Tax & Accounting Blog

Three Long-Term Trade Trends, From Leading Trade Practitioners

Blog, Global Trade, ONESOURCE December 1, 2017

The macro environment that underpins our third annual global trade survey, which will be released shortly, is increasingly uncertain and complex.

The long-term consequences of protectionism; the fate of proposed and existing free trade agreements; and general technological developments in manufacturing are themes that are creating uncertainty.

Added to these themes is the increasing regulatory enforcement actions; additional compliance requirements; and more digitization of goods and services as additional themes that are producing complexity for trade teams and the vendors and consultants that support them.

Our 2017 Global Trade Survey was a qualitative assessment featuring in-depth, one-on-one interviews with the people who lead trade compliance departments of complex, multinational corporations. The aggregate sentiment of these discussions leads me to make three broad predictions about what’s next for global trade looking a couple years down the road.

1: By 2020, China will successfully seize a more commanding, visible role in shaping global trade policy.

China’s shift from an export-driven economy to a consumption-oriented one continues to play out and its approach to trade has therefore evolved to favor more engagement.

Our findings suggest that free trade agreements do not materially drive decisions related to where companies build new plants or locate offices; rather, they often become an opportunity to a company’s supply chain decision-makers on optimizing their duty avoidance, or in supporting their customers’ FTA opportunities. This is an important part of our outlook.

2: With the shrinkage of global trade, local sourcing is increasing — not only in the US, but worldwide.

This is in large part a consequence of the protectionist posture of leaders in several countries that play important roles in global supply chains. It also has to do with competitiveness: in general, local sourcing can reduce logistical costs and bring products to market faster.

The automotive sector has known this for some time, and this explains the nearshoring strategy this industry has adopted. But the fundamentals of car-buying hasn’t changed much in decades, even with the increasing prominence of digital commerce: it’s still a major decision for consumers that tends to involve a great deal of research and deliberation.

Other sectors are pressed to bring products to market much quicker. Consumers increasingly prefer on-demand commerce and quick, automated shipping that brings their goods to their doorsteps with minimal intervention. Retailers like Amazon and, now owned by Wal-Mart, have cracked the code of delivering on these expectations, and local sourcing helps brands bring products to the masses more quickly than before.

3: Governments will approach tax with data management and analysis techniques that are increasingly sophisticated.

Distributed ledger technology, i.e., the blockchain, is one of the most promising technological advancements of the past century for society. It promotes transparency and makes impossible certain kinds of fraud and mismanagement. It can significantly improve the speed and costs of audits. It is not difficult to imagine a future in which audits are almost entirely automated, real-time processes.

Companies are beginning to incorporate distributed ledgers into products and internal processes. Governments will soon follow suit by incorporating blockchain technology into tax regulation via new standards and mandates for how companies report direct and indirect taxes as well as trade operations. Eventually, blockchain technology can reduce or eliminate the need for activity done at borders.

For trade practitioners, this impact will be two-fold: A greater emphasis on gathering and structuring data for regulators, and an increase in the speed at which trade can occur.

Global trade is now an industry that makes headlines across the globe, and leading trade practitioners should welcome the opportunity to leverage the profession’s increasing prominence into greater influence at their respective companies.