You are required to produce an essay on “The future of trade” report by The Future Inc.
P E R S P E C T I V E S O N P R O S P E R I T Y charteredaccountantsanz.com/futureinc The Future of Trade ARE WE READY TO EMBRACE THE OPPORTUNITIES? https://www.charteredaccountantsanz.com/news-and-analysis/insights/future-inc https://www.charteredaccountantsanz.com/news-and-analysis/insights/future-inc https://www.charteredaccountantsanz.com/ Chartered Accountants Australia and New Zealand Chartered Accountants Australia and New Zealand is a professional body comprised of over 120,000 diverse, talented and financially astute members who utilise their skills every day to make a difference for businesses the world over. Members are known for their professional integrity, principled judgment, financial discipline and a forward-looking approach to business, which contributes to the prosperity of our nations. 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Deloitte Access Economics is Australia’s pre-eminent economics advisory practice and a member of Deloitte’s global economics group. For more information, please visit our website www.deloitteaccesseconomics.com.au About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. About Deloitte Australia In Australia, the member firm is the Australian partnership of Deloitte Touche Tohmatsu. As one of Australia’s leading professional services firms, Deloitte Touche Tohmatsu and its affiliates provide audit, tax, consulting and financial advisory services through approximately 6,000 people across the country. Focused on the creation of value and growth, and known as an employer of choice for innovative human resources programs, we are dedicated to helping our clients and our people excel. For more information, please visit our website at www.deloitte.com.au Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited. Copyright © March 2017. Chartered Accountants Australia and New Zealand. All rights reserved. Disclaimer: This was prepared by Chartered Accountants Australia and New Zealand with the assistance of Deloitte Access Economics. This publication contains general information only; none of Deloitte Touche Tohmatsu Limited, its member firms or their related entities (collectively the “Deloitte Network”), nor Chartered Accountants Australia and New Zealand are, by means of this publication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No warranty is given to the correctness of the information contained in this publication, or its suitability for use by you. To the fullest extent permitted by law, no liability is accepted by Chartered Accountants Australia and New Zealand or any entity in the Deloitte Network for any statement or opinion, or for any error or omission or for any loss whatsoever sustained by any person who relies on this publication. Chartered Accountants Australia and New Zealand. Formed in Australia. Members of the organisation are not liable for the debts and liabilities of the organisation. ABN 50 084 642 571 1216-16 https://www.charteredaccountantsanz.com/ Foreword Despite current uncertainty for global trade, it will continue to be critical for the future prosperity of Australia and New Zealand. Trade has evolved beyond exporting and importing. The effects of globalisation and technology have meant that trade is not only a business exchange, but a cultural exchange as well. We see this particularly in the changing landscape of policy on domestic and international levels regarding trade and political positions. We have also seen trade shifting from goods to the exporting and importing of services, including professional services such as accounting. The appetite for trade has increased and so has the ability of businesses to trade. However, globalisation has seen attitudes towards trade change. Recent events such as the Brexit vote in the United Kingdom and President Donald Trump signing the order to remove the US from the Trans-Pacific Partnership might be seen as signs that the days of free trade are over. The costs and benefits of trade are questioned – as well as the fairness, equality and the impacts of trade distribution. These questions have influenced political choices and raised uncertainties about Lee White FCA CEO, Chartered Accountants Australia and New Zealand trade in the future. Policy makers will need to consider how to mitigate risks and maximise the potential benefits of trade. It is also important to consider how we communicate changes and benefits for businesses and what it means for the public. We are in an environment where trade is continually evolving – new models of trade have emerged online, allowing more people and businesses to participate in trade, including the direct dealing to consumers. Business will require agility and flexibility to meet the changing needs of trade. We have exporters becoming importers, new markets participating, buyers and sellers connecting directly – the effects of globalisation, policy and technology will continue to shape trade. But the future of trade is bright if we embrace the opportunities it offers. charteredaccountantsanz.com/futureinc P E R S P E C T I V E S O N P R O S P E R I T Y https://www.charteredaccountantsanz.com/news-and-analysis/insights/future-inc https://www.charteredaccountantsanz.com/news-and-analysis/insights/future-inc Contents 02 Executive Summary 2 Introduction 6 The megatrends shaping the future 8 Globalisation 10 Technology 12 Policy context 14 To trade or not to trade? 18 Looking forward 24 The role of industry in trade 28 Looking forward 34 03 04 05 0 1 charteredaccountantsanz.com/futureinc How will technology change the future of trade? 36 Looking forward 40 The changing intermediary 42 Looking forward 45 The ethical consumer 48 Looking forward 52 Conclusion 55 References 60 06 0 7 P E R S P E C T I V E S O N P R O S P E R I T Y https://www.charteredaccountantsanz.com/news-and-analysis/insights/future-inc https://www.charteredaccountantsanz.com/news-and-analysis/insights/future-inc 2 The Future of Trade: Are we ready to embrace the opportunities? Executive Summary Trade has recently come under greater scrutiny, with the US election and Brexit highlighting voter opposition to integration into the global economy. Yet international trade is essential to our modern economy. It gives us access to a wider range of goods and services, stimulates competition and allows us to focus on areas of comparative advantage. Exports currently account for close to 30% of world GDP.1 In Australia and New Zealand, exports alone account for 20% and 28% of GDP respectively.2 With 98% of the global economy beyond the shores of Australia and New Zealand, international trade presents exciting opportunities for businesses seeking to expand.3 PREDICTIONS Trade will be growing rather than slowing over the next five years for Australia and New Zealand. Services exports will become increasingly important for Australia and New Zealand. Technology is set to facilitate even more trade. International trade is essential to our modern economy 3future[inc] While there are significant opportunities ahead, the rate of growth in international trade has slowed in recent years. Between 1985 and 2007, international trade was growing, on average, twice as fast as world GDP. This was spurred by rapid growth in industrialising Asian economies, driving increased demand as well as introducing new global producers. Reductions in the costs of trade – especially transport and communication – greased the wheels of trade, enabling new business models and the shift to global supply chains. Liberal trade policies proliferated and further strengthened trade flows, as many countries saw trade as a means of bolstering economic growth. But since the Global Financial Crisis, international trade has slowed, keeping pace with global GDP growth, rather than growing at double the rate. And in 2016, trade growth was the slowest it has been since the GFC; a result of slower growth in China’s industrial capacity, as well as the appetite for services, which continue to grow as a share of spending. But the tides are turning. 2016 saw improvements in container volumes, rising orders of manufacturing globally, and an increase in the number of businesses going global – all good early indicators for trade. And while services are generally less trade-intensive than goods, technology and policy mean that the volume and value of trade in services are also likely to increase. Green shoots are already appearing in Australia, which recorded AUD32.6 billion in exports in December 2016, the highest level ever in Australian history. This represents an AUD7.9 billion increase on the previous December.4 Looking forward, globalisation, technology and policy will be key factors in determining the future rate of growth in international trade. We may not return to the heyday of trade growing at on average double the rate of GDP growth, but there are many signs that there is still a strong future ahead in international trade for Australian and New Zealand businesses. 4 The Future of Trade: Are we ready to embrace the opportunities? Policy Technology Globalisation On the policy front, businesses would prefer small changes over wholesale shifts in trade policy. Indeed, in both Australia and New Zealand, businesses thought that no change to existing trade policy settings would be the best for their business. Businesses see consolidating existing trade agreements as the best route for government. Our survey found that 64% of Australian and 72% of