Trade Knowledge and Execution Gap

Trade is the lifeblood of global economy. World trade volume today is roughly 45 times the level recorded in the 1950s. (4500% growth from 1950 to 2022). Since 1995, when the World commerce Organisation (WTO) was originally founded, the volume and value of global commerce have grown by 4% and 6%, respectively.

Trade and Global Value Chains

Lack of knowledge about how trade works restricts many aspirational enterprises and individuals from reaping the benefits of Global Value Chains (GVCs). Large companies have dedicated human and financial resources to procure and execute an international order. On the other hand, lack of access and awareness about the trade tools has held back the benefits of globalisation from reaching its true potential.

Small and medium businesses are often referred to as the "engines of growth" because they play a critical role in driving economic development and job creation. A company can expand by releasing current products in new foreign markets. Small businesses can create jobs, spur innovation, and bring new products and services to market.

GVCs offer firms the opportunity to integrate into segments of global production rather than having to build entire processes of production from scratch. Multinational firms exploit differences in comparative advantages across countries and allocate production to where it is most efficient. As a result, GVCs have led to a redistribution of economic activity towards emerging countries offering new opportunities for economic development for both large and small firms.

Changes in Global Trade Ecosystem

First, the participants of global trade must deal with heightened complexity and volatility. Geopolitical unpredictability, shortages in the supply chain, regulatory adjustments, sanctions, labour unrest, and rising fuel prices are just a few of the problems that the professionals in global trade must often deal with. People with an equally comprehensive range of abilities and skills in these and other areas are needed because of a rapid evolution of job responsibilities.

The influence and use of technology at every level of international trade is the second key factor contributing to this skills gap. Almost every aspect of trade, including customs compliance, screening for sanctions and denied parties, monitoring regulatory changes, managing free-trade agreements (FTAs) and foreign-trade zones (FTZs), is now governed, and managed using several types of specialised software. Communication between corporations, governments, and customs authorities is now entirely conducted through interconnected computer systems. Technical knowledge is another crucial ability that is lacking among global trade workers because proficiency with this software is now required.

Trade Tariffs and Agreements

Tariffs and trade agreements can have a significant impact on importers and exporters. Tariffs are taxes imposed on imported goods, while trade agreements are agreements between countries that set rules and regulations for international trade. Lack of knowledge about applicable tariffs can result in higher-than-expected customs duties. On the other hand, when traders are aware about existing trade agreements between countries, they can make the most of reduced tariff for a particular item. Knowledge about tariffs applicable in different jurisdictions is easier to access if you have knowledge about the correct HS Code.

International Laws and Contracts

International laws and regulations refer to the rules and principles governing cross-border transactions and activities. These laws are designed to ensure that businesses and individuals operating in multiple jurisdictions pay their fair share of taxes while avoiding double taxation and comply with other applicable local trade regulations.

Non-compliance with laws and regulations can have serious consequences for businesses and individuals. Some of the consequences include:

• Penalties and fines: Governments can impose penalties and fines for non-compliance with laws. The amount of the penalty or fine varies depending on the specific violation and the jurisdiction in which it occurred.
• Business disruption: Non-compliance with laws can result in business disruption, including the seizure of assets, closure of operations, and loss of business licenses.
• Loss of business opportunities: Non-compliance with laws can result in the loss of business opportunities, including being disqualified from government contracts or being denied entry into certain markets.

Solutions for the Trade Knowledge and Execution Gap

Traders who are either experienced in international trade or fall in the aspirational category can now check the eligibility of their foreign business partner and get help with customs and documentation. Prior knowledge about applicable duties and taxes helps in better estimation of working capital needs. Let us get a more detailed idea about each of these solutions for easier trade.

1. Partner Due Diligence: The ability to verify the authenticity and credibility of traders across the world ensures that the trader is a legitimate and trustworthy entity. By following this practice, a trader is safe from frauds and financial loss.
   
2. Essential Documentation: When traders have thorough knowledge about necessary documents involved in shipping goods, it helps to save valuable time and money. Not having the required documents leads to fines and late clearance of goods from customs.
   
3. Customs Handling: Customs handing is a specialised activity. Due to several reasons, customs processing requires coordination with multiple stakeholders. When a trader takes the help of an expert, it saves them both time and money.
4. Duties and Taxes: Different percentage of duties and taxes are applicable to different jurisdictions. Knowing your duties before shipping can help you avoid unexpected costs and delays - this increases workforce productivity and reduces operational costs.
5. Visualising Your Supply Chain: Enterprises can now visualise their entire supply chain from first to last mile. Real-time alerts and predictive ETAs can be shared with all the participants of the supply chain. Greater visibility and control over operations helps to identify problems before they become crisis.
6. Freight Predictability and Schedules: Artificial Intelligence (AI) has started to deliver results for all sectors of the economy. When a trader is equipped with reliable and competitive rates from multiple carriers, it helps in better planning. The feature to pick preferred time and carrier for the shipment has finally given freedom to enterprises and will eventually result in democratisation of trade.