For Global Trade to Survive, It Needs an Overhaul

Governments and the private sector need to address weaknesses in global trade and supply chains, not get rid of them, as some critics suggest.

Globalization and the international trade system have many critics these days. Some say that trade does more harm than good, is bad for the environment, lacks resilience, is not transparent, and doesn’t include enough people.

It is true that the economic and political environment, and the climate crisis, are exposing some weaknesses in the global trading system. But that should be the impetus to improve it, not abandon it. Improving global trade and supply chains means making them more resilient and inclusive, and developing them as a vehicle for a greener and more equitable future.

While the complicated and inter-twined global trading system has room for improvement and requires scrutiny, it remains the best hope for future growth, especially in developing countries. If the pandemic and current political and economic circumstances exposed weaknesses, they have also highlighted how ripe the system is for the changes that would benefit all.

What is needed is a significant review of the global trading system.

First, committed efforts to transform trade from the antiquated, paper-based system used to move goods worldwide for hundreds of years is one critically important and meaningful step that can and should be taken globally. That system, which in many countries remains in place by law, needs to become digital.

Digitalizing trade–replacing paper documents, such as bills of lading with electronic ones–would mean lower costs and make trade easier to manage, opening global trade to new entrants, including small suppliers in developing economies.

The data generated would allow for better monitoring of global supply chains so that issues such as climate change/carbon tracking and proper labor standards (safety, and the elimination of human slavery in supply chains, for example) could be facilitated, at even the smallest suppliers. Financial crime would be easier to detect.

A vital step in digitalizing trade is for countries to bring their legal systems into an alignment that does not demand multiple paper documents accompany each trade shipment. To that end, the United Nations Commission on International Trade Law has developed the Model Law on Electronic Transferable Records for countries to adopt, or to which they could align their current legal systems.

Second, we need to ‘green’ trade. McKinsey estimates that more than 80% of greenhouse gas emissions and 90% of the adverse impact on air, land, water, biodiversity, and geological resources are connected to trade and supply chains.

It is imperative that we see deep into these networks to track, report and address carbon in supply chains. Barcode and QR code technology can help align climate and sustainability standards, as well as collect and transmit data about such standards.