Global Trade Management Agenda 2015
The top priorities in global supply chain management, the importance of preferential agreements, and the risks and opportunities of the planned free trade agreement TTIP.
[Source: SCM Portal; by: Prof. Dr. Dirk H. Hartel (*) and Dr. Ulrich Lison (**)] This year’s “Global Trade Management Agenda” focuses on the burning issues of the day: In addition to the top priorities in global trade management (GTM) in 2015, these include the importance of preferential agreements and the business community’s assessment of the planned Transatlantic Trade and Investment Partnership (TTIP) between the EU and US. The Global Trade Management Agenda 2015 is based on the results of an online survey of logistics and global trade experts conducted in the summer of 2014. The study is a collaborative project of AEB and Baden-Württemberg Cooperative State University (Duale Hochschule Baden-Württemberg, DHBW) in Stuttgart. Here is an overview of the key findings:
Global trade management
More and more businesses seek legal protection. Worldwide crises have a direct impact on global trade management and the risk that global enterprises perceive in foreign trade. That’s why such companies are turning more attention to compliance and adapting their processes to ever-changing regulations. Direct costs savings, on the other hand, play a comparatively minor role in the GTM of the businesses surveyed.
Challenges well under control
The businesses participating in the study are holding up well amid the crises and report being already well equipped when it comes to complying with the relevant regulations and restrictions. They see much more room for improvement when it comes to tapping into new markets, however. The training and continuing education of employees is another important topic.
- Routine today – even more important tomorrow
Businesses regard free trade agreements as part of their everyday operations. International activities without the use of available preferential agreements are the exception. Most businesses – especially those heavily involved in the US market – expect the issue to grow even more relevant over time.
- Cost-benefit ratio is not optimal
Lower costs are typically the primary motivator for businesses to use preferential agreements. But potential savings are offset by relatively high expenses. For this reason, most of those surveyed take a more critical view of the cost-benefit ratio. But the respondents, especially those in larger enterprises, find the regulations to be essentially clear.
- Customers are main drivers
The overwhelming majority of businesses report that customers expect to receive preference documents for their goods. This expectation is one of the primary reasons named by participants in the study for dealing with the subject of preferences. The strong customer interest means that in very many businesses, the topic has taken hold not only in management accounting, taxes, and customs but also in sales. There is even a growing interest in free trade agreements among upper management.
- Barrier: compliance of all participants
Complex regulations make compliance more difficult for every single business. In addition, companies count on their suppliers to also be familiar with the rules, apply them correctly – and be willing to apply them. This dependence is the most significant barrier to the use of preferential agreements.
- Knowledge management not yet up to par
Most participants in the study have personal experience with free trade agreements and generally confirm the same for their logistics departments. But in most cases, this knowledge is not written down, and only very seldom is it systematically and consistently documented.
TTIP – Transatlantic Trade and Investment Partnership
- Consumer protection and European standards
When respondents are asked for their spontaneous associations with TTIP, the results are mostly negative. The main reasons given are the topics covered in all the media: genetic engineering, consumer and environmental protection, and the threat to democracy from special protections for investors. But one out of four spontaneous responses also mention positive effects for global trade and the economy.
- Behind closed doors
The general sentiment toward TTIP among the surveyed businesses is rather guarded and skeptical. The main reason is a perceived lack of transparency surrounding the processes and content of the negotiations. The personal assessments cover a broad range from “important advantages” to “major threat.”
- Relevant for nearly all businesses
Most experts assume that TTIP will have a big impact on their companies, though the emphasis is not so much on financial performance or the number of employees, where the impact is expected to be much more modest. One interesting note: Respondents from the UK expect a much stronger positive impact on the economic development of their companies.
- Opening markets – to competitors as well
Businesses see in TTIP a good opportunity to dismantle non-tariff barriers to trade. Easier access to markets applies to other providers as well, of course, so experts are also aware of the risk that competitive positions could shift.
- No hurry – no specific plans
Since most of those surveyed assume that TTIP will not take effect in the next two years, they have not generally planned any concrete measures. Two approaches can be expected: adjustments to routine operations and continuing education for employees.
The survey included a total of 177 global trade and logistics experts in businesses from various industries with an emphasis on Germany and the United Kingdom.
(*) Head of the Department of Business Administration Service Management at DHBW Stuttgart
(**) Member of the Executive Board at AEB and expert in the area of global trade, preferences and international customs processes