Simon Paris, President, Misys
We are at a critical moment in history. After many years of globalisation and global free trade, we’re now witnessing a significant slowdown, as compared to GDP growth. In fact, 2016 was the fifth consecutive year of trade growth below 3%. On the edge of a major reversal and a possible dismantling of the trade apparatus we’ve had in place over the last 50 years – under Brexit and the new US presidency – it is time to step up and step out of what the OECD calls the low-growth trap. The goal: to boost world trade and make financial inclusion a reality.
Stepping up and stepping out
Of all economic theories, the one that is most universally accepted is that trade drives prosperity, reduces the income gap and reduces poverty. Director-General of the World Trade Organisation, Roberto Azevêdo believes, “The path to greater inclusion will be through more trade, not less. It will be through engaging more with our partners around the world, not less.” These are powerful words which we mustn’t lose sight of amidst a growing anti-trade rhetoric.
Trade remains a critical enabler of achieving global harmony and driving financial inclusion. At the World Trade Symposium in June this year, we will look at financial inclusion through three key themes:
Corporate conscience and a trend towards more ethical consumerism are driving a welcome increasing interest in sustainable trade. It’s an area that needs focus as protecting the environment, ethical sourcing and extending financial inclusion should be trade benefits available to all today – unfortunately we aren’t quite there yet.
At the United Nations Sustainable Development Summit in September 2015, world leaders adopted a 2030 agenda for sustainable development with 17 sustainable development goals (SDGs) to end poverty, inequality, injustice and climate change – many of which directly relate to trade.
Sustainable trade is about generating social, economic and environmental benefits in accordance with the fundamental principles of sustainable development, including the creation of economic value and the reduction of poverty and inequality. An environment
previously dominated by the exchange of paper documents and manual checking processes is rapidly being overtaken by electronic verification, making use of radio frequency identification (RFID) and the Internet of Everything.
This advance enables users not only to track goods in transit, but also to monitor the conditions under which those goods are being stored and their provenance. This data can support the environmentally-friendly recirculation of resources and raise the economic benefits of trade to a new level.
Gone are the days when trade happened solely between two counterparts. Instead, trade has become a networked interaction between many. This puts pressure on global and local players but also presents opportunities towards the evolving ecosystems of trading relationships in global value chains.
In order to remain relevant, banks and alternative financial services providers need access to comprehensive real-time information to mitigate risk and release more funds into the value chain. Credit risk and operational risk must be better understood and managed in order to plug the gaps.
Technology underpins this move and has a significant role to play in furthering financial inclusion as well. Imagine, for example, a shoe manufacturer in India. Helping it to sell its goods to a retailer in the UK boosts financial access. This type of global trade supports SMEs and creates a positive environment for correspondent banking to thrive.
Agile analytics can not only be adapted to power the management and distribution of risk, but also to attract new investment and boost the availability of alternative financing options. The adoption of intelligent trade can help developing economies and SMEs reduce costs in the supply chain, broaden economic prospects and improve wealth distribution for everybody.
World trade also stands to benefit from the developments in new technology that increasingly connect our lives. Digitalisation will not only deliver significant opportunities for value creation but also demand changes in regulation and policy making.
Thanks to the Internet of Everything and self-optimising networks, cities are becoming smarter, as are devices – and so can the global trade value chain. These connected networks support greater financial integration to open the door to sustainability and fairer trade. But regulation and policy are also important considerations when it comes to ensuring success.
Most recently, the United Nations (UN) General Assembly has granted Observer Status to the International Chamber of Commerce (ICC). This marks a step change and will further strengthen ties between the UN and the global business community, leading to greater financial inclusion too.
The accelerated adoption of ‘intelligent assets’, linking together the millions of items we consume each year globally, opens the door not only to sustainability and fair trade but also to the preservation of environmental resources. These goals can only be achieved through the alignment of digital innovation with the circular economy.
Changing trade, changing lives
International trade is on the brink of a new era. The next few years will be driven by enhanced governance, new financing models and new technology. If tackled correctly, true transformation for widespread economic prosperity can become a reality and, what’s more, reduced poverty and greater financial inclusion can finally be on the horizon.