Building a new consensus on trade

Higher productivity and quality products are some of the benefits that International Standards can bring to global trade.

Few minutes to read
By Ann Brady
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Trade
Business
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Remember when the millennium bug was all we had to worry about? Cast your mind back about 20 years. As the seconds ticked down on 31 December 1999, many businesses around the world – from airlines to banks and power plants – were holding their breath over fears about the so-called “millennium bug”. Were those fears about to be realized? For those of you who may have forgotten now, what was also known as the Y2K bug referred to a computer programming glitch that was expected to cause widescale disruption at the start of the new millennium as the year changed from 1999 to 2000.

As it turned out, there was no widespread havoc or disruption, no global meltdown. Many companies, fearing the worst, had taken steps to correct their systems to minimize potential damage and businesses kept trading, international markets didn’t crash. Indeed, months into the new millennium, the economic outlook was not only good but also, according to the International Monetary Fund, GDP growth was projected to increase in all major regions of the world, with the US economy the key driver.

Onset of digital age

At the time, the Internet was still in its relative infancy and the digital era was barely a glow on the horizon. Twenty years on, however, as our ever-more globalized and interconnected world has been moving swiftly into the so-called Fourth Industrial Revolution and embracing its new technologies such as artificial intelligence, robotics and quantum computing, another bug – a “low-tech” one, which we weren’t prepared for – has unleashed widespread disruption, anxiety and uncertainty. The COVID-19 pandemic has caused over five million deaths, mass unemployment and the many start-stop-start national lockdowns to curb the spread of the virus have put the brakes on international trade.

According to the London-based research firm Capital Economics, disruption caused by COVID-19 is expected to hold back growth in the world economy for the first time since 2009. This bleak forecast is echoed by the World Bank, which says the global economy is heading for the worst recession since the Second World War. The bank says countries that rely heavily on global trade, tourism, commodity exports and external financing, and where the pandemic has had a huge impact, are hardest hit. These include emerging markets and developing economies. The pandemic is taking a heavy toll on countries with weaker healthcare systems.

Estimates in a Global Trade Update from UNCTAD (the United Nations Conference on Trade and Development) have noted some “green shoots” in economic recovery, notably China, but Secretary-General Mukhisa Kituyi warns that “the uncertain course of the pandemic will continue aggravating trade prospects in the coming months”. According to UNCTAD, a 5 % drop in world trade in the third quarter of 2020 compared to 2019 is an improvement from the 19 % decline in the second quarter but insufficient to pull trade out of the red.

The uncertain course of the pandemic will continue aggravating trade prospects.

Global trade outlook

The outlook for global trade growth is far from rosy for developing countries that rely on export opportunities. A report on COVID-19 and international trade by the Organisation for Economic Co-operation and Development (OECD) says: “In an unprecedented global health crisis, trade is essential to save lives and livelihoods; and international cooperation is needed to keep trade flowing.” The OECD’s Economic Outlook, December 2021 highlights the risks and uncertainty that might hold back global economic recovery and emphasizes that “restoring confidence will be crucial to how successfully economies can recover”.

World GDP evolution: https://www.oecd.org/economic-outlook/

The pandemic has unfolded against a backdrop of increased trade tensions between some of the world’s largest economies, further deepening the uncertainty over global trade. As the European Central Bank notes in its Economic Bulletin: “The slowdown in global investment and trade has occurred in an environment of rising trade tensions between the United States and China, slowing Chinese demand, (geo-)political tensions, Brexit and idiosyncratic stresses in several emerging economies, with rising uncertainty magnifying the negative impact.”

In this time of great uncertainty, one thing that is certain, according to an article published by the World Economic Forum (WEF) in collaboration with policy institute Chatham House, is that “global trade policy is not going back to the consensus that prevailed over the past few decades”. As Megan Greene, Dame DeAnne Julius Senior Academy Fellow in International Economics at Chatham House, writes: “As long as the limbo persists, and it probably will for at least a few more years, trade issues will remain a risk for the global economy.”

Cooperation and collaboration

The health crisis has also underscored the need for global cooperation and collaboration. However, building a new consensus will not be easy but, in the context of trade, International Standards have a key role to play. Ben Shepherd, Principal of Developing Trade Consultants, and author of a research paper on the topic, explores the relationship between standards and trade. He points out that, when a large number of countries adopt an International Standard, “exporters can benefit from stronger economies of scale by accessing a larger potential market”.

Shepherd goes on to say: “Even when there is an initially negative cost-impact of an importing-market standard, over time, firms and governments tend to show substantial ability to adapt and prosper in the new environment, and the standard can be the catalyst for higher productivity and quality.” And when importing-market standards are harmonized with International Standards, such as those from ISO or IEC, he says “the negative effect on developing country exporters is substantially lessened, or even reversed”.

According to the European Commission, “standardization is a key factor of trade policy. It contributes to the removal of technical barriers, increases market access and international trade, and enhances international cooperation. The use of standards can help EU industry and small and medium-sized enterprises to access global markets.” Standards also help manufacturers reduce costs, anticipate technical requirements and increase their productive and innovative efficiency.

The aviation industry, for example, has been severely hit by the pandemic with passenger numbers at an all-time low. But as the industry recovers, there will be a big push for aviation to be more sustainable. Notably, the sector of unmanned aircraft systems (UAS) looks set for a great lift-off thanks to the help of standards such as the ISO 21384 and ISO 23629 series. Robert Garbett, Chief Executive of Drone Major Group, said that overcoming issues such as safety, security and privacy “is not achievable without robust safety and quality standards upon which the industry can grow safely”.

“Tech-ready” mindset

A blog article published by the WEF highlights how digitalization is transforming international trade. It gives an example of how UAS used for underwater inspection and port infrastructure maintenance already show how “the acceleration of a tech-ready mindset coming out of the crisis could be turned into trade facilitation’s opportunity of the century”.

As Jesse Lin, Project Specialist, Digital Trade, at the WEF, and Christian Lanng, cofounder, CEO and Chairman of Tradeshift, a cloud-based digital B2B network, say in another blog on global supply chains and COVID-19: “The current crisis is an opportunity to reset a system that has relied on outdated processes. Creating smart and nimble supply chains is the key to building a global trade and investment network that’s capable of weathering future storms.”

Along with COVID-19, lack of harmonization of technical legislation has been another brake on growth. Again, International Standards can play a significant role in helping to raise technical barriers. Every country develops at its own pace and standards can help to achieve a more level playing field and give developing countries a better chance of promoting global trade. Born out of global consensus, they are ideally placed to help the compatibility of products and services and open doors to new markets.

A timely strategy

International Standards have never been more relevant in helping to build a new consensus, reduce uncertainty and restore badly needed confidence to global supply chains. When it comes to trade, speed is of the essence, especially for developing countries integrating with global markets. When goods and inputs are time-sensitive, International Standards on moving goods from country to country can help to eliminate costly delays. This all chimes with the goals and priorities of the timely ISO Strategy 2030, which aims to ensure that standards – and International Standards in particular – will be key to building our economy and increasing trade.

On the flip side of uncertainty lies the opportunity for meaningful change, and organizations and businesses that are agile and ready to embrace change will be more successful in achieving their goals. As former ISO President Eddy Njoroge commented in a recent interview: “There has never been a more important time for market-led, consensus-based International Standards to support the global challenges facing a multilateral trading system. Economic and trade uncertainty, changing societal expectations and the urgency for sustainability and digital transformation are some of the external factors that shape our economy and they form the basis of our new ISO Strategy 2030. With appropriate standards, however, it will be possible to address these multiple challenges at a global and national level.”

ISO states of its mission: “Through our members and their stakeholders, we bring people together to agree on International Standards that respond to global challenges. ISO standards support global trade, drive inclusive and equitable economic growth, advance innovation and promote health and safety to achieve a sustainable future.” The ISO Strategy to 2030 also dovetails with the United Nations’ 2030 Agenda for Sustainable Development, which recognizes international trade as an engine for inclusive economic growth and poverty reduction, and an important means to achieve the Sustainable Development Goals (SDGs).

UNCTAD’s Kituyi has written: “Achieving this beneficial interaction between trade and investment catalyses the structural transformation of economies, creates jobs and develops skills in direct support of SDG 8 (promoting decent work and economic growth), SDG 9 (building resilient infrastructure, promoting inclusive and sustainable industrialization and fostering innovation) and SDG 10 (reducing inequality within and among countries). In addition, a universal, rules-based, open, non-discriminatory and equitable multilateral trading regime, which provides the institutional framework for sustained global trade, is chief among the global partnerships for sustainable development whose revitalization is called for by SDG 17 (strengthening the means of implementation and revitalizing the global partnership for sustainable development).”

With key standards such as supply chain security (ISO 28000), risk management (ISO 31000) and asset management (ISO 55001), ISO has already taken significant steps in helping to reduce poverty and making people’s lives easier, safer and better. And despite the changes resulting from economic and trade uncertainty, which may affect the demand for, and relevance of, International Standards, with its Strategy 2030, ISO has a framework and blueprint to meet these challenges.

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