Put in place to enable a larger volume of trade between countries and to open up new opportunities for businesses, trade agreements play a key role in the global exchange of goods and services. Bilateral trade agreements are made between two entities while multilateral agreements involve more than two states or countries. Cumulatively, these trade agreements help reduce/eliminate tariffs, remove barriers to trade and promote economic growth.
With the global political climate always in flux, new trade agreements are always being introduced and existing arrangements are being honed, changed, and even replaced. With global trade reaching a record $32 trillion last year, the need to reduce the barriers to global trade are nearly always top of mind for countries around the world.
In a recent report, UNCTAD highlights the positive factors of new trade agreements, including the Regional Comprehensive Economic Partnership and the African Continental Free Trade Area. It says demand for foreign goods proved “resilient” throughout 2022, with trade volumes increasing by 3%. It also says that geopolitical frictions, persisting inflation and lower global demand may negatively affect global trade in 2023.
New German Supply Chain Law
According to Bloomberg, Germany is ensuring human rights and environmental due diligence in supply chains, with companies now facing penalties for failing to address harmful practices and exploitation in their business operations and supply chain. The “Supply-Chain Law” went into effect on January 1, 2023, and applies to companies with at least 3,000 employees—a number that will be lowered to 1,000 workers in 2024.
The law requires companies to introduce a strict risk analysis, management, and documentation system, Bloomberg reports, “to ensure minimum standards in human rights and environmental rights, both domestically and internationally.” France and the Netherlands introduced similar measures in 2017, the publication adds, while the European Commission is working on a broader set of rules for the entire EU.
Three More EU Trade Trends to Watch
Three additional EU global trade trends that shippers should be paying attention to in 2023 include:
- Global trade may slow in 2023 as global economic growth also softens. “Although China will continue to drive some commodities demand, this will be lower than in previous years, and Chinese imports of many consumer goods will not see a rapid rebound from 2022,” the Economist reports.
- Trans-Atlantic trade links have come under pressure over green energy and industrial policy tensions, as well as the US’s increasingly hawkish stance on China. “Tighter US-EU coordination on trade policy is more likely than not in 2023,” the Economist points out. “even as the EU continues to develop its own ‘strategic autonomy.’”
- Climate change has also become a key factor in international trade policy, with the EU emerging at the forefront of this trend. “This will, however, worsen existing frictions with the developing world, even if Europe’s energy diversification plans offer opportunities for some energy exporters in Asia,” the Economist predicts.
Supply Chains & Tech
As supply chain disruptions continue to ease, the positive trend will create some benefits for shippers involved with global trade. Container ships are spending less time waiting outside of harbors, carriers across most modes have available capacity and fewer stock-outs are being seen at the consumer level. At the same time, there’s been a significant decline in international ocean shipping rates, which—if shippers choose to take advantage of them—may help to set a more normal level of global trade for 2023.
Concurrently, the World Economic Forum (WEF) says technology continues to play an increasingly important role in the smooth running of global supply chains. In fact, the group says that the rapid development and adoption of digital technologies is “transforming the global economy and cross-border trade,” and expects this trend to continue in 2023 and beyond.