions.
We have also seen trade shifting from
goods to the exporting and importing of
services, including professional services
such as accounting.
The appetite for trade has increased
and so has the ability of businesses to
trade. However, globalisation has seen
attitudes towards trade change. Recent
events such as the Brexit vote in the
United Kingdom and President Donald
Trump signing the order to remove the
US from the Trans-Pacific Partnership
might be seen as signs that the days
of free trade are over. The costs and
enefits of trade are questioned – as
well as the fairness, equality and the
impacts of trade distribution. These
questions have influenced political
choices and raised uncertainties about
Lee White FCA
CEO, Chartered Accountants Australia
and New Zealand
trade in the future. Policy makers will
need to consider how to mitigate risks
and maximise the potential benefits of
trade. It is also important to consider
how we communicate changes and
enefits for businesses and what it
means for the public.
We are in an environment where trade
is continually evolving – new models of
trade have emerged online, allowing
more people and businesses to
participate in trade, including the direct
dealing to consumers.
Business will require agility and flexibility
to meet the changing needs of trade.
We have exporters becoming importers,
new markets participating, buyers and
sellers connecting directly – the effects
of globalisation, policy and technology
will continue to shape trade. But the
future of trade is
ight if we em
ace
the opportunities it offers.
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Contents
02
Executive Summary 2
Introduction 6
The megatrends
shaping the future 8
Globalisation 10
Technology 12
Policy context 14
To trade or not to trade? 18
Looking forward 24
The role of industry
in trade 28
Looking forward 34
03
04
05
0 1
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How will technology
change the future of
trade? 36
Looking forward 40
The changing
intermediary 42
Looking forward 45
The ethical consumer 48
Looking forward 52
Conclusion 55
References 60
06
0 7
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2 The Future of Trade: Are we ready to em
ace the opportunities?
Executive Summary
Trade has recently come under greater scrutiny, with the US election
and Brexit highlighting voter opposition to integration into the global
economy. Yet international trade is essential to our modern economy.
It gives us access to a wider range of goods and services, stimulates
competition and allows us to focus on areas of comparative
advantage. Exports cu
ently account for close to 30% of world
GDP.1 In Australia and New Zealand, exports alone account for 20%
and 28% of GDP respectively.2 With 98% of the global economy
eyond the shores of Australia and New Zealand, international trade
presents exciting opportunities for businesses seeking to expand.3
PREDICTIONS
Trade will be growing rather than slowing over the next five years
for Australia and New Zealand.
Services exports will become increasingly important for Australia
and New Zealand.
Technology is set to facilitate even more trade.
International
trade is essential
to our modern
economy
3future[inc]
While there are significant opportunities
ahead, the rate of growth in international
trade has slowed in recent years.
Between 1985 and 2007, international
trade was growing, on average, twice
as fast as world GDP. This was spu
ed
y rapid growth in industrialising Asian
economies, driving increased demand
as well as introducing new global
producers. Reductions in the costs
of trade – especially transport and
communication – greased the wheels
of trade, enabling new business models
and the shift to global supply chains.
Liberal trade policies proliferated and
further strengthened trade flows, as
many countries saw trade as a means of
olstering economic growth.
But since the Global Financial Crisis,
international trade has slowed, keeping
pace with global GDP growth, rather
than growing at double the rate. And
in 2016, trade growth was the slowest
it has been since the GFC; a result of
slower growth in China’s industrial
capacity, as well as the appetite for
services, which continue to grow as a
share of spending.
But the tides are turning. 2016 saw
improvements in container volumes,
ising orders of manufacturing globally,
and an increase in the number of
usinesses going global – all good early
indicators for trade. And while services
are generally less trade-intensive than
goods, technology and policy mean that
the volume and value of trade in services
are also likely to increase.
Green shoots are already appearing in
Australia, which recorded AUD32.6 billion
in exports in December 2016, the highest
level ever in Australian history. This
epresents an AUD7.9 billion increase on
the previous December.4
Looking forward, globalisation,
technology and policy will be key factors
in determining the future rate of growth
in international trade. We may not return
to the heyday of trade growing at on
average double the rate of GDP growth,
ut there are many signs that there is still
a strong future ahead in international
trade for Australian and New Zealand
usinesses.
4 The Future of Trade: Are we ready to em
ace the opportunities?
Policy Technology Globalisation
On the policy front, businesses would prefer small changes over wholesale shifts in
trade policy. Indeed, in both Australia and New Zealand, businesses thought that no
change to existing trade policy settings would be the best for their business.
Businesses see consolidating existing trade agreements as the best route for
government. Our survey found that 64% of Australian and 72% of