Attacks on cargo ships in the Red Sea in recent months have caused vessels to reroute around the Cape of Good Hope in Africa, producing longer and costlier trips. Happening simultaneously, the lower water levels along the Panama Canal have limited the number of cargo ships that can pass through the waterway each day.

Supply chains were also rattled not so long ago with the collapse of the Francis Scott Key Bridge in Maryland, which meant other U.S. ports had to step up and take on the shipping activity that the Port of Baltimore normally manages. There has also been a reported shortage of truck drivers stateside.

With all of these external factors in play – from public health crises to weather patterns to political discord – how can we protect our supply chains and – dare we say – even improve the relationships among selling and buying partners?

Export factoring.

Export factoring is a strategic tool to ensure cash flow

Trade finance is a set of financial tools that both improves a business’ cash flow and reduces its credit risk. Two well-known types of trade finance products are export factoring and supply chain finance.

Export factoring is when a financial firm buys a company’s receivables and advances them the majority of the invoice amount up front in cash (up to 90% in some cases).

This type of funding can also include credit protection and collections services. When this is the case, this full package is known as non-recourse export factoring.

Though manufacturers tend to choose export factoring services and retailers initiate supply chain finance with their suppliers, both umbrellas of trade finance achieve the same goal: better access to working capital all along the supply chain. A reliable source of working capital is critical to keeping operations moving along, despite any headwinds in global trade.

The waiting game

In today’s global trade landscape, there is often a wide gap between when an invoice is issued by the seller and when payment is submitted by the buyer. This is normal, though it can be a strain on supplier cash flow.

Payment terms between buyer and seller can be up to 3 months in some cases, meaning buyers don’t have to settle their invoices until 90 days after they have placed their order.

In fact, according to The Hackett Group, it takes large U.S. buyers an average of 54.7 days to pay their bills.

Factoring cuts this waiting period and converts unpaid invoices into cash up front. This method can be looked at as a “win-win” for both the supplier and the buyer, since the supplier receives additional liquidity right away while the buyer can enjoy extended periods until payment is due.

Why does getting cash right away matter to a supplier?

Well, in short, suppliers have vendors to pay too, and they can’t do so on schedule without sufficient capital on hand. By releasing the capital locked in their receivables, suppliers can pay their vendors in a timely manner, respecting these vital relationships needed to procure raw materials so they can continue to fill orders smoothly.

Besides paying their bills, manufacturers can also be looking to grow or expand their operations and customer base, which requires enough working capital to achieve these business goals. Many of these new buyers in new markets are also looking to negotiate longer credit terms, an arrangement that is attainable with trade finance bridging the cash flow gap.

Why do longer payment terms matter for buyers?

Trade finance allows buyers to optimize their working capital too. Without the pressure to pay suppliers right away, large retailers can invest in their operations, product offerings, footprint, employees, and their own growth and expansion aspirations. Having ample time to settle their bills gives retailers the opportunity to focus on their core activities and values.

Credit protection and collections services

Now, in the case a buyer happens to go bankrupt, trade finance still ensures that the buyer’s supplier gets paid. This is because trade finance, or non-recourse export factoring, includes credit protection to protect against non-payment in such cases of default.

This inclusion of credit protection allows suppliers to conduct business with peace of mind, without the worry of not getting paid.

These suppliers also benefit from the collections services that come as part of trade finance packages, which means the trade finance company is responsible for collecting payment from the buyer, giving suppliers more time to invest in their business.

The upshot

Cash is a major catalyst in allowing supply chains to function properly and operate smoothly. In a global trade environment that can be affected by everything from political discord to drought, reliable cash flow through trade finance is something a business can count on.

Trade finance provides easy access to cash by turning unpaid invoices into capital within 48 hours of verifying a business’s invoices, in some cases. Importantly, it supports payment cycles that work for all parts of the supply chain while reducing trade risk, allowing for strong, “happy” relationships and global trade dynamics.

In this three-part series, digital trade expert Craig Atkinson, CITP addresses key questions and practical considerations related to technology-enabled cross-border interaction among buyers, sellers, intermediaries, and governments. Article based on an interview by FITT’s Pamela Hyatt.

Craig Atkinson is the Founder and Director of Lexmerca International Trade and a Trade Development Specialist with the International Trade Centre (ITC), the joint agency of the United Nations (UN) and the World Trade Organization (WTO). His roles focus on addressing legal-technical challenges that affect global trade.

Active in the field of digital trade, Craig participates in the World Economic Forum’s TradeTech community and in projects with multiple international organizations, academic institutions, technology foundations, and standards bodies.

Academically, he is a Non-Resident Fellow with the World Trade Institute (WTI) as well as a Research Affiliate with the Singapore Management University (SMU) Centre for AI and Data Governance and the SMU Centre for Computational Law. Professionally, Craig has been a FITT Certified International Trade Professional (CITP) since 2011.

What is a ‘Single Window’ for trade regulation?

In the first article in this series, ‘Single Windows’ were described as exemplifying the digitalization of goods trade. Aside from being known as the most impactful class of ‘TradeTech’, what is a Single Window?

The answer is found in the ambitions of ‘digital trade facilitation’: government measures to simplify, harmonize, and modernize trade formalities and procedures to allow for cross-border paperless exchange between actors in international supply chains.

According to United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) Recommendation 33, a Single Window (SW) is a ‘facility’ that “allows parties involved in trade and transport to lodge standardized information and documents with a single entry point to fulfil all import, export, and transit-related regulatory requirements”.

An electronic SW environment links government bodies – Customs and other government agencies (OGAs) like ministries of health, agriculture, and finance – for online application, issuance, and exchange of trade-related permits/certificates.

Private stakeholders include traders, agents, customs brokers, carriers, forwarders, ports, freight terminals, and commercial banks. As documents (or data) is in electronic form, they only require ‘single’ submission and leading systems utilize ‘rules engines’ for compliance automation.

While Singapore is credited with deploying the first SW in 1989 – TradeNet for Business-to-Government (B2G) exchange and the more recent Networked Trade Platform (NTP) extension to facilitate Business-to-Business (B2B) transactions – other countries have implemented projects for paperless trade via Single Window.

Note: Singapore is not a typical case. Above, ‘Trade Permit’ is used for Customs declarations. Yet, if goods require permits from other OGAs when submitting a ‘Trade Permit Application’ to TradeNet, the application is a ‘single’ submission for other OGAs to process and provide permits. Unlike the SWs of most countries, traders/agents using TradeNet do not have to apply for each permit separately.

How do Single Windows solve problems?

Borders represent a ‘labyrinth’ of paper that must be exchanged between private actors and government agencies through manual processes.

In reaction, Single Windows lower certain barriers to trade compliance – identifying, preparing, submitting, and coordinating documents – by creating a public-private interface to overcome what the Organisation for Economic Co-operation and Development (OECD) calls “sludge”: unjustified friction that affects satisfaction, trust, and access to government services.

As institutional arrangements, networks, and platforms, SWs generate observable results that make trade faster and less costly as well as more safe and secure. In offering the highest standard of public service delivery, a Single Window for trade is considered a ‘beau ideal’ by the World Customs Organization (WCO).

As SW is a ‘whole-of-government’ facility, Customs is just one of the involved regulatory agencies and its authority is limited to import/export approval and permitting.

Though Customs is often a lead agency for SW, it does not have legal power to override other OGAs. Even if a SW neither eliminates nor diminishes the role of any regulatory agency, simplification through a single point of entry mitigates duplication, ‘re-keying’, and other data-related issues while enabling consistent data reuse.

Significant benefits arise for trade logistics and economies: across studies on the impact of Single Window, costs fall for all actors (i.e., traders, intermediaries, and governments), trade grows between countries with SWs, and the public sector improves its revenue mobilization/collection capacity.

For example, in the United States, government agencies and traders have realized benefits with the Automated Commercial Environment (ACE). In 2021, the platform reduced transaction processing by 795,000 hours for private actors, assisted process automation for 269 forms/document types, and led to $2.7 billion USD in efficiencies.

How can Single Windows contribute to inclusive trade?

Single Windows are inclusive because, as a whole-of-government interface that is usually free (or low cost), they allow for micro, small, and medium-sized enterprises (MSMEs) to interact with governments with less or no need for intermediaries (e.g., agents and brokers).

A single channel of interaction lowers effort and administrative costs of compliance with documentation and increases accuracy/speed of submission and processing, helping small businesses to better participate in international trade.

For example, In Costa Rica, a study by Volpe Martincus et al. estimated the impact of the gradual phase-in (2007-2016) of an electronic SW, Ventanilla Única de Comercio Exterior (VUCE CR). Adoption of VUCE was associated with increased and more frequent exports by businesses using the system, larger shipments, and greater numbers of exporters, especially MSMEs located in non-central areas.

Such outcomes are particularly important in industries and sectors with specific or complex regulations. For instance, to meet Sanitary and phytosanitary (SPS) requirements for food safety, pest mitigation, or disease prevention, SW facilitated trade in agricultural goods has moved toward processing of electronic SPS certificates.

Are there different kinds of ‘Single Windows’ for trade regulation?

The short answer: no. The term ‘Single Window’ is frequently mis-used. In digital trade facilitation, it’s important to follow UN/CEFACT standard terminologies. Five ‘must’ features differentiate SWs for national trade regulation.

Source: Adapted from UN/CEFACT 2017

Given the strict criteria provided by Recommendation 33, true SWs are realized by a country as a ‘National Single Window’ (NSW).

At their core, NSWs are a B2G interface, but some systems have evolved to further allow for B2B transactions. Under Article 10.4 of the World Trade Organization (WTO) Trade Facilitation Agreement (TFA), member governments “shall endeavour to establish or maintain” a NSW. Article 10.4 is also the most frequently requested area of TFA-related technical assistance.

Under Article 23.1, a national trade facilitation committee (NTFC) is usually the appropriate cross-government agency/mechanism to guide and monitor NSW establishment.

Going beyond the scope of UN/CEFACT Recommendation 33, NSWs can be interlinked for Country-to-Country exchange as a ‘Regional Single Window’ (RSW).

However, these systems are not ‘facilities’ in the same sense as the Single Window definition: RSWs are Government-to-Government (G2G) focused and implemented under international frameworks as a collaborative system of NSW networks.

Additionally, and not to be conflated with a SW for trade regulation, there are many ‘sector-specific’ platforms, such as an airport Cargo Community System (CCS) or a maritime Port Community System (PCS).

The International Maritime Organization (IMO) defines a Maritime Single Window (MSW) as a “one-stop service environment”: a vessel operator-to-port interface for maritime procedures (e.g., port entry/departure declaration and security reports) between private and public actors. The amended Annex to the IMO FAL Convention makes MSW mandatory for ports.

In some cases, a ‘unified’ PCS can be considered MSW.

Which governments have established a Single Window?

Hundreds of Single Windows have been deployed and are at different stages of maturity. With more than ten years in operation, some SWs are relatively mature and cover all the OGAs in their respective country, such as Indonesia (Indonesia NSW, INSW), Singapore (NTP/TradeNet), and South Korea (UNIPASS/uTradeHub).

Those already deployed, but in in progress toward covering all OGAs, include Canada (Single Window Initiative, SWI), Chile (Sistema Integrado de Comercio Exterior, SICEXChile), Costa Rica (VUCE CR), Kenya (Kenya TradeNet), New Zealand (Trade Single Window, TSW), Pakistan (Pakistan Single Window, PSW), Peru (VUCE PERÚ), and the US (ACE).

Other jurisdictions are continuing to strengthen their bases for SW, including Australia, Bangladesh, the Maldives, and the United Kingdom (UK). For example, under the Single Trade Window (Preparation) Regulations and the Electronic Trade Documents Act (ETDA) (see FITT coverage), the UK is planning its NSW.

Taking stock of initiatives globally, the WTO Trade Facilitation Agreement Facility (TFAF) indicates that, at 56%, SW is the TFA measure with lowest ​implementation rate.

Source: Author based on WTO data (2024)

Regionally, Association of Southeast Asian Nations (ASEAN) members have established the ASEAN Single Window (ASW) and technical collaborations; the Pacific Alliance has connected its member NSWs; and the European Union aims to enhance ‘digital cooperation’ under the Single Window Environment (SWE) regulation.

Why do governments and the private sector need to work together?

More than a technology project, SW initiatives represent major ‘reform’ and require whole-of-government cooperation internally as well as collaboration externally with the private sector to realize a fully-fledged, evolved, SW environment. A Single Window and its suite of services truly represent a ‘virtual enterprise’.

Implementation of a SW requires planning and the creation of a legal-institutional framework, followed by business process analysis/design, document simplification/standardization, data harmonization, platform piloting, and phased deployment.

Despite the variety of implementation or operational models, all stakeholders should be aware of the types of decisions to be made at each phase:

• Develop internally: The public sector is made up of different agencies must coordinate the roll-out and functioning of SW with their own staff and resources. For governments, it’s important that services – Customs, finance/treasury, health, agriculture, – work harmoniously, regardless of the internal model(s).
• ‘Buy off the shelf’: Procure hardware, software components, and/or services.
• Engage in public-private partnerships: Any combination of options at different phases of implementation and/or operation of a Single Window.

What are some key resources for planning and deployment?

There are many implementation guides and even a ‘ChatGPT’ for Single Window. Key resources include:

• Under the auspices of the United Nations Economic Commission for Europe (UNECE), UN/CEFACT provides core standards and guidance, such as Recommendation 33 (establishing SW), Recommendation 34 (data simplification/standardization), Recommendation 35 (legal framework), the Reference Data Model White Paper, a technical note on terminology for SW, and the SW Assessment Methodology (SWAM).
• The WCO Compendium on Building a Single Window Environment (g., Volume 1 Part 1, Volume 2, and the supplement), WCO Data Model, and Data Harmonization Guidelines.
• The United Nations Trade and Development roadmap for building a SW.
• The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) and its Network of Experts for Paperless Trade and Transport in Asia and the Pacific (UNNExT) provide a planning/implementation guide and expert Neelima Pamulapati has developed comprehensive case studies on legal frameworks for SW. Other important UNESCAP guides focus on Business Process Analysis and Data Harmonization/Modeling.
• The Asia-Pacific Economic Cooperation (APEC) SW implementation guide.
• With significance for Regional Single Window, UN/CEFACT Recommendation 36 provides guidance required for the interconnectivity and interoperability of two or more SWs, APEC has produced a study on SW systems’ international interoperability, UNESCAP provides a paper on ‘e-trade’ through the ASEAN Single Window, and UN/CEFACT is developing guidelines on establishing RSW.

How are you engaging with Single Window-related efforts?

Cross-border regulations are constantly changing and digital public infrastructure (DPI) must be agile. In certain situations, rules and requirements can change by the minute.

Taken as a whole, the contributions have been to advance Single Window design in support of greater engagement by software development and business communities.

Although ‘greenfield projects’ and ‘legacy system’ integrations face difficulties, prospects exist for SW ‘rules engine’ (re)design in the short-term and new thinking on the long-term viability of systems.

Everything is deeply interconnected and ‘global value chains’ (GVCs) depend on streamlined interactions between people through computer technologies. Single Windows should empower MSMEs to capture value in GVCs through ‘interlinking’.

Any trade professional, especially a CITP, may consider informing SW deployment and upgrading. The next article in this series examines relevant innovations and how a Single Window frontend/backend paradigm can be ‘flipped’ for optimal human communication, interoperability of systems, and impact.

Strategy at the core

A sustainability strategy acts as a guiding map with clear objectives and precise action steps to minimize adverse effects on the environment while maximizing lasting advantages for both the company and society at large.

By adhering to global sustainability benchmarks, organizations manage ESG risks and also enhance their standing among various stakeholders, including clients, shareholders, and authorities.

These sustainability initiatives foster a culture of effectiveness and purpose within the organization, which also results in reduced expenses and enhanced competitiveness in markets increasingly demanding these efforts from the companies they patronize.

1. Cascades

Packaging and hygiene products producer Cascades Inc.’s sustainability action plan recently received accolades for its forward-thinking aspects, which aim toward a circular business model. The company has focused on building a legacy on their dedication maintaining a circular supply chain for their products and packaging.

For the 5^th year in a row, Cascades was ranked among the top 100 most sustainable companies in the world.

The company’s investment policy included proactive investments aimed at sustainability goals, with perhaps the most impressive point of this plan being a target to shift all packaging to recyclable, compostable, and reusable forms by 2030. Amidst the growing urgency to combat climate change, this bold vision reflects Cascades’ resolute application of its circular economy philosophy and waste reduction practices.

Furthermore, Cascades intends to be a pillar of North America’s recycling sector with 17 sorting facilities, while having an impressive high usage ratio of recycled fibers in its products at 83%. Through its guarantee that more than 90% of all the goods manufactured are compostable, it’s estimated that 2.2 million tonnes of fiber is diverted from landfill sites, which leads to the preservation of over 31 million trees. Cascades is a leader in demonstrating a strong commitment to the environment and to society.

2. IKEA

IKEA’s sustainability strategy is based on three fundamental pillars: living sustainably and healthfully, focusing on climate action and fairness, and safety first. Applying several programs and strategies, the “IKEA Concept” aims to expand the scope of its actions and expand the coverage of sustainability action through 2030 – to reach more than one billion people around the world.

It’s a broad-ranging program that may encourage a huge section of the global population to adopt sustainable lifestyles and minimize the adverse impacts of their activities.

IKEA acknowledges the increasing importance of the contribution of families to the health, environment, and resilience of today’s world. For instance, these groups are helping to take care of our environment by working towards the reduction of pollution and carbon emissions through promoting energy and water conservation, the use of renewable energy sources, as well as suggesting sustainable means of nutrition.

Among their efforts, IKEA is are 100% committed to sustainable cotton ensuring the cotton they use is grown with less water and chemicals, helping areas that are subject to erosion and water scarcity.

The company has also prioritized drastically reducing greenhouse gas emissions across the IKEA value chain and moved toward the use of only renewable or recycled materials by 2030.

All wood used in IKEA products is also sourced from responsibly managed forests which do not contribute to deforestation.

On top of that IKEA has become very popular by developing products that are not just the cheapest but also the greenest, hence people are observing IKEA’s green credentials and making some effort to follow their lead.

IKEA’s vision: through 2030, reaching zero fossil materials or fuels used. This should be a major contributor to the reduction of global warming.

3. Pact

Pact developed a sustainability strategy which is based on organic cotton, fair trade practices, and environmentally smart shipping. Its initial purpose was to be an underwear brand, which has extended into men and women’s clothing.

Being a label that offers all kinds of organic cotton with tops, dresses, and lounge wear, it now ensures it sells only GOTS organic cotton, and that its processes are also certified by fair trade factories.

A notable example of their circular fashion initiatives is their partnership with the “Give Back Box” program, whereby people can use free shipping labels distributed by Pact to send on their used clothing on to multiple charities.

Through teaming up with SimpliZero and organizations similar to that, Pact ensures that each one of its products is manufactured on a zero-emissions basis and completely carbon neutral.

Packaging with Pact is all about paper eco envelopes with FSC-certified 100% recyclable material and cardboard boxes constructed of recycled material. All in all, Pact’s sustainability plan consists of fair-trade alternatives, carbon emission offsetting and ecologically sustainable packaging, showing the company’s involvement in the environmental and societal responsibility of the fashion business.

4. Novo Nordisk

A pharmaceutical giant, Novo Nordisk manifests its dedication to the environment through an innovative program called “Circular for Zero”, which tries to get Novo Nordisk to a point where the company’s activities pose no harm to nature.

The company reported a more than 66% reduction in carbon emissions and progressed even more after achieving 100% renewable energy consumption in all production centers in November 2020.

Aware of the magnitude of the sustainability issue, Novo Nordisk emphasizes that it will shift its supply chain and zero emissions out by 2045 through a set of bold ambitions, justifying its unalloyed dedication to sustainability.

Novo Nordisk not only has to face environmental issues but also solve the matter of equal access to treatment and affordable treatment for all patients who are in dire need with the help of their company.

The company’s “Changing Diabetes® in Children” Program is global and in almost 380 hospitals in low and middle-income countries, the initial goal being to create a platform where children with diabetes would have access to the right medical treatment.

Collaborating with UNICEF as a partner helps the company build an operations strategy concerned with identifying environmental factors. The activities demonstrate how Novo Nordisk encompasses the whole approach to disease prevention.

5. Clif Bar

Clif Bar implements CSR through various environmental initiatives including waste reduction, using renewable energy sources and campaigning for protecting our forests. Moreover, Clif Bar aims to make all its packaging recyclable, compostable or reusable by 2025, and this process is going to begin with the classic Clif Bar packaging.

Reducing plastic usage stands as the main principle followed by the company, and it plans to minimize the consumption of plastic by 12% and to acquire 25% of its plastic from recycled or renewable sources by 2025. In addition, Clif Bar has committed to remove 1000 tons of plastics from the ocean within the specified years.

Besides that, Clif Bar has moved towards the harnessing of renewable energy which is one of the company’s main objectives, and to have all their production facilities powered by clean energy by the year 2030 as well as cutting down CO2 emissions by half.

The firm also aims at planting up to 1 million trees by 2030.

Clif Bar’s process-based approach in its value chain is an indicator of the organization’s determination to make the whole food system sustainable – from sourcing raw materials to the final product delivery – as healthy as possible.

Sustainability with purpose

The path to sustainability for companies no matter small or large is by way of combining purpose and faithfulness. It’s clear that sustainable management can be applied not just in the operations of business, but also can cover waste disposal, renewal of energy sources, procurement of raw materials, and reduction of plastic use.

These brands are serving as leaders, demonstrating how companies can start modifying their business practices by focusing on environmental issues and building a portfolio of green activities to create this future. The promotion of sustainability is not solely a decision, but also an obligatory commitment. Its advantages are not only for the company and its customers, but for the entire global community as a whole.

These books cover vital subjects like supply chain management, geopolitics, leadership, business strategies, the AI economy, cultural diversity, and the historical context of global trade, offering valuable perspectives for navigating the complexities of the worldwide market.

1. The Culture Map: Breaking Through the Invisible Boundaries of Global Business by Erin Meyer

Erin Meyer’s book “The Culture Map” explores cultural differences in the workplace, emphasizing the importance of understanding nuances for effective communication and collaboration. She introduces “authentic flexibility” for adapting to diverse cultures while staying true to oneself. The book provides insights on virtual communication in multicultural teams and offers practical tips for successful cross-cultural interactions. Meyer’s work is a valuable resource for enhancing intercultural competence and succeeding in diverse professional environments.

2. The Value of Everything: Making and Taking in the Global Economy by Mariana Mazzucato

The Value of Everything” by Mariana Mazzucato critiques how economic value is measured and the blurred line between value creation and extraction in the global financial system. The book examines cases from Silicon Valley to pharma, illustrating how this confusion impacts innovation and inequality. Mazzucato calls for a re-evaluation of capitalism, public policy, and value measurement to promote sustainable economic growth. She challenges the idea that market prices reflect true value and argues for a re-politicization of value as a social and political concept. Professionals importing or exporting are well versed in the myriad of complexities in valuing products, services and components. This book offers a fascinating perspective on the whole system.

3. How the World Ran Out of Everything: Inside the Global Supply Chain by Peter S. Goodman

The book “How the World Ran Out of Everything” by journalist Peter S. Goodman explores the complexities and vulnerabilities of the global supply chain. Through gripping storytelling, Goodman exposes the intricate pathways of manufacturing and transportation that bring products to our doorsteps, while also unveiling the ruthless business practices that have left local communities vulnerable to disruptions. Highlighting recent events like the pandemic-induced shortages, Goodman illustrates how financial interests, market opacity, and deteriorating working conditions have placed the supply chain on the brink of collapse. By following the journeys of individuals from factories in Asia to striking railroad workers in Texas, Goodman advocates for a reformation of the supply chain to ensure reliability and resilience.

4. Scale: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life, in Organisms, Cities, Economies, and Companies by Geoffrey West

Geoffrey West, a pioneering physicist in complexity science, unveils the hidden laws governing the life cycle of diverse systems, from living organisms to cities. Contrary to the complexity of these systems, West’s discoveries reveal an underlying simplicity that unites them. By applying the rigor of physics to questions of biology and mortality, West found that mammals, despite their diversity, follow scaling laws that relate their size to various biological characteristics. This groundbreaking insight extends beyond biology to include cities and businesses, where similar laws of scalability apply. West’s work offers a unique perspective on the fundamental principles governing diverse systems, relevant for professionals working in global business. “Scale” is a captivating journey through fundamental natural laws that connect us all in profound yet straightforward ways, illuminating how cities, companies, and life itself are governed by the same principles.

5. Pivot: The Only Move That Matters is Your Next One by Jenny Blake

If change is the only constant, let’s get better at it.

In “Pivot: The Art and Science of Reinventing Your Career and Life,” Jenny Blake, a former career development manager at Google, shares practical strategies for navigating career transitions effectively. In today’s dynamic economy, where job roles change frequently and career plateaus are common, Jenny Blake introduces the concept of the “pivot” as a way to methodically make your next career move. Drawing from her experience in Silicon Valley and as a career consultant, Blake presents the Pivot Method, a framework for taking small, strategic steps towards a new direction in your career. Whether you’re considering a new role, starting your own business, or transitioning to a new industry, this book provides actionable advice to help you move forward with confidence.

With practical guidance and real-life examples, Blake empowers readers to embrace change and chart a path towards greater career satisfaction and success.

6. The International Business Culture Pathfinder: A Practical Guide to Navigating Cultural Differences in Global Markets by Marvin Hough

Written by experienced CITP Marvin Hough, The International Business Culture Pathfinder is a collection of concise business culture guides for 11 countries, including Brazil, Canada, China, UAE, South Africa and more.

This book provides a comprehensive overview of each nation’s business landscape, cultural traits, and practical scenarios demonstrate the impact of culture on business. Whether you are a seasoned global business professional or just embarking on your international journey, this resource is indispensable for grasping negotiations, communication norms, relationships, management approaches, and time management in varied cultural settings.

7. Power And Prediction: The Disruptive Economics of Artificial Intelligence by Avi Goldfarb, Ajay Agrawal and Joshua Gans

In “Power and Prediction: The Disruptive Economics of Artificial Intelligence,” Avi Goldfarb explores the “Between Times” of AI evolution, highlighting the necessity for systemic changes in decision-making processes within organizations. Despite the transformative potential of AI, its widespread adoption has been delayed, akin to past technological revolutions such as electricity and computing. Goldfarb stresses the need for complementary innovations alongside AI advancements.

8. Dare to Lead: Brave Work. Tough Conversations. Whole Hearts by Brené Brown

Leadership goes beyond titles, status, and authority. A true leader is someone who takes on the responsibility of identifying potential in individuals and ideas and has the bravery to nurture that potential.

Renowned author Brené Brown, a four-time #1 New York Times bestseller, has dedicated decades to studying emotions and experiences that add value to our lives. For the past seven years, she has collaborated with transformative leaders and teams worldwide. In her book “Dare to Lead,” she delves into how courageous leadership entails recognizing potential, staying open-minded, sharing power, and embracing vulnerability. The book stresses the importance of cultivating human qualities like empathy, connection, and courage in a society dominated by scarcity and fear. It presents four essential skill sets for courageous leadership and advocates for choosing courage over comfort.

From the humblest middle manager to the CEO of a fortune 500 company, anyone who wants to lead effectively could learn from this book.

9. Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail by Ray Dalio

A few years ago, Ray Dalio observed unique political and economic conditions, leading to his exploration of repeating patterns in wealth and power shifts over the last 500 years.

“Principles for Coping with the Evolving World Order” delves into the most tumultuous economic and political eras in history to explain why the future is expected to be markedly distinct from our own experiences, yet reminiscent of past occurrences.

Ray Dalio discusses unique circumstances leading to global changes and offers advice on navigating upcoming challenges. Dalio’s analysis covers major empires and historical patterns to provide practical principles for preparing for the future.

For professionals working in international trade, navigating the turbulent geopolitical and economic environment is part of the job. Learning more context for how things evolve may just help you get ahead of the curve.

10. Prisoners of Geography: Ten Maps That Expla in Everything About the World by Tim Marshall

Journalist Tim Marshall’s book “Prisoners of Geography” explores how physical characteristics of countries like Russia, China, the US, Latin America, the Middle East, Africa, Europe, Japan, Korea, and Greenland and the Arctic, their strengths, vulnerabilities, and leaders’ decisions. In ten chapters and ten maps, the book delves into geopolitics and how geography shapes global strategies and historical events. It highlights the impact of geography on nations’ destinies and provides a fresh perspective on world affairs, something that is incredibly helpful for anyone doing business in foreign markets.

Knowledge is power, and continuous learning is the cornerstone of success in the evolving world of international trade. Share with us your top reads in 2024!

This was adopted by businesses that remained productive and profitable during that time of economic disruption.

Subsequently, during the Covid-19 pandemic, we noticed, businesses that maintained a global productivity mindset were able to innovate and tweak their processes rapidly to tap into new market opportunities. This resulted in resiliency and growth.

New packaging to serve a new demand

An example of resilience and innovation involved a restaurant that modified the method of serving food. This restaurant identified an opportunity to support truck drivers making deliveries across the Canada and United States border. During the Covid-19 pandemic period, many food outlets along trucking routes were either closed or limited services to drive-through.

Most trucks could not use the drive-through services. The restaurant modified their food packaging to individual serving portions of ready to eat meals. These meals were offered both as freshly cooked and frozen sealed packs. These individual portions were ideal for truckers on their long drives across the border and back. The frozen meal packs were convenient as these could be heated up in the trucks. This enabled truckers to continue deliveries in a timely manner.

The restaurant’s business has grown into a specialty supplier of meals for the trucking industry. An additional benefit was the popularity of these meal packs with students. The restaurant flourished and maintained its take-out unit even after the pandemic. There were no layoffs as servers were re-trained and deployed as packers.

Reaching a wider audience through online services

We ourselves, pivoted to providing lectures at the university using online video platforms. This enabled more rural and out of province students to register and attend classes.

Fellow lecturers at institutions across the country contributed ideas on how to make online teaching more effective. This experience has created opportunities to provide consulting and training services online to clients across a wider geographical reach.

Modifying products to take advantage of near-shore supplies

A local chef who had trained at a Canadian culinary college was able to modify Hong Kong comfort food recipes to the taste of his customers. He utilized ingredients readily available in abundant supply. By doing this he avoided supply chain disruptions in delivery of exotic ingredients from Asia.

Applying a global productivity mindset, he sourced for local ingredients through near-shoring for supplies. He retrained his staff on how to prepare these new menu items. With a more resilient supply of ingredients secured, this enterprising chef was able to grow his customer base and open a branch across the city.

A global productivity mindset helps businesses to stay focused on producing more with existing resources.

Many businesses responded rapidly to the pandemic restrictions by tweaking processes to ensure health and safety of both customers and staff. They limited number of customers entering the stores at any one time and provided hygiene training to staff.

To secure a steady supply, some stores consolidated the range of fresh produce and processed products to items having secured local and international suppliers. A productivity mindset encouraged initiative to ensure resiliency in the supply chain which resulted in continued profitability.

An international café chain has established a network of near-shoring suppliers to ensure timely delivery of fresh coffee beans to their café branches across continents. For their café branches in North America, coffee beans are sourced from growers in South America. Coffee beans for the café branches in Southeast Asia are sourced from growers within the region.Having multiple suppliers within local regions ensures reliability and resilience in their supply chains

Businesses can now pivot towards serving the growing population of middleclass consumers worldwide. This can be achieved through a combination of friend-shoring, near-shoring and re-shoring with businesses along the supply chain adopting a global productivity mindset.

Applying such a mindset to decision making on raw material sourcing or location of manufacturing can result in greater resiliency in the supply chain.

What makes a business able to pivot while others can’t?

We investigated as to why some businesses were able to adapt while others found it difficult to do so. One factor that stood out with those able to adapt was in the fact that prior to the pandemic lockdown the more agile businesses had business owners with a productivity mindset focused on maintaining cash-flow and customer satisfaction.

There was a steep learning curve for many businesses and those focused on productivity and innovation, were able to learn and adapt to the unfamiliar environment.

The successful businesses illustrated in this article all had a global productivity mindset whether they were aware or not. They remained focused on their vision and mission.

This resulted in innovations that helped maintain customer satisfaction while preserving cash flow. This combination improved productivity and promoted business growth.

Stay faithful to your long-term vision and use your mission statement to drive innovation that maintains competitiveness even when market conditions change.

This is the essence of a global productivity mindset, a critical asset that enables business leaders to achieve and maintain success.

Avoid cutting expenses that will cost more in the long run

We are now experiencing potentially disruptive economic conditions that include supply chain challenges, inflation and the introduction of artificial intelligence, all happening simultaneously across industries worldwide. In this environment, it is the most agile leaders with a mindset focused on productivity who will be the ones to succeed.

Some organizations have taken the decision to cut expenses by laying off employees in the higher pay bracket. This can result in a double loss:

1. The morale among the remaining employees can go down, thereby reducing their productivity; and,
2. When the economic situation improves, the organization will have to spend more on training new employees.

Adopting a global productivity mindset can help organizations retain their premium employees in adverse conditions.

3 ways to apply a global productivity mindset

To acquire a global productivity mindset, make sure your work processes are aligned to a long-term vision that shapes a mission driven productive work culture.

To inspire and drive productive performance:

1. Encourage team members to seek out fresh perspectives, training, and flexibility in work practices.
2. Match talent to job requirements, and challenge team members to innovate and adapt to change.
3. Utilize the feel-good factor of achievement to encourage sustainable productive output.

Why not try tapping into the global productivity mindset to see how your business can utilize your existing resources more innovatively?

 “Vision and mission statements must come off the boardroom walls and be instilled into the workforce as a global productivity mindset driving the organization” – Quote from Page 12

At a time when stability and access to working capital are essential, there is an urgent need for more effective, robust supply chain finance (SCF) solutions.

This makes the passing of a concise but extremely powerful piece of legislation particularly pertinent. The UK’s Electronic Trade Documents Act 2023 (ETDA) came into force in September.

While most businesses will likely have paid little heed to this development, its relevance is profound for companies of all sizes that trade domestically or internationally.

The legislation has an immediate global impact as between 60%-80% of all global trade is governed by English law, regardless of the domicile of the counterparties.

The ETDA reflects the essence of the 2017 UNCITRAL Model Law on Electronic Transferable Records (MLETR), that has been adopted by Singapore and the UAE amongst others, and which will form the root of similar legislation being adopted by G20 nations.

So, what is the ETDA? And importantly, what does it mean for businesses?

One small step for legislation

The processes behind funding trade and drafting their documentation largely rely upon the same laborious, manual methods. Consequently, they are insecure, inefficient, siloed, and impractical. Digitalisation is widely acknowledged as being the way forward for both physical and financial supply chains but applying digital capabilities to trade finance is not straightforward.

Unlike in other sectors of finance, where digital progress is more advanced, the rules upon which trade finance is governed date back centuries. Trade finance is therefore built on entrenched, longstanding legal specifications established for a paper-based age. The principles of “possession” and “transfer”, for example – which pertain to the exchange of trade documentation and are vital to facilitating trade finance – have remained largely unchanged in most jurisdictions.

In effect, according to the wording of global trade rules, paper documents are the format by which trade finance has to be conducted. And this has been the fundamental barrier to digital trade document adoption.

What the ETDA does is give certain documents commonly used in global trade the same legal status in digital form as their paper-based equivalents.

Superficially a small change, this amendment is the breakthrough that has been needed to allow digital documents to become mainstream and come into their own.

One giant leap for businesses and their balance sheets

Specifically, the ETDA has significant implications for negotiable documents such as promissory notes and bills of exchange. It is the digitalising of these documents – and their legal recognition – that is key. Free from the inefficiency constraints of paper, digital versions of negotiable instruments (or “DNIs”) are creating an avenue to transform and optimise SCF, and, in the process, discard inefficient and insecure paper-based processes.

From a corporate treasurer’s perspective there is considerable value to be gained – including, fundamentally, improvements to working capital through more effective funding and cost savings, with earnings within their existing supply chains.

DNIs are a scalable, flexible and binding promise of payment by a business. Crucially, this enables today’s fractured, impractical funding structures that result in lengthy payment cycles and strains on working capital to be completely inverted – from a “bottom up” approach to a “top down” one.

This means tying funding to the balance sheet of the issuer, rather than that of the generally weaker creditworthiness of businesses’ SME suppliers. A business can therefore borrow from a financial institution (FI) and then cascade funding down to their suppliers by issuing DNIs.

DNIs dispense with the separate assignment agreements and irrevocable payment undertakings (IPUs) that are currently necessary for the transfer of trade documentation. And, with the DNI the basis of the lending rather than non-negotiable invoices, not only can 100% of invoice values be financed, but payments can be made immediately, thereby massively speeding up access to funding across supply chains.

This approach enables smaller suppliers to optimise their working capital through early payments which, in turn, ensures supply chain security for the business, generates opportunities for supplier discounts, and improves buyer-supplier relationships.

DNIs also allow corporates to have far greater control of how and when they use SCF, including being able to negotiate payment terms with suppliers to pay early or on time, depending on their liquidity needs. They are inherently more flexible than existing solutions, meaning treasurers can effortlessly switch between different funding methods – such as employing either their own or third-party cash – depending on which is the most effective for them at any given time, predicated, for instance, on their business cycle or cash position.

For example, if a typically cash-rich business runs into liquidity issues, instead of having to limit their dynamic discounting programmes, they can use DNIs to access external liquidity to extend payment terms as needed.

In terms of bottom-line contribution, a typical supplier early payment programme using digital documents such as this, can result in annual net benefits of between 1-7% of cost of goods. Furthermore, regardless of whether supplier early payment discounts are negotiated, businesses can also use digital instruments to avail themselves of post maturity finance and can thereby ‘buy’ themselves an approximate additional 50% cash in hand (i.e. a 60 day supplier invoice is settled with a bill or bill drawn for an additional 30 days) to plug financing gaps as needed.

Harnessing Digital Negotiable Instruments (DNIs)

One consideration that must be made regarding DNI adoption is the ETDA stipulation that the use of a reliable electronic trade document system and sufficient security on electronic documents is required for a DNI to be legally recognised. While clarity regarding exactly what constitutes a “reliable system” is currently being sought, there are DNI solutions readily available that, by passing key possession and reliability tests, already conform with the ETDA’s definition.

These solutions, such as the TradeSecure platform, place quantum-secure digital seals around DNIs that require a specific cryptographic key and protect electronic signatures using quantum notary technology. Such capabilities ensure DNIs cannot be duplicated or tampered with, thereby assuring the ownership and authenticity of the instrument. Easy trackability also streamlines and automates the audit process.

ETDA: Enter The Digital Age

One can reasonably ask that, if the use of promissory notes is already possible, why don’t businesses employ them? Simply put, without digitalisation, this process was heavily reliant on physical, paper documentation, the inherent administrative costs that accompany it, and the slow pace of transfer via mail. As a short-term financing process (between 90-120 days), long turnarounds have made them previously not worthwhile.

With digital documents, there is no long waiting period for paperwork to move through the supply chain, creating a far more readily available cash pool. This is because digital instruments can be exchanged in (close to) real-time, expediting processes by approximately 10-12 days, and thereby enhancing time to revenue and operational efficiency.

DNIs can easily be integrated into current SCF programmes via APIs, making them interoperable with existing global trade platforms and businesses’ ERP systems. For smaller businesses that may not use ERP, invoice data can be uploaded simply using CSV files. DNI adoption is therefore non-disruptive, straightforward, and efficient.

Once onboarded, using digital trade documents rather than paper versions will bring direct cost savings, with costs linked to paper trade documents estimated to be three times more than their electronic counterparts.

There is little doubt that to the bystander that the ETDA is a dry and inconsequential piece of legalese. However, by enabling the digitisation of trade documentation, it and similar legislation being implemented across the G20 and beyond, promises to create opportunities for corporates to conduct trade financing unlike what has come before.

By issuing a digital promissory note (DNP) or bill of exchange that gets immediately financed by a financial institution and discounted by suppliers, and then being able to choose the timing and frequency of the use of these solutions is transformational for businesses – driving extensive commercial advantage. As businesses seek to seize the opportunities abound and adoption inevitably accelerates, let us enter the age of SCF 2.0.

These issues not only underscore the canals’ vulnerabilities but also their crucial role in maintaining the rhythm of global trade. We also explore the strategies traders are employing to navigate these challenges and the outlook for 2024, offering insights into the future of these vital trade routes.

The importance of the Suez and Panama canals on global trade

The Suez Canal, opened in November 1869, is a 193km waterway connecting the Mediterranean Sea and the Red Sea. It provides a direct route for shipping between Europe and Asia, bypassing the need to navigate around Africa.

Approximately 12% of global trade, representing 30% of all global container traffic and over USD $1 trillion worth of goods per annum, passes through the Suez Canal.

This includes energy, commodities, consumer goods, and componentry from Asia and the Middle East to Europe.

The Panama Canal, opened in 1914, is another vital link in global maritime transportation, connecting the Atlantic and Pacific Oceans. It allows ships to avoid the lengthy and hazardous voyage around Cape Horn at the southern tip of South America.

The canal plays a crucial role in global supply chains, supporting the movement of various commodities, including dry bulk, container, chemical tankers, and more.

Both canals have had significant impacts on global trade patterns and the economic geography of many countries. They have facilitated faster delivery of goods, but their importance also highlights the vulnerability of global supply chains, as blockages or disruptions in these canals can have far-reaching effects on global trade.

What the drought has meant for the Panama Canal

Drought has led to decreased water levels in the Panama Canal. Water is crucial for its operation as water is used to raise and lower ships. This has forced officials to reduce the number of vessels they allow through the canal, creating expensive complications for shipping companies.

The decreased water level in the canal is due to a reduction in rainfall in Panama, leading to one of the driest years in the country’s history. The water levels in the Gatun Lake, which feeds the canal, have reduced significantly compared to usual levels during this period. This has led to a severe drought, with water levels in the canal at their lowest in decades.

The drought has also led to delays in transit times, impacting the ability of large cargo ships to quickly traverse the Panama Canal. The Panama Canal Authority has had to implement new operational measures to minimize the impact of the drought. These measures include reducing the number of available reservation slots, which is likely to hinder trade levels, particularly for the U.S. East Coast.

The drought has also forced the Panama Canal Authority to reduce the number of daily transits and the maximum weight of ships. This has led to a significant reduction in vessel traffic, affecting the flow of trade. Shipping containers are piling up along the Panama Canal, triggering a wave of supply chain disruptions. This has led to additional container surcharges imposed by ocean carriers on shippers.

Conflict in the Red Sea – and its implications for Suez Canal attacks

The current conflict in the Red Sea involves Houthi rebel attacks on maritime vessels, which has escalated military tensions in the region. The Houthis, who control a portion of Yemen’s Red Sea coastline, have launched missiles and drones against ships, asserting that their actions are retaliatory against Israel’s military operations.

These attacks have disrupted international shipping and led to a multinational maritime security force, including the U.S. and U.K., to protect ships passing through the Red Sea. The implications for the Suez Canal are significant, as it is one of the world’s most crucial maritime chokepoints, facilitating a substantial portion of global trade.

Any disruption in the Red Sea could impact the flow of traffic through the Suez Canal, potentially causing delays and economic repercussions due to the canal’s strategic importance in connecting the Mediterranean Sea to the Red Sea, and thereby Europe to Asia.

The conflict has attracted international attention, with various nations responding to the threat against shipping in the Red Sea. The U.S. and U.K. have conducted airstrikes against Houthi targets in response to the attacks, and there is concern that the conflict could widen, affecting not just regional but global stability and trade.

Understanding the aggregate effect

The aggregate effect of restrictions on both the Panama Canal and the Suez Canal can be profound for global trade.

These two canals are essential shortcuts for maritime shipping, with the Panama Canal facilitating about 6% of global trade and the Suez Canal handling around 12%.

When operations at these canals are restricted, it can lead to significant delays, increased shipping costs, and disruptions in supply chains.

For instance, the Panama Canal drought meant that ports in Panama, Nicaragua, Ecuador, Peru, El Salvador, and Jamaica have seen 10% to 25% of their total maritime trade flows affected. The Suez Canal’s disruption could add about 10 days to the duration of trips, forcing ships to reroute around the Cape of Good Hope, adding about 3,000-3,500 nautical miles to journeys.

These disruptions can also lead to increased prices for goods. The Panama Canal disruption has resulted in generalized price increases for agricultural commodities and food industry produce in Europe. The Suez Canal disruption could lead to surging prices on goods like oil and gas.

Moreover, these disruptions can force shipping companies to seek alternative routes or modes of transportation, which can further increase costs and lead to delays. Some shipping companies have started redirecting shipments from Asia away from Panama and through the Suez Canal due to the Panama Canal’s drought.

However, with the ongoing conflict in the Red Sea, these companies may have to reroute their vessels around Africa, adding at least a week to the journey.

5 strategies importers and exporters can action to avoid disruption

Goods and commodity traders can employ several strategies to compensate for disruptions in the Panama and Suez Canals:

• Diversification of supply chains: One option is to diversify supply chains to reduce dependence on a single route. This could involve using alternative shipping routes, such as the Cape of Good Hope, or exploring other modes of transportation like rail or air freight.
• Stockpiling and strategic reserves: Traders can maintain larger inventories or strategic reserves of key commodities to buffer against supply chain disruptions. This strategy, however, increases storage costs and may not be feasible for perishable goods.
• Insurance and hedging: Insurance can cover losses from supply chain disruptions. Traders can also use financial instruments, such as futures and options, to hedge against price volatility caused by disruptions.
• Investment in technology: Considering investing in technology to improve supply chain visibility and resilience. For example, supply chain control towers, which use artificial intelligence, can provide timely alerts about possible delays, allowing companies to adjust their strategies quickly.
• Trade shifts: Traders can shift their trade towards regions or countries that have increased their exports due to the disruptions. For instance, traditional trading partners like the United States, Canada, Australia, and New Zealand have heavily increased their exports towards the EU27.

While disruptions in the Panama and Suez Canals pose significant challenges, traders have a range of strategies at their disposal to mitigate the impacts.

The choice of strategy will depend on the specific circumstances of each trader, including their risk tolerance, financial resources, and the nature of the commodities they trade.

The Panama and Suez Canal outlook for  2024

In the Panama Canal, daily vessel passages, expected to reduce to 18, have instead increased to 24, and delays have been minimal. Despite this, water levels remain below average, and the long-term outlook for the canal is concerning.

Meanwhile, the Red Sea crisis has seen increased security issues, with attacks by Yemen’s Houthi forces on commercial vessels causing most container lines to reroute around Africa and the Cape of Good Hope.

It is arguably the Suez Canal that poses the biggest ongoing threat to global trade flows. The lack of security in the Red Sea has led to a halt in transits, and any potential military action to increase security will risk escalating the regional conflict.

Users of freight shipping are advised to monitor the port outlook as 2024 is set to see problematic conditions for at least the first quarter. Resolving the issues in both the Panama and Suez Canals is crucial for the industry, but there are no quick or easy solutions to the challenges currently faced.

Unsurprisingly, this year’s top stories included several focused on technology such as digital trade and AI. There was also a lot of interest in sustainable practices, tips for women leaders and the value that immigrant-led businesses can bring in Canada and beyond.

Enjoy this year’s top international trade articles.

1. 10 global trade trends we’ll be watching in 2023

10 global trade trends we’ll be watching in 2023

2. Why digital trade should be a cornerstone of Canada’s Indo-Pacific Strategy

Why digital trade should be a cornerstone of Canada’s Indo-Pacific Strategy

3. 7 emerging cleantech suppliers that can help you create a more sustainable supply chain

7 emerging cleantech suppliers that can help you create a more sustainable supply chain

4. Unpacking the Digital Transformation of Trade

Unpacking the Digital Transformation of Trade

5. How to Take Your Business Global – 5 Important Steps for Female Leaders

How to Take Your Business Global – 5 Important Steps for Female Leaders

6. Investing in immigrant founders to unlock the next generation of Canadian innovation

Investing in immigrant founders to unlock the next generation of Canadian innovation

7. 8 common global procurement mistakes made by small and medium sized businesses (SMEs)

8 common global procurement mistakes made by small and medium sized businesses (SMEs)

8.Top 10 things we learned at the WPO 2023 Entrepreneurial Excellence Forum

Top 10 things we learned at the WPO 2023 Entrepreneurial Excellence Forum

9. 5 ways AI is transforming international trade

5 ways AI is transforming international trade

10. Top 10 fastest growing international trade jobs in 2023

Top 10 fastest growing international trade jobs in 2023

Peter Hall has long been an influential voice in the international business community. He served as VP & Chief Economist at EDC for over a decade. In the FITT Economic Briefing series, Peter explores the current state of the world economy, forecasts and what it all means for today’s exporters.

Here is a recap of the first three installments in the series. For the full picture, watch the videos and be sure to subscribe to FITT’s Youtube channel so that you will be the first to know when there is a new briefing update.

Is forecasting passé? Projections and pandemonium are a strange mix

Released in August, 2023

Chaos is a big theme these days – it appears in books, movies, high-level economic and political discussions, and it has come to permeate our view of things. Whether it’s climate change, technological change, de-globalization, terrorism, populism, pandemics,  demographic change, misinformation, corporate ethical issues, IP, AI or the host of other mega-shifts I’ve left off the list, each individual issue is daunting on its own; collectively, they are something of a nightmare.

The shock, persistence and randomness of these issues has led many to conclude that it’s not really possible to see the future, that the models of the past are broken. That’s probably true if everything has changed. But everything hasn’t changed.

The traditional business cycle is still relevant

We still talk the business cycle and its four phases: growth, peak, recession and recovery. All of these terms are still in our business vocabulary, and still active in reality.

What’s confusing about today’s business cycle is that it doesn’t seem to be following the same cadence as in the past. In recent history, we could count on a recession happening roughly every 10 years. However, dating back to the early 1980s, the world has undergone significant positive shocks that have increased our collective capacity to grow. Things like computing power, telecommunications, the rise of emerging markets, globalization, and myriad related factors and applications have revolutionized and set whole new limits to our growth potential.

It’s really hard to argue that in the big, driver economies there is clear evidence of pre-recession excesses. In fact, there is ample evidence of the exact opposite – a massive anti-bubble of pent-up demand.

If you don’t agree, you’re in good company – but try these arguments on for size: first, the COVID-19 policy-induced recession simply deferred a lot of intended spending. And the money is there for it, from incomes that were just banked to paid-out but unspent stimulus money. Second, prolonged sluggish growth created a huge groundswell of pre-pandemic pent-up spending. Third, at the same time, Americans vastly reduced their personal debt levels. Fourth, the 2008 housing disaster, most evident in the U.S. market, brought chronic underbuilding that created a big supply-demand gap that will take years to fill. In the U.S. and Europe, housing is on the up and up. No wonder the Fed is finding the inflation battle hard.

Canada and the U.S. are facing different scenarios into 2024

Ditto for Canada? Sadly, no. Soaring consumer debt and poor housing fundamentals will not respond well to aggressive interest rate hikes. This, together with higher consumer prices will ensure that Canadian consumers are tighter with their cash. Avoiding a significant domestic recession will be very difficult for Canada to do.

This time around, Canada’s exporters will get a free pass. The relative strength of our key trading partners will likely shift business interest more to an export focus – by extension, heating up demand for international trade expertise.

Not only will exports partly offset the domestic malaise, but that same domestic weakness could well free up labour and plant capacity for the export sector – it’s actually a good moment to keep an eye open for talent that’s currently being shed in the high tech, financial services and skilled-trade firms that primarily serve the internal economy. It’s also a good time to be on the lookout for strategic investment plays.

Here’s the deal

Forecasting is alive and well, if the impact of structural changes is properly understood. Data and cyclical fundamentals together show that the global economy is stronger than news reports have indicated. This will help it to absorb higher interest rates without drastic fallout, and to continue growing for a number of years to come. To do this successfully, more capacity will be needed to deal with rising demand. That will be good for Canadian exports, Canadian business investment, and skilled international trade professionals.

Is Inflation Going the Wrong Way? Analysts say more rate hikes ahead

Released in September, 2023

As you know, businesses, exporters and consumers have already paid a huge price in the Bank of Canada’s inflation fight. The sharply higher cost of borrowing has hit us from all angles – personally, in business investment projects and working capital needs, and in business flows.

Haven’t rate hikes gone far enough? Why aren’t they more effective? What about core inflation?

That’s all the Bank of Canada cares about, right? Partly right – in an inflation fight, they’re looking at everything.

What wasn’t discussed in immediate news flashes over the past few months is that certain key groups in the CPI basket are either deflating or in disinflation territory. Take household operations, furnishing and equipment, for instance. It’s a category that accounts for almost 15% of the CPI basket, and has fallen by an average of 0.5% per month for the past three months. That’s an annualized drop of 5.9%, a pretty serious tumble. Guess what – this category isn’t alone. Clothing and footwear tumbled by 2.8% in the past two months alone. Meanwhile, health care costs have flatlined. Add it up, and about a quarter of the basket is really hard-hit.

Still a lot of interest costs pain ahead

This sure complicates the budgeting process. Businesses are struggling with irrepressible energy and transportation costs, critical for international trade, and a softening domestic market that’s putting downward pressure on selling prices. Weak producer prices are a mixed blessing; input costs are muted, but those selling intermediate goods are in a squeeze.

Monthly increases in mortgage interest costs are still rising at a double-digit pace that has persisted for 14 months, and is almost sure to continue for some months to come. In July alone, growth was at a 24% annualized pace. The pace was actually higher a few months back, but today’s growth is on top of previous gains and is almost sure to barrel on in the coming months. For interest costs, there’s still a lot of pain ahead.

Is the cure worse than the disease?

Now wait a minute; when we’re talking about inflation from interest rate hikes, isn’t that inflation that’s sort of caused by the Bank of Canada? Well, I’m afraid so.

This is one of those strange situations where fighting fire with fire is the remedy. But if that’s the case, shouldn’t the measure of success be the price path of everything but mortgage interest costs? That is, are the fires that are being intentionally started helping us conquer the original fire? Seems reasonable.

That should be easy; mortgage costs are hefty, so tackling what remains should be easy, right? Not quite; hard as it may be to swallow, the weight of mortgage interest costs in the the entire 2022 CPI basket was just 3.46%. But don’t despair; multiply that by the 30.6% year-on-year growth in this category and you add a full percentage point to headline CPI!

Here’s the deal

Monetary policy remains a delicate dance. Rate hikes to date will still be biting down hard on the economy well into next year. Spurious and fleeting price changes will doubtless complicate the exercise, but the Bank’s potion seems to be working. As we’ve seen in the past, too much is lethal.

Navigating Near-shoring: Tempering enthusiasm with caution

Released in November, 2023

It seems everywhere there’s business-talk, near-shoring is one of the key topics. Whether in keynote presentations, strategy meetings or side-bar conversations, there’s lots of buzz.

While serious talk of near-shoring is nothing new, springing to life with SARS-1, business-arresting weather and seismic events and the Global Financial Crisis of 2008, it really took the COVID-19 pandemic to kick it into tangible action. In investment-speak, that’s pretty recent.

It takes time to actually get shovels in the ground, but that seems to be happening in spades in 2023.

What does this mean for exporting businesses in Canada?

Many are welcoming this enthusiastically. They see new investments coming in, with employment opportunities, ribbon-cutting ceremonies and of course tax dollars to follow. And if they’re not coming here, well, they’re setting up shop in a ‘friendlier’ location. Supply chains are more secure. Shipping will be more predictable, and require shorter lead times. In short, it’s much more about us, and it’s keeping the so-called ‘bad guys’ out. But is it all positive?

6 key near-shoring challenges for exporters

Unfortunately, there are a good few things to watch out for:

1. Higher costs

Let’s face it, under globalization, business was organized internationally to minimize costs. Competitive pressures ensured that businesses would make cost-efficient decisions. It’s logical, then, that unwinding this process will result in higher-cost production. The timing isn’t great, as we are already dealing with the first serious inflation outbreak in 31 years. Exporting businesses will have to factor this into their plans, and will have to be creative to remain competitive.

2. Labour shortage

New domestic investments will require workers, and these – at least in Canada, the U.S. and Western Europe are in short supply. As such, these new operations will likely bid up the cost of labour, which no doubt will seep into our own organizations, magnifying wage pressures that are already present.

Canada’s acute shortage of skilled labour also suggests that new investments may well poach skilled labour from existing operations, compromising production from existing facilities, and again, adding to wage pressures for skilled workers.

3. Financing

The timing of new investment activity isn’t great, as it’s clashing with the recent spike in interest rates. While we may welcome all of this new activity, the cost of what it produces will likely have to factor in increased borrowing costs.

4. Location

You may be happy that a key part of your supply chain is moving closer, say from China to Mexico. If you haven’t dealt with Mexico-based businesses before, there’s likely a lot to learn about transactional, taxation and logistics issues, among other things. And even if you are familiar with the new market, there may well be differences that relate to the nature of the goods and/or services in question.

5. Are potential partners really near?

Near-shoring has created a wave of investments from offshore suppliers, in an attempt to be treated as local content. China is particularly active, with anecdotal evidence suggesting strongly that it is investing in North America, especially Mexico, and in places like South Korea which have preferential trade agreements with the U.S.

This new investment is generally being welcomed by the recipient jurisdictions, but if in U.S. policymakers’ eyes this is ultimately viewed as a violation of the spirit of near-shoring, then these investments – and those supplied by them – may well find themselves on the wrong side of Canada’s top customer. With this in mind, remember that USMCA is up for renewal in 2026.

6. Politics vs business

Businesses make investment decisions based on long-term dynamics, given the amounts being committed and the need to generate shareholder value. Politics is often on a shorter horizon, and can be fickle. When it finally dawns on consumers that they will ultimately pay the bill for this, in addition to current inflation pressures and higher interest rates, they may sour on near-shoring.

At the same time, businesses need to be aware that higher-cost repatriated investment means that there are still lower-cost operations elsewhere that could well threaten future competitiveness. They, too, may lose enthusiasm for near-shoring. Best to keep an open mind and remain flexible.

Here’s the deal

Past promises to re-shore, near-shore or re-localize supply chains weren’t honoured for a reason. Businesses simply weren’t convinced that the long-run costs of disruption justified a substantial re-working of their global production networks. Political pressure and security concerns have convinced many that it’s time to make good on the promises.

Whether or not the changes stick remains to be seen. Where national security is concerned, near-shoring is here to stay. For the rest, time alone will tell. As near-shoring is essentially a policy in flux, it is critical to keep an eye on the progression of the issue in the coming months.

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Effects of a lower demand for ground freight

In the wake of the COVID-19 pandemic—a world event that spiked freight demand exponentially—the trucking industry has now entered a recession-like period due to an inflated number of drivers and a normalized demand for ground transportation. What does this mean for consumers in the trucking industry and the shipping companies that supply them? Let’s find out.

Effects on customers

From the customer end of the spectrum, a lower market demand for ground freight is a positive thing. They’ll get to take advantage of shorter (or non-existent) wait times for shipping, last-minute availability, and more affordable shipping costs.

Effects on shipping companies

Shipping companies, on the other hand, suffer as a result of lower demand.

Global Trade magazine says the decline in demand has “placed the sector at a disadvantage during annual contract negotiations.”

Since there are more trucks available than loads that need shipping, shipping companies have to compete against each other and lower prices in order to secure short-term and long-term contracts.

Digital freight brokerage and AI

Freight brokerage is the business of matching truck drivers to shipping companies and other businesses that require their services. Freight brokerage can occur between independent truck drivers and small businesses, but it is also used within a single company to streamline communication between drivers and warehouse personnel.

The freight brokerage process used to be conducted with paper and phone calls, but the industry has been making a switch to digital freight brokerage, particularly with the use of artificial intelligence technology.

Digital freight brokers can take two forms. Businesses that prefer working directly with people rather than technology can hire a digital freight brokerage company that will gather information about available drivers, as well as the details of the load that needs to be shipped, and then will handle the matchmaking process.  There are also digital freight broker apps that collect the same information and allow businesses to cut out the middleman.

The main benefit of digital freight brokerage is the ability to match customers to freight trucks much more efficiently. Not only does this make the process easier for everyone involved, but it also streamlines the entire supply chain and improves customer satisfaction and loyalty.

Hwy Haul describes five benefits of digital freight brokerage: time savings, less paperwork, better prices, 24/7 access, and optimization of driving routes.

Competition within the shipping industry

Due to changes in demand for ground freight along the entire supply chain, competition in the shipping industry has grown significantly. Most notably, long-standing shipping companies are being pitted against newer startups with a highly digital business portfolio.

Legacy shipping companies are still fairly determined to maintain the status quo and are resistant to change. Unfortunately, slow attempts to digitalize will simply not be able to sufficiently meet the changing needs of businesses on a global scale. While they are currently responsible for a large portion of the market, new digital-based startups are innovating and stirring up interest in a new way forward.

Commerce Ventures summarizes things perfectly:

“The lack of action by the most dominant players to address the industry’s biggest challenges has given rise to a growing number of startups ready and waiting to disrupt trucking as we know it.”

As businesses start to demand faster shipping times, more accessible brokers, and better rates, the newer digital companies will have an undeniable edge over long-standing companies set in the ways of the past. Given the current state of the industry, legacy shipping companies will undoubtedly begin to lose their hold on the market in favor of revolutionary startups.

Expected developments in shipping tech

Although the future is impossible to predict, industry experts can make educated guesses in regard to the expected developments for the short term and long term where digital brokerage and AI trucking are concerned.

Short term predictions

Digital freight brokerage is afflicted by a number of challenges that prevent it from serving the entire industry right now. For example, the shipping solutions available from this source today are heavily skewed towards flat beds and vans and away from niche specializations like refrigerated trucks. As a result, much of the industry cannot be served. In the short term, it is predicted that this problem and others will be solved by a growing demand for the services and advancing technology.

In the field of self-driving trucks, the short-term expectations are as follows: research and development will continue, including road testing and small-scale integrations, and industry leaders will continue to open their minds to the possibilities of autonomous trucking.

Long term predictions

Digital brokers have been called a “solution to improve agility, reliability and performance of supply chains…” by CIFFA. As time goes on, it is expected that the digitalization of freight brokerage will transition from its role as a new trend to an established norm in the industry.

As technology advances, self-driving trucks will also make their way onto roadways through one small integration at a time. Autonomous trucking has the potential to revolutionize the industry as a whole, but it is also fraught with technology-related barriers and the challenge of trust and safety in fully autonomous vehicles.

As the trucking industry continues to evolve toward a digital future, digital freight brokers will become an even more integral component of the supply chain. Innovation in the realm of AI trucking—particularly self-driving trucks—will become more mainstream, and legacy shipping companies will be forced to either keep up with the changing technology or fall far, far behind. The future is coming, and the future is digital freight brokerage and AI technology.