By Chris Nixon, Principal Economist, NZIER
Nietzsche famously said: “what doesn’t kill you, makes you stronger”. Many working in supply chains in Australia and New Zealand must be thinking (hoping) that this is true.
Why have physical exports and imports held up under the most difficult logistical environment in living memory? A combination of fierce competition for market share by shipping companies, assistance by governments (subsidies, trade documentation adaption etc.), enduring relationships within supply chains between producers, logistics companies, and other supply chain participants, and strong demand for commodities all helped.
How can we ensure that supply chains thrive?
If we have weathered the storm – COVID willing – how can we ensure that our supply chains work harder? Here are three opportunities/challenges that could improve the resilience of supply chains even more.
- Full blown digital trade initiatives will produce significant benefits
The latest trade agreements have chapters that enable digital trade. The mooted Indo-Pacific Trade Economic Framework for Prosperity (IPEF) has digital trade as its economic centrepiece.
So much so, that the efficiency gains that can potentially be reaped from participation in digital trade are equivalent to a high-quality free trade agreement.
This will not be easy though since there are parties both on the export and import side of value chains that benefit from paper trade.
But the economics will prevail and the impact of dynamic gains over time should not be underestimated. The Figure below shows the impact when the European Union introduced e-certificates for perishable goods.