Q&A: How digital solutions will aid NZ’s Covid recovery

ExporterToday editor Glenn Baker approached TradeWindow COO Andrew Balgarnie for his predictions on New Zealand’s export fortunes in 2022, and the role digital solutions will play.

ET: What will be the biggest challenges and issues facing Kiwi exporters and importers in 2022?

Andrew: We expect exporters to continue to lead the charge in a strong New Zealand recovery from the impacts of Covid-19, while both exporters and importers will be exposed to our geographic position at the ‘end of the global supply chain’. As such our supply chain will still be suffering a ‘hangover’ into 2022 as Covid-related constraints bump into a boom in worldwide consumer demand as countries come out of lockdown. 

Reliability of port calls is dropping and there are some indications that New Zealand-based cargo owners will be more exposed to the spot market for cargo than previously.

We are also expecting to see continuing pressure on airfreight capacity for both exporters and importers. While demand for international travel is on the rise, New Zealand (as of the end of 2021) still has a way to go until we have free-flowing international travel through our borders.

 

ET: How do you see the emerging freight and logistics issues playing out? And what are some of the best strategies trading companies can use to cope with them?

Andrew: Airfreight is facing increased demand coupled with a dramatic reduction in passenger flights. With the curtailment of air services goods flow is slowed, with a compounding effect. Shipping cargoes have also slowed dramatically, the number of people working at ports has been reduced due to illness and quarantine requirements, there’re container shortages as well as well-publicised automaton issues at Ports of Auckland – all this here on the local front.

As things were slowed and delayed, carriers had to look to where they could quickly create more efficiency in their business model, and so did exporters and importers.

We know that businesses can mitigate issues across their supply chain by creating trust and visibility with their key supply chain partners – and this applies at every stage of the supply chain. The more integration and connectivity you have, the easier and more efficient trading becomes.

Sometimes bottle-necks are unavoidable. However, to cope with the peaks and troughs, integrating digital solutions (and ones that are interoperable along the supply chain) is an important step.

 

ET: What other key trends do you see emerging in regards to export markets and access to those markets? In particular, when will we see the first benefits of the recently signed NZ/UK FTA? How significant is that FTA to us?

Andrew: Following from some impactful conversations at APEC in 2021, we are beginning to see countries really working to break down trade barriers. Free Trade Agreements, and partnership agreements like the Digital Economy Partnership Agreement (DEPA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are crucial for adoption of digital trade.

Increasingly more trade agreements are also starting to take account of digital trade facilitation, with a positive number having binding commitments on data flows. DEPA is an example of an agreement that aims to take advantage of digital trade opportunities. New Zealand, Chile and Singapore have signed the agreement, with China, Republic of South Korea and Canada looking to join.

Regarding the NZ/UK FTA, we know that several industries will have tariffs removed essentially from day one, this includes wine, honey, onions and hoki.

It is estimated that tariff elimination alone will save exporters $37.8 million, and pre-Covid estimates suggested goods exports would increase by up to 40 percent under the agreement. It also paves the way for the UK to join the CPTPP.

 

ET: In terms of efficiencies across the whole trading sector, what recent or emerging technologies, or services such as TradeWindow, are going to have the greatest impact going forward?

Andrew: Trade is complex. Boston Consulting Group, a global consulting firm, notes that a single shipment often requires more than 20 entities, and involves between ten and 20 documents and 5,000 data field exchanges.[1] Efficient data flow is critical to ensuring streamlined trade.

We’re already seeing digital solutions like ours have a major impact on global trade, this involves improving speed and security while also reducing costs.

The World Trade Organisation estimates that digital trade solutions alone could reduce trade costs by 14.3 percent and boost global trade by up to US$1 trillion per year. [2]

It has also been estimated by NZIER that the benefits from digital trade for all of APEC would be between $9 billion and $18 billion over ten years.[3]

Our solutions enable customers to more efficiently run their back-end operations, share information and securely collaborate with a global supply chain ecosystem made up of customers, ports, terminals, shipping lines, banks, insurance companies and government authorities.

As mentioned, interoperability of systems is crucial, it enables the seamless transfer of data from customers to their supply chain ecosystem – for example at TradeWindow we are investing in ensuring interoperability with the members of the Pan-Asian E-Commerce Alliance to create ‘digital trading lines’ between member countries.

 

ET: What are your views on our current trading relationship with China? How do you see that progressing in 2022 and beyond? Should we be looking to alternative markets rather than have most of our eggs in one basket?

Andrew: China has just recently (end of 2021) formally requested to join DEPA (along with South Korea and Canada).

If China joins the DEPA, it’s been quantified that the economic gains could be between NZ$405 million to $1,584 million per year in the NZ-China trade lane alone through the adoption of digital trade. It will always be important for exporters to diversify into new markets, to spread risk.

 

ET: What’s your prediction for the performance of New Zealand’s trade and export sector going forward? How do you see it emerging post-pandemic?

Andrew: With our population of just 5.1 million people, New Zealand is always going to be strongly dependent on trade to pay our way in the world. We expect to see the continuing premiumisation of New Zealand primary industry exports – supported by increased transparency and traceability through the supply chain for verification of the provenance story. 

Integration of technology will increase productivity. We expect to see improved productivity gains from improved tracking systems, optimised logistics and the ability to more accurately forecast demand. This all supports overcoming the tyranny of distance and associated costs.

We know the New Zealand government has a ‘trade for all’ agenda to ensure that a spread of New Zealanders can participate in trade. The inclusive nature of digital trade lowers barriers to entry to trade, thereby increasing participation by small to medium enterprises.

We also see major growth in investment in warehousing and distribution centres as the severe shocks suffered through Covid-19 translate to increased holdings of inventory closer to the end market, to act as a buffer, with less emphasis on just-in-time manufacturing and delivery.

Only when full confidence in the supply chain has returned, will we see things revert to the previous just-in-time model. However, there will be three new drivers of supply chain system design: sustainability, sustainability, and sustainability.