The Need to Reduce the Barriers to Global Trade
Over the last 50 years we have seen global trade prosper in line with the success of globalisation. Global trade has generated jobs and growth, created opportunities for businesses both big and small, spurred investment in public infrastructure and connected emerging markets around the world to the global economy.
But today trade is not as free as it should be in the face of both tariff and non-tariff barriers. Various obstacles continue to hamper trade. Lack of infrastructure, corruption, burdensome documentation processes, supply chain inefficiencies, lack of logistics know-how to mention just a few. What these issues all have in common is that they make trade much more expensive and difficult than it should be.
The World Trade Organisation estimates that the reduction of trade barriers could add a potential USD 1.2 trillion to global GDP, most of which would come from eliminating non-tariff barriers by agreeing on product quality standards, introducing more effective customs procedures and mitigating or eliminating infrastructure bottlenecks.
In other words, reducing trade costs by minimizing bureaucracy and reducing the non-tariff barriers for trading across borders holds great potential for boosting economic development. But how do we remove these barriers, transcending the boundaries that have constrained us thus far? How do we pool the collective resources of the public and private sectors to generate new solutions and business models for sustainable, profitable growth for today and tomorrow?
Enabling trade is at the heart of what the Maersk Group does. Before containers were invented in the 1950s, 30% of the price of a traded product came from the cost of shipping. Today it is less than 1%. With 90% of goods travelling by sea, our containers act as the building blocks of global trade – connecting countries, markets, businesses and people. Our ports are the gateway to trade and a critical component in a country’s economic growth. But as we invest in it we also depend on it to progress.
Recently, we have begun to explore how to unlock growth for both society and Maersk by actively accelerating the positive impacts we have as company; be it removing barriers to trade in East Africa, improving local access and business environments for trade in Brazil, or investing in low-carbon infrastructure in West Africa that enables efficient trade with the lowest possible cost to the environment. By taking an active role in addressing trade barriers, we aim to be the chosen transport and logistics provider facilitating the increased trade growth and in that way develop profitable markets.
In the last decades of the 20th century, Africa underwent a period of negative development, facing declining production and purchasing power. Its fortunes have since changed for the better, and the notion that Africa is on the brink of long-term, sustainable growth has moved from being far-fetched to quite conceivable.
The introduction of the WAFMAX, a new line of container vessels introduced by Maersk into West Africa in 2011, is a good example of how combined efforts by port authorities, terminal operators and shipping lines can bring important benefits to buyers and producers in developing markets where improved transport efficiency and connectivity are prerequisites for growth and development.
Each WAFMAX vessel carries 4,500 containers (TEU) and is specifically designed to accommodate the lower drafts in West African ports. The higher capacity of the ships means that one port call from these larger vessels replaces three calls from the averaged-sized vessel. With fewer ships needed to deliver the same number of containers, port turnaround times are shorter – dropping a full 50% since 2011.
This, in turn, results in savings for shippers and cargo owners as they are able to reduce the total transit time of their cargo and thus lower inventory levels. In effect, we have seen the cost of logistics in the region go down, enabling increased trade.
Maersk will continue to explore these kinds of opportunities in the future, looking for partners that share a mutual aspiration for sustainable, profitable growth.
We have a vested interest in seeing trade growing and countries prospering from increased exports and imports. This means we must do everything we can to lift the barriers faced by global trade, and to bring forward the message to governments and partners around the world on the significant potential it has to help grow the global economy.
In a year where the world convenes to agree on the Sustainable Development Goals, I can see no greater impetus than to act now.