Barriers to full speed

Blog | 18 May 2017

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Achieving a speeding ticket in Jakarta must be quite a feat. Even with a police escort, several bus loads of delegates at the ICC Banking Commission annual conference in Indonesia in April were challenged to go more than a few miles an hour in the traffic. It may be a tortuous analogy, but world trade recovery feels a lot like that.

Trade is recovering slowly from the global economic crisis, but there remain at least three significant barriers preventing real trade growth from achieving the pace of twice the rate of GDP growth, which it registered prior to the crisis.

The first is the continuing systemic uncertainty in the global financial sector. This has an effect on all parts of the financial complex but particularly on the banks, which are the global providers of liquidity and the established means of payment across borders. Their increasing cooperation with alternatives such as fintech is a positive
and necessary sign. Is it a sufficient one?

The second is the effort to establish a harmonised infrastructure for world trade. Progress has been made in proposals and debate but much remains to be done. The foundations for digital technology have been dug but implementation remains slow
(see our digitisation focus on page 33). This is no surprise because of the complexity of the subject but it is a matter of increasing urgency. The ICC is certainly trying to provide regulation and guidance to underpin the new architecture.

To return to the analogy of traffic in Jakarta, building the mass transit
system can help (though in the short term construction makes things worse), but
will it be enough?

The third, and perhaps most scary, is protectionism. The G20 and IMF, both of which have emphasised trade as a promoter of growth, appear to accept, albeit reluctantly, that protectionism could become a reality and the impact on the mechanics of trade and export finance could be profound, as was discussed in the ECA panel in the April issue of TFR (page 36). The ICC is encouraging the G20 to enable inclusive growth and not to allow protectionism, which is inimical to growth, to take hold at its summit in Hamburg in July. Will its entreaties be sufficient? We can only hope.

A final note - please don't forget to vote to acknowledge the performance of those who are helping trade flow on tfreview.com/vote.

Katharine Morton is editor-in-chief of TFR

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