By Jon Brooks – TradeWindow Country Manager, New Zealand 

International trade can be a powerful driver of economic growth, and the benefits it brings are real. According to the World Bank, between 1990, when the pace of globalisation began to accelerate, and 2015, the number of people living in extreme poverty fell by more than a half, from almost 2 billion to just 0.7 billion people.

International trade has also improved outcomes for people across the globe, from helping increase the number and quality of jobs in developing countries, to stimulating economic growth and driving productivity increases – but there’s also risks that need to be managed.

What happens when an economy is ill-equipped and unprepared for the potential consequences of trade growth, and what are the consequences of poor transparency over supply chains? Anything from labour disruption, widespread outbreaks of foodborne illness, worsening inequality, lack of quality control, and environmental degradation can and do result.

Sustainable trade

The fourth edition of the Hinrich Foundation’s Sustainable Trade Index (STI) was released last month, against a backdrop of escalating geopolitical conflicts and deteriorating macroeconomic conditions. The index is a comparative measure of capacity and capability to successfully engage in trade in an enduring way, measured across 30 economies and 70 criteria.

The good news? New Zealand was ranked first place overall, with strong rankings across the Societal (1^st), Environmental (1^st), and Economic (7^th) pillars of the index.

Other contenders that placed in the top five overall spots included the UK, Hong Kong, Japan, and Singapore.

Hon Damien O’Connor recently said that the New Zealand government has placed trade at the centre of New Zealand’s economic recovery, having secured four FTAs in the past five years – but that we should always be working to lift our brand and maintain our position.

While New Zealand topped the charts overall, we only scored 73 out of 100 on the economic pillar, with economies scoring higher on the economic indicators including Hong Kong, Singapore, South Korea, the US, and the UK. Although New Zealand is doing well now, we cannot become complacent.

The links between the overall high-performing economies are clear. The top countries all tend to have low trade barriers and encourage technological innovation, yet even the top performers have red flags. The top five ranked economies in the Societal pillar – including New Zealand – continue to have high levels of imports of products made in parts of the world that participate in modern slavery. In fact, World Vision reports that in 2019 alone, every household in New Zealand spent on average $34 a week on goods associated with either forced labour or child labour.

Rather than resting on our laurels, if New Zealand wants to continue to lead in the sustainable trade space, businesses need to continuously invest in tools and capabilities to capture and monitor supply chain activities – including those in relation to modern slavery and in other areas, such as proving sustainability and provenance claims, which all require a high degree of traceability.

The solution

If New Zealand wants to remain the top contender in sustainable trade, the ability to prove provenance and validate the travel of goods along the supply chain is ever more essential for our businesses to continue successful operations in key markets.

So, what’s all the fuss about digital tools? Aside from simply increasing productivity and reducing exporters’ exposure to hidden supply chain risks, digital trade tools can also enable traceability.

Digital tools provide assurance and transparency to key stakeholders, including both importers and customers, unlocking value right along the supply chain to the end consumer.

Benefits from traceability solutions for the end consumer are vast and include enhanced food safety, biosecurity, and the ability to identify environmental and ethical production characteristics such as animal welfare, sustainable production, and quality control – as products can be traced right back to their origins.

What’s more, anyone involved with manufacturing, processing, packing, or holding foods destined for the US market that fall on the FDA’s food traceability list must now meet additional traceability requirements – including capturing and maintaining records of key data elements associated with different critical tracking events.

There are many other reasons that traceability solutions are important too – from gaining greater visibility over suppliers’ processes to facilitating payments and enabling immutable audit trails for the benefit of regulators, consumers, and, ultimately, the brand itself. Traceability also gives firms the ability to reconfigure their logistics if there is a trade shock – an unpredictable event such as the 2021 Suez Canal obstruction that led to long delays for multiple cargo vessels – adjust to meet consumer demand, and track adherence to environmental, social, and governance (ESG) imperatives.

In some instances, firms are even able to trace their goods after they have been sold – what is known as ‘downstream traceability’ – a crucial tool in the case of product recalls or faulty items that could cause safety concerns after the point of sale.

All of this and more is possible with the right digital tools in place. And as more trade stakeholders along the supply chain adopt these tools, the more likely New Zealand will be to defend its valuable position at the top of the list for sustainable trade.