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UK TAKES A PROACTIVE APPROACH TO PUBLIC ENGAGEMENT ON TRADE

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UK TAKES A PROACTIVE APPROACH TO PUBLIC ENGAGEMENT ON TRADE

It seems that studies on the effects of free trade agreements on the U.S. economy have increasingly become exercises in checking a box, with groups for and against simply waiting on a punchline. Surely, we can do better to undertake public-facing intellectual analyses that are both accessible and potentially interesting to a wider swath of the general public – something more akin to what the United Kingdom (UK) has done to prepare for free trade agreement negotiations with the United States.

What’s good for the goose

Reflecting for a moment on U.S. free trade agreement negotiations with Central American countries in 2003, I recall we simultaneously worked with the Central American governments to build their institutional capacity to implement an eventual agreement. We also nudged the governments to engage their public on aspects of the agreement early in the negotiations. (Full disclosure, I was the Director for Central America at the Office of the U.S. Trade Representative at the time.)

Our contention then was that only a very limited segment of the population would be tuned into any calls for input through the countries’ “Diario Oficial,” their version of the Federal Register where the U.S. Government publishes notices of regulatory changes and opportunities for public comment. The Central American negotiators set out to conduct a series of roundtables, even engaging women in rural Guatemala about how their traditional handicrafts could benefit from intellectual property rights and exports under the agreement.

It could have been a moment for introspection on our part, but it wasn’t. After all, interested parties in the United States are very familiar with the process of submitting comments and appearing at a public hearing to express views on a free trade agreement.

But there’s always room for improvement, isn’t there?

A fresh take on public engagement in trade

The UK Department for International Trade has provided an example of how to reinvent the process of public consultation on trade. After all, it had to. The UK hasn’t needed to lead on trade policy development for the last 50 years. Brexit, by definition, means the public is seeking a bigger voice in its affairs, including trade.

The Department’s report titled simply, UK-US Free Trade Agreement, runs about 110 surprisingly readable pages, not including the helpful Glossary of Terms and a detailed summary of feedback from public consultations. It begins where it should, by making the “strategic case” for a free trade agreement with the United States – a clear exposition on the “why”. Then it turns to the “how” with an outline of key components of an agreement. With that as context, the report explains how the government undertook 14 weeks of public consultations that included use of a new online portal, 12 “town halls,” a national Public Attitudes to Trade Tracker, and a series of roundtable events throughout the UK. These engagements were in addition to forming standing advisory committees similar to those the U.S. government relies on for expert perspectives from industry and civil service representatives.

Having presented that material, the remainder of the report is comprised of two pieces. First and importantly, is the government’s response to public input – “we heard you” and here’s how we’ll use your input in the negotiations. And second, is a relatable presentation showing the results of standard econometric modeling to understand the potential effects of a free trade agreement with the United States on the UK economy and workers.

UK-US Economic Impacts of FTA

A great example of effective policy communications

The UK’s Scoping Assessment concluded a broadly liberalizing FTA with the United States would boost UK exports to the United States by 7.7 percent and UK imports from the United States by 8.6 percent. This would induce a 0.5 to 0.36 percent gain in the UK’s productivity, sustained over time. In the long run, almost all sectors of the UK economy would increase output as they more efficiently allocate resources.

The explanation of the modeling’s output breaks down impact to GDP across its components: consumption expenditure, investment, government expenditure and net trade (C+I+G+(X-IM)=Y is the one and only equation I remember from economics classes, so I found that part of the report interesting). The report explains the limitations and imprecision of modeling – in other words, we should not fight over trade policy based on debatable numbers, but rather over directional gains versus losses.

Rather than only present economy-wide effects (after all, everything smooths out in the long run), the report indicates which UK nations and regions stand to gain most (Scotland, Wales, the North East, East Midlands and West Midlands of England) versus those that would expand the least (London, the South West and East of England). This recognizes that employment and industry vary across regions. The report even takes into account the effects on the UK’s trading partner (in this case, us), and developing countries that have a stake in access to both the UK and the United States, but which would be excluded from a UK-US FTA (impact negligible).

Workers affected by US-UK trade

Focusing on jobs

The report is direct in explaining the implications for some workers that would need to find employment in growing sectors. It also concludes workers are expected to experience increases in overall real wages and outlines how those gains are derived. The report breaks down potential changes in average wages by type of occupation and skill level. It also identifies sectors likely to add jobs so that the government and businesses can better prepare workers for shifts into growth areas.

When it comes to job losses, the agreement is not likely to cause any disproportionate change to what different segments of workers would naturally experience in terms of job loss as the economy churns – with one exception. Jobs held by 16-24-year-olds appear to be disproportionately concentrated in sectors where employment could fall. The government responds to this challenge by stating it already increased funding in education for 16-19-year-olds, funding for STEM, technical and digital skills, and new technical qualification programs to address the impact. This a staggeringly different approach than waiting to catch workers with a safety net when they fall.

Importantly, the report was written so that any reader could understand how the analysis was arrived at, what it means for them based on where they work and live, and what the government was prepared to do with the information – and, that the analysis would be updated and repeated to inform negotiations as they proceed.

Most trade reports are Greek to everyone but economists

Why is the UK report so readable? Because it was written to be read by the general public, not merely by congressional staffers who glance at an Executive Summary or economists who perform modeling themselves. This is not a knock on the U.S. International Trade Commission (USITC) which produces U.S. reports, though its report on the economic effects of the U.S.-Mexico-Canada agreement was 376 pages and did contain Greek lettering.

USITC reports are first-rate analyses deploying industry-standard methodologies. A paragraph at the beginning, however, offers a good indication the reports intend to stick to their congressional mandate:

“[The Bipartisan Congressional Trade Priorities and Accountability Act of 2015] requires the Commission to assess the likely impact of USMCA on the U.S. economy as a whole and on specific industry sectors, including its impact on the U.S. gross domestic product (GDP); exports and imports; aggregate employment and employment opportunities; the production, employment, and competitive position of industries likely to be significantly affected by the agreement; and the interests of U.S. consumers.”

So, smart USITC economists set about to use a standard economy-wide computable general equilibrium (CGE) model based on the Global Trade Analysis Project (GTAP) model, among other modeling extensions, to fulfill its analytical mandate, with all the same caveats about econometric modeling limitations the UK describes. The USITC also conducts interviews with industry representatives and collects testimony from a public hearing and written submissions from interested parties.

Greek in USITC report

But the end result is a document that fulfilled a requirement rather than one that informs the negotiations. Neither does it resemble a government strategy to leverage the benefits of a trade agreement or mitigate the negative impacts on some workers. And it is unlikely that most of the general public would feel compelled to read such a report to gain understanding of a major component of national trade policy. Again, this outcome is because that is not what the USITC was asked to do.

Being too careful about what you ask

Everyone has a stake in the direction and outcome of trade policies, but not everyone cares enough to have their say. Nonetheless, the main complaint about trade policymaking is that large organizations with Washington representation know when and how to provide their input. The rest of us do not. For example, the U.S. Chamber of Commerce and U.S.-U.K. Business Council recently published comments on what their groups – that represent millions of workers – would like to see in a U.S.-UK deal.

A big conversation is coming about the value of global trade, which at TradeVistas we think is generally a source of strength and resiliency, not a vulnerability. Perhaps the time has come for the U.S. government to evolve and expand its approach to engage the public on trade before the deal is done, rather than pitch it to the public after the fact.

Given the potential for growing public skepticism, we can’t afford to wait to build awareness, understanding – and support – for trade deals like the one the administration is embarking on with the UK, one of our most longstanding and important allies, and a deal that will likely bring broad benefits to the citizens of the United States.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

ireland

NORTHERN IRELAND ISN’T WAITING ON POST-BREXIT TRADE DEAL TO COURT U.S. INVESTORS

A Trade Agreement for the “Whole of the U.K.”

On March 2, 2020 the United Kingdom (U.K.) released its public negotiating objectives for a free trade agreement with the United States, its largest bilateral trading partner. In pursuing increased trade in goods and services and greater cross-border investment, the U.K government seeks an “agreement that works for the whole of the U.K.,” including “all four constituent nations,” and that takes account of the Northern Ireland Protocol that aims to avoid the introduction of a hard border on the island of Ireland. The United States released its objectives for talks with the U.K. in February of 2019.

Trade agreements are a valuable tool governments use to generate broad economic benefits, but negotiations can take time and outcomes are uncertain. Many governments simultaneously deploy export and investment promotion agencies to promote access to new markets for its companies or attract investments that will create jobs at home.

Usually affiliated with government, these agencies may promote the image and offerings of the home market, provide export training, offer support in identifying partners or specific business opportunities, organize trade fairs or trade missions, and conduct research and market analysis. They may be based domestically and maintain offices abroad.

The U.K. has enjoyed longstanding success in attracting inbound investment, but with uncertainties surrounding the implementation and impact of Brexit, U.K. trade and investment promotion agencies have a key role to play in promoting a thriving post-Brexit economic future. Although the U.K.’s Department for International Trade is on the front lines in providing trade and investment services, another agency — Invest Northern Ireland (Invest NI) — is specifically focused on making sure benefits accrue to Northern Ireland.

Banking on Belfast

Formed in Belfast in 2002 through a consolidation of the departments of trade, investment, and research and development, Invest NI helps new and existing Northern Irish businesses to compete internationally and works to attract new investment to Northern Ireland. The organization has over 600 professionals in its network, with business advisors across Northern Ireland, and throughout Europe, the Americas, Asia and the Middle East. With U.S.-U.K. commercial relations in the headlines, we spoke with Peta Conn, the Boston-based Executive Vice President and Head of Americas for Invest NI about the narrative she shares.

“Northern Ireland’s strength is its talent – a growing youth population, excellent universities and people who want to stay. We offer a strong ecosystem that brings together government, academia and business. There is a real focus on ensuring we can cater to future demand for skills. I’d add that Northern Ireland offers a great lifestyle and one that is affordable. Many come for the business and stay for the life.”

Look at Belfast

Key industries in Northern Ireland include financial services, legal services and cyber security. According to FT fDi Markets, Belfast has been ranked as the world’s number one destination for financial technology development projects, the top city in Europe for new software development projects, and the number one international location for U.S. cyber security development projects.

Conn highlighted the importance of testimonials, including the vote of confidence from Boston-based security analytics software and services firm Rapid7, which announced in October 2014 it would set up a software innovation center in Boston’s sister city of Belfast, creating high-paying jobs. Speaking of the investment at that time, Rapid7 CEO Corey Thomas pointed to the work that Northern Ireland’s universities were doing in IT security and the availability of high-quality technical staff.

The Hunt for Talent

Despite the uncertainties of Brexit, Conn noted that the last few years have seen some of the strongest foreign direct investment flows out of the United States into Northern Ireland. “It’s really about the need for talent and an immediate need for developers.”

That talent flows from Northern Ireland’s two major universities – Queens University Belfast and Ulster University. Both are leaders in innovative research, and Queens is home to the Centre for Secure Information Technologies, the U.K.’s national innovation and knowledge center for cyber security.

“If you want development operations or software, you can do this at Belfast salaries that are 20 percent lower than Dublin and 30 percent lower than London, and also have lower workforce attrition.”

NI's human talent

The Tools

Conn leads the Americas team, which includes a dozen people in Boston and 28 people in total across the region, in New York, Chicago, San Francisco, Miami, Toronto, Santiago, and, as of very recently, Los Angeles. In addition to promoting foreign direct investment, the team also helps Northern Ireland companies export to the United States.

Their performance indicators are based on employment and economic growth. Sales teams work to identify prospective investors and explain how Northern Ireland could fit within their growth strategies. Business development teams then offer customized solutions of how the market can specifically support business plans.

Once a company has committed to set up in Northern Ireland, one of the programs on offer is a pre-employment program called Assured Skills, which is unique to the region. Companies can co-design an academy-style course with a local training institution and then recruit a cohort of potential employees to take the course. At its conclusion, all participants are offered a job interview, thus de-risking the recruitment process and leading to a conversion rate of about 90 percent.

Crushing It

As U.S.-U.K. trade talks get underway, politics in both countries and the U.K.’s parallel negotiations with the EU, make the timing of any deal uncertain. The issue of Northern Ireland, which under the U.K.’s Withdrawal Agreement with the European Union (EU), remains part of the UK customs territory but subject to EU regulations, will be a focus of attention among U.S. lawmakers insistent on avoiding a hard border in Ireland and protecting the 1998 peace agreement that helped bring an end to conflict in the region.

A U.K. trade deal with the United States may bring modest benefits for Northern Ireland as government analysis suggests, but the Rt. Hon. Brandon Lewis, Secretary of State for Northern Ireland, has emphasized: “The United Kingdom is going to be one area and all will be able to benefit from our future global trade deals.”

While the talks proceed, Invest NI will continue to offer a compelling narrative of innovation, entrepreneurship, and opportunities to invest in Northern Ireland. Their stories will include everything from sophisticated software development to Northern Ireland’s dominance in producing 40 percent of the world’s mobile crushing machines and manufacturing a third of the world’s airline seats.

Like free trade agreement talks, investment promotion involves understanding long-term strategy direction and the areas of an economy’s competitive advantage. Invest NI will remain an important complement to U.K. government trade negotiation efforts, serving as the messenger of an economy that is open for business.

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Leslie Griffin is Principal of Boston-based Allinea LLC. She was previously Senior Vice President for International Public Policy for UPS and is a past president of the Association of Women in International Trade in Washington, D.C.

This article originally appeared on TradeVistas.org. Republished with permission.

brexit

What’s Your Brexit Security Strategy?

Boris Johnson’s new Conservative majority is set to plow forward with leaving the EU on January 31st, 2020, however, what exactly does this mean for Britain’s logistics industry? K9patrol has put together this infographic highlighting concerns and possible issues with the logistics industry post-Brexit.

As we’ve seen so far, there still appears to be uncertainty ahead regarding Brexit, and this could impact logistics especially. With further disruption and delays, new regulations and potential diplomatic breakdown between the UK, the Republic of Ireland and the EU, there does seem to be some very real threats posed to this particular industry. Cargo security, in particular, will be a major concern for many businesses within logistics because of goods that would otherwise be in transit may have a possibility of being sold on or delayed for long periods of time in foreign countries. The EU receives around 50% of our exports, so with this, e should take this possible risk very seriously.

We hope this infographic lays out potential future issues that this may bring, and with this better understand the key political decisions that might affect them and their business.

Any arguments made by the evidence in the infographic is incidental and do not reflect our political opinions as a business.

 

 

 

 

What’s Your Brexit Security Strategy?
Infographic: K9 Patrol

 

 

global trade

Global Trade: 2019 Wrap-Up and 2020 Forecast

Looking back at this year, 2019 saw a multitude of global economic growth disruptors from the escalation of the trade war between the U.S. and China, to Germany’s manufacturing and automotive decline and Brexit.

Consequentially, global trade growth has almost come to a standstill, and while it’s not quite at recession levels, nearly every market and sector, as well as businesses within those sectors, have felt the impact of policies and decision making.

Even with the possibility that trade growth could rebound in 2020 to a modest 1.5%, economic policy uncertainty remains high and if it abates, it is likely only to do so to a limited extent into 2020. What factors are at play? Let’s take a look.

Trade war with China. Despite the recent conclusion of ‘phase one’ of a U.S.-China trade deal, uncertainty remains high. The underlying reason for the trade war is not resolved and is unlikely to be resolved soon either: it regards fundamental issues such as the influence of China on the global economy and theft of intellectual property. Although tensions may temporarily soften, as they seem to do now, we see no end in sight for the trade war with China and with the current administration in the White House for one more year, another rocky year is forecasted. The trade war alone is affecting no more than almost 3% of global trade — currently approximately $550 billion of goods — but it is sending a ripple effect around the globe from business investment to value chains and trade flows. If it expands to other economies in Asia and Europe, which is very possible, we could see an even more pronounced slowing in trade.

Brexit. The self-imposed economic hardship has caused much uncertainty and plummeting fixed investments in the business sector. With Boris Johnson elected to Prime Minister in the December election and Brexit a certainty come January 31, policy uncertainty has been lessened, but some will remain until a new trade relationship with the EU is shaped. While the clout of those favoring a no-deal Brexit has been diminished, a no-deal Brexit is still possible. If this occurs, it would throw chaos into supply chains across Europe.

Business insolvencies and market pressure. The U.S. is expected to lead the number of business insolvencies with a 3.9% increase in 2020, far above the global average of 2.6% expected next year. This is due to the fact that there’s been lower business investment, lower external demand (especially from China), and higher import and labor costs. Those sectors feeling the most pressure include steel, which is dealing with an overcapacity issue, automotive, and businesses dealing in aircraft, which have seen a 20% market share loss. U.S. businesses dealing in vegetable and animal products and agriculture won’t see any relief soon either, and all U.S. businesses that have typically relied on imports from China (as well as businesses in China relying on imports from the U.S.) are now facing higher costs, which are resulting in insolvencies.

Despite all the economic doom and gloom, there are a few bright spots. Indeed, the ‘phase one’ agreement between the U.S. and China provides at least hope. Moreover, the U.S. signed trade agreements with Japan, Canada, and Mexico, and a few countries, like India and China, which are pulling their weight with a 6% GDP growth rate, are providing some positive impact on the global figure as they continue to grow at rapid pace, that is to say above 5% per annum.

Further, the consumer outlook looks positive with household consumption in both North America and Europe ending on a high note, thanks to low unemployment. Unfortunately, this alone cannot support economic growth. Low-interest rates and the amount of money floating around the U.S. as well as Europe could give rise to turmoil in the markets and the economy – both pillars of global growth – and any detriment to consumer confidence could put the economy in a downward spiral, reversing the modest growth expectations set for 2020.

There is much at stake and a low likelihood of that changing for 2020. If economic and political developments continue to sour, economic growth could be hampered even more than it already is.

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John Lorié is Chief Economist at Atradius Credit Insurance, having joined the company in April 2011. He is also affiliated to the University of Amsterdam as a researcher. Previously, he was Senior Vice President at ABN AMRO, where he worked for more than 20 years in a variety of roles. He started his career in the Dutch Ministry of Foreign Affairs. John holds a PHD in international economics, masters’ degrees in economics (honours) and tax economics as well as a bachelor’s degree in marketing.

trade

Trade and the Impact on Imports and Exports in 2020

Significant and sustained increases in the world trade index (an index measuring the number of times the word uncertainty or its variants are mentioned in Economist Intelligence Unit (EIU) reports at a country level) should be a worry for many as “the increase in trade uncertainty observed in the first quarter could be enough to reduce global growth by up to 0.75 percentage points in 2019”[1]

In August, the US Institute for supply management[2] latest report shows a contraction in production, purchasing, and employment indices.

Ahir, H, N Bloom, and D Furceri (2019), “The global economy hit by higher uncertainty”, VoxEU.org. https://voxeu.org/article/trade-uncertainty-rising-and-can-harm-global-economy

 

Uncertainty generated from Brexit, the US-China trade war, Japan – South Korea trade wars, and general discontentment with global trend towards widening income inequality is creating a toxic mix for politicians to deal with. The irony is the conventional approach of blaming your trading partners for your problems is only likely to exacerbate a general lack of confidence and increase further uncertainty.

The current round of the G7 summit in Biarritz concluded with support “to overhaul the WTO to improve effectiveness with regard to intellectual property protection, to settle disputes more swiftly and to eliminate unfair trade practices.” In essence, it’s signaling a need to strengthen the capabilities of the WTO to act faster and more decisively in resolving disputes that are even more political than structural in nature, requiring a more multi-faceted engagement approach. Whilst this may help in the long-run, in reality, companies will have to contend with uncertainty in global trade for some time to come as well as the impacts on the real economy from these disputes.

And all of this is happening as IMO 2020 approaches, the January 1, 2020, date by which the International Maritime Organization mandates a switch to lower sulfur fuels in order to achieve an 80% reduction in sulfur emissions leading to significant cost increases in the shipping goods via ocean freight (initial estimates between 180USD – 420 USD per TEU dependent on routing, base fuel costs, carrier).

So given the significant uncertainty around global trade agreements, the increasing use of trade as a political football, the increasing costs to trade and the shortening of product lifecycles as customers want faster, newer more differentiated offerings. Is it still worth it?

Of course this is very much dependent on what industry you are in. Whether you’re a global manufacturer or a wholesaler sourcing goods, your perspectives may be different based on investments made, sensitivity to current trade/tariff measures, customer demands, your markets, and the degree to which you are exposed to political debate and targeting.

However, I would offer that the benefits of specialization, economies of scale and unique factors of production that have underpinned global trade still exist as Adam Smith put it in 1776:

“By means of glasses, hotbeds, and hot walls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and burgundy in Scotland?”[1]

Today this simple analogy still holds true in skills, competences, capabilities, and access to markets and insights so that over time the expectation is that trade will prevail.

While the recent outlook has been gloomy, opportunities for 2020 include a resolution to a number of ongoing disputes and a final settlement on Brexit (we hope). Additionally, the maturation in technologies such as blockchain, process automation, forecasting and demand management solutions can also offset costs associated with IMO and support greater agility in the uncertain supply-chain world that we currently live in.

Indeed, if 2019 was the year of trade uncertainty, 2020 could be a restorative year in our ability to execute global trade.

Partnering with an experienced supply chain leader will be essential to minimizing cost increases while ensuring the efficient flow of your company’s goods and services.

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[1] World Economic Forum:https://www.weforum.org/agenda/2019/07/how-trade-uncertainty-is-impacting-the-global-economy/

[2]https://www.instituteforsupplymanagement.org/ismreport/mfgrob.cfm?SSO=1

[3]Adam Smith: Wealth of nations 1776

Neil Wheeldon is the Vice Presidents Solutions, BDP International.

intermediary banks

Connecting the World: The Importance of Intermediary Banks

Whether you are initiating electronic international payments through a fintech solution or buying physical currency, the chances are high that a bank will be involved. The relationship between banks, as well as the role of intermediary banks, often eludes the general public, who are content with the process as long as it works.

However, understanding how the sausage is made can provide valuable insight into the way you conduct your business. Let’s take a closer look at intermediary banks and their subsequent relationship with currency exchange.

What is an Intermediary Bank?

In layman’s terms, an intermediary bank is where funds are transferred prior to reaching their destination, the payment bank. 

To transfer money, banks must hold accounts with each other in the same way that a typical client would. However, there are too many banks for one to hold accounts with all the others, so instead, they strategically choose where to open accounts. The result is a fragmented network of financial institutions. 

When a bank needs to send money to a location where their bank does not hold an account, the bank instructs an intermediary bank to act as a “middle man” to pass on the funds on their behalf. Funds can transfer between multiple intermediaries, especially if one of the banks is not networked with many larger banks. If the payment bank is across an international border, the intermediary bank may also act as the currency exchange provider.

The Role of Currency Exchange

Currency exchange refers to the use of one currency to purchase the same value in another currency. It’s required any time one entity wishes to pay another in a currency different from their default option.

Each country has either a “fixed” or “floating” exchange rate. A “fixed” exchange rate—also known as the “gold standard”—means that all the country’s money has a physical equivalent in gold or another precious material. “Floating” exchange rates may not have a physical worth, but are influenced by the market and politics, as is currently the case with the Great British pound’s relationship with Brexit.

Breaking Down the Cost

For businesses, currency exchange is vital to a true international payment process. Some vendors may wish to be paid in their customer’s default currency, which would not warrant an exchange. U.S. businesses may experience this when working with vendors in countries like China or Japan, who often prefer payments in USD. This happens when a vendor finds it cheaper to open accounts specific to currencies other than their own in order to avoid exchange fees.

Some vendors have opened multi-currency accounts, which enable vendors to accept and store more than one currency in a single account. Because this method is still gaining traction, it’s good practice to ask if vendors have multi-currency accounts before sending them money. If they don’t, and their account cannot support your currency, the payment bank will likely reject the funds.

Other hidden costs to consider when working with international payments are:

The exchange. If your origin currency is weaker than the payment currency, your money may lose some value in the trade. However, the market is continuously shifting, so the exchange will also gain value at times. The more international payments you make, the likelier that this cost will even out over time.

Intermediary bank fees. Some intermediary banks shave off a fee for their services, which is usually taken from the sum – the net amount is deposited into the vendor’s account. Not all intermediary banks will charge this fee, and it’s not immediately obvious which banks will do so.

Payment bank fees. Similar to the intermediary banks, certain payment banks also charge a fee for processing international payments. Again, not every bank charges this fee, but those that do will deduct it from the payment sum before depositing the net amount into the vendor’s account. Vendors can discuss this charge with their bank if it occurs.

Disrupting the Status Quo

With all these nuances to keep in mind, it can feel like involving a fintech will only add another cog to an already-overwhelming process. However, a fintech can determine the most efficient route through an intermediary bank, and assist in locating missing payments. If funds are returned for any reason, fintechs also act as a holding account while you decide if you want to exchange the funds back or resend them. Following a process like this ultimately saves time, money, and hassle.

If you’re on the fence about using a fintech for international payments, keep in mind that you aren’t losing out by mitigating an overly complicated bank processes. You’re merely side-stepping the complications in favor of usability.

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Alyssa Callahan is a Technical Marketing Writer at Nvoicepay. She has four years of experience in the B2B payment industry, specializing in cross-border B2B payment processes.

Uncertainty Over Brexit Leaves the B2B World in Suspense

When talk turns to Brexit, much of the discussion revolves around what will happen once the United Kingdom of Great Britain and Northern Ireland leaves the European Union. While the United Kingdom Parliament hashes out a withdrawal agreement, with Prime Minister Theresa May at the helm, the economy is already shifting in anticipation of… what? The trouble is, no one is quite sure. Even experts can only make educated guesses since their research hinges on the type of withdrawal the United Kingdom and European Union ultimately consent to.

Where Brexit currently stands – A high-level view

The European Union recently approved a second extension of the Brexit deadline to allow May additional time to forge a deal in Parliament and finalize the United Kingdom’s withdrawal from the Union. While the new October 31, 2019 deadline offers some breathing room, it leaves the United Kingdom and European Union in an uncertain economic limbo for most of this year.

The spiderweb of potential events that lay ahead for the United Kingdom stem from two of the most likely outcomes:

-May passes her withdrawal agreement in Parliament by October 31st. If she succeeds, the United Kingdom can hammer out future trade deals with the European Union, to be expanded upon after the separation is finalized.

-May does not pass her withdrawal agreement by October 31st. This would mean the United Kingdom leaves with no trade deals in place, and very little room to negotiate ideal terms in the future. A “no-deal” situation has the potential to create lingering consequences, particularly at the border between Northern Ireland – which is part of the United Kingdom – and the Republic of Ireland, with the European Union.

While those in favor of Brexit are eager for a more economically independent United Kingdom, others hope that the withdrawal agreement will come with lenient tariffs, not just at the Irish border, but for trade across the United Kingdom and European Union. Unfortunately, only time (and an approved withdrawal agreement) will tell how the trade relationship between the United Kingdom and Europe continues.

What Brexit means for businesses in the United Kingdom

Politics aside, the United Kingdom has already seen changes to their market and businesses since the original Brexit vote in late 2016. The pound sterling (GBP), which dropped drastically after the majority of United Kingdom citizens voted to leave the European Union, remains weakened in comparison to the United States Dollar (USD). The approach of each Brexit deadline has triggered a slight drop in the market, followed by a recovery a few days after the granted extensions.

The GBP and Euro (EUR) have become tied to shifts in the political sphere, rather than the market. Companies are making financial decisions in anticipation of a plummeting currency values caused by Brexit.  Many banks have already moved their home offices  from London to various European cities. Healthcare facilities are stockpiling life-saving medicines in the event of a shortage. United Kingdom-based businesses are reducing their investments and employment opportunities. 

How will Brexit affect U.S. business with the United Kingdom?

With a diminished value for pound sterling, currency exchanges between USD, GBP, and EUR won’t be very attractive for a while, especially when considering the added per-payment fees charged by banks to transmit funds across international borders. Global businesses depend on stable markets to keep exchange rates as uniform as possible; someone will always be paying the difference, whether it’s the buyer purchasing more currency, or the supplier receiving a reduced amount.

Companies whose accounts payable teams have adopted payment automation into their processes can use their rebates to mitigate irregular exchange rates. Payment solutions that lower the cost of electronic payments through exchange rate transparency ultimately improve the buyer’s relationships with their suppliers.

Only one thing left to do

The United Kingdom and European Union are in a transitory stage – and that is an enormous understatement. The Brexit experience is genuinely frustrating because it has no precedent, so no one’s sure what will ultimately happen. Economic growth may stagnate for a while, but as with any market, where there are ebbs, there will be flows. The only thing left to do is what the United Kingdom already does best: “Keep calm and carry on.”

Alyssa Callahan is a Technical Marketing Writer at Nvoicepay.  She has four years of experience in the B2B payment industry, specializing in cross-border B2B payment processes.

GTKonnect Sets the Bar Higher with Global Trade Management Platform

“Sometime last week, I was chatting with a long-term customer about our recent rebranding. She asked me why we had the tagline, “Our goal is to drive your Global Trade success?” And this was my explanation, “We have all been observing the constant changes that have been happening with global trade in recent times. Brexit, US-China tariffs on each other, the US pulling out of the Trans-Pacific Partnership (TPP) trade deal, NAFTA renegotiations and more. More and more businesses now have a global footprint and such economic and political decisions have a major impact on global trade. Compliance rules and trade regulations are changing rapidly, and businesses cannot afford to adapt a reactive stance to Global Trade Management (GTM) any longer. They need to be armed with information and keep pace with the changing trade environment to stay ahead of the pack. Protection and polarization are becoming more relevant in the existing political and economic conditions and trade partnerships are being altered more often.”

“Businesses constantly need to keep watching baseline outcomes and be prepared with content relevant to changing compliance rules. For instance, vehicle manufacturing companies might require some percentage of the components to be made locally and due to a broken partnership, businesses might not fall under the same compliance rules as before. While adherence might appear to be a stumbling block, free trade zones could be an option to address the concern and optimize costs at the same time. Irrespective of the compliance regulation, and the possible solutions, businesses can stay ahead and reach out for success only if they lead with content. In the current changing GTM environment, additionally, businesses need to be proactive and collaborative. GTKonnect offers solutions to bridge these gaps and empowers businesses to achieve GTM success. And that explains the reason for our new tagline.”

“Let me now give you a wider perspective that places the current GTM trends in context. Global trade professionals have stayed in the background for very many years, only making sure the business met compliance regulations, and not influencing business decisions for the most part. The tide is turning now and due to the changing political and economic global climate, company CEOs are now consulting global trade professionals on new regulations and trade policies. On the one hand, countries are approaching trade with a very protective and conservative outlook and drawing up new regulations based on this approach. These are reflecting in terms of control rates, tariff rates, retaliation and other stringent limitations. On the other hand, they are also aiming at expanding their global trading presence, looking to formulate agreements and seeking new marketing opportunities.”

“Businesses are now compelled to keep an eye on the wider global trade scenario along with the impact on their costs and efficiency. However, many companies have not yet adapted this two-pronged approach and are lacking the information and tools to be successful in GTM. Data has to be proactive and global trade professionals need to be aware of the changes and stay in step with the top management’s needs. In order to do this, they must be equipped with the latest information, stay connected with industry experts who can offer advice on the latest developments and take advantage of the cost savings and opportunities that are available. A mix of the right tools, content to power the tools and the ability to collaborate can help the business remain competitive and lead to the right decisions in GTM. Let’s also not forget that any information on global trade, and access to expert advice tend to be expensive.”

“Businesses vary in their capabilities vastly, some being technologically well-equipped and others not so much, but all of them require the right content and information that is readily available on demand, at a reasonable cost. GTKonnect has been listening to customers and having observed these needs in the context of global trends in GTM, came up with the iKonnect+ feature to connect the dots. Harmonized Tariff Schedule (HTS), dumping case details, import/export procedures and customs office locations are a few factors for which content is difficult to find. iKonnect+ is a single content platform that helps source all the information in one place, without added costs. The first social platform of its kind in the GTM space, the tool helps global trade professionals connect with a community that can offer expert advice and help develop contacts in the global trade arena.”

“No matter what rules and trade partnerships change, a business’ preparedness to adapt to global trade changes and trends makes it efficient and successful. And GTKonnect is here to help businesses achieve success in GTM.”

Find out how we can help you achieve GTM success.

Anand Raghavendran is GTKonnect’s President & CEO.

Tigers Opens UK Facility Despite Brexit Environment

As e-commerce demands continue to increase, global solutions provider, Tigers, announced its new Thurrock facility this week. The new facility will serve as a larger space for operations currently held at the company’s Basildon location and adds an additional 50 jobs to the company’s employment portfolio.

“We have always viewed the UK as an important market and remain committed to investing in the expansion of our e-commerce and fulfillment operations,” said Andrew Jillings, CEO, Tigers. “The Thurrock facility significantly expands our UK presence and provides us with a strategically located hub to cater for increased customer demand.”

Located near the London Gateway off the M25, the facility’s location provides an advantageous location close to all main road routes to the Midlands, Wales, northern England, and Scotland. The expansion will also continue efforts for UK-investment goals.

“This is a multi-million-pound investment by Tigers in the UK, despite Brexit, and not only will it create new jobs, it will also secure our future as a leader in the logistics and supply chain industry as e-commerce demand continues to grow,” said Shahar Ayash, Managing Director UK and Europe, Tigers.

What to Consider when Planning for the Post-Brexit Period

The past weeks have seen a flurry of parliamentary activity in London, none of which has yielded any more clarity regarding the status of the UK’s membership in or relationship with the European Union. At time of writing, British lawmakers have twice voted down a proposed Brexit deal that EU officials have said is non-negotiable, and subsequently voted against leaving the EU without a deal.

Even in the likely event the EU agrees to delay the Brexit deadline, the future of Brexit remains very much in question, as Britain’s divided Parliament won’t be any more likely in the coming months to reach consensus than European officials are likely to re-open negotiations.

The innocent bystanders, of course, are the countless businesses on both sides of the English Channel, which have hitherto relied on seamless trade between the two entities, and which are increasingly reconsidering their relationships with suppliers and vendors across what has the potential to become a hard border.

Unprepared for Brexit

While the impending Brexit deadline has generated expected urgency in Britain’s parliament, the inevitability of Brexit has been known for nearly three years. Yet, as it stands today, many businesses are unprepared for the very real possibility of a hard Brexit. In fact, a recent report in the Wall Street Journal, citing a study by the Chartered Institute of Procurement & Supply (CIPS), notes only 40 percent of British businesses would be prepared to comply with a new customs compliance regime.

That’s a daunting number and serves as a call to action for those who have yet to prepare for Brexit’s rapid approach. Should a hard Brexit occur, it will serve as much more than a milestone; it will turn Britain’s customs regime on its head, sowing confusion and uncertainty that will inevitably result in disruption to supply chains, administrative headaches and unexpected costs. Industries heavily integrated with European supply chains, such as aerospace, pharma, food manufacturing and autos will face acute disruption.

Increasing Landed Costs

Perhaps the most urgent consideration for those who engage in trade will be the spike in associated landed costs. In the event of a hard Brexit, the current European customs regime will cease to apply to imports. The immediate effect will be the application of tariffs and Value-Added Taxes (VATs). Those tariffs will be based on Most Favored Nation (MFN) rates, which will vary by product and could be quite substantial. While the British government has already stated that, in the event of a hard Brexit, it plans to waive seven percent more tariffs than which  currently exist, VATs will still apply as will tariffs on virtually all imports from non-EU origins. That includes countries with which the EU currently maintains free trade deals, such as the Comprehensive and Economic Trade Agreement (CETA) recently signed between the EU and Canada.

Compliance (New customs regime)

While tariffs for EU imports may be reduced for the most part, customs declarations will still be required. This is a critical development. Given that approximately half of the UK’s imports come from the EU, and the EU has several trade agreements with key trading partners, there’s been little need for customs declarations in the UK to this point. However, after Brexit, the number of customs declarations is estimated to increase almost 400 percent (from 55 million to 205 million) at a cost of approximately £6.5billion or USD $9.1 billion to businesses. In addition, there will be 180,000 British business who will be filing a customs declaration for the first time, while those who have already been filing declarations will need to adjust to a new regime of customs classification.

The importance of correctly classifying these cross border movements cannot be overstated. In a best-case scenario, such as declarations with missing information, importers will face delays at UK border crossings, which are already anticipated to be backlogged. In a worst-case scenario in which goods are misclassified, importers may face retroactive payments on top of financial penalties and – in extreme cases – lose their authorizations to import.

Border Delays

According to CIPS, 10 percent of UK businesses could lose EU business if there are delays at the border, and about 20 percent will see their EU buyers demand discounts for delays of more than a day.

The organization notes 38 percent of EU businesses have already changed suppliers because of Brexit and up to 60 percent of EU businesses would look to switch suppliers if border delays were to extend to two weeks or more.

Delays are almost inevitable given the more robust customs administration requirements. Today, tractor trailers pass through the UK-EU border without stopping. At the Port of Dover, the UK’s busiest and closest port to mainland Europe, some 17,000 tractor trailers pass through on a daily basis with only about two percent being stopped. After Brexit, almost all of them are likely to be stopped. Even if that stop is only for a few minutes, it’s going to result in a significant backlog of transports.

In short, importers into the UK and exporters out of the UK will need to factor in additional time in transit and set expectations with their trade partners on the other side of the English Channel.

Preparation is Key

Given the shrinking time window for preparation, businesses that haven’t done so already should be working with their trade services partners – carriers, freight forwarders, trade lawyers and consultants and customs brokers – to ensure they’re able to minimize the negative impact of Brexit on their trade activity.

The UK’s official leave from the EU may very well be imminent, or potentially months or even more than a year away, but given the consequences of inaction, getting prepared late is still better than not being prepared at all.

Mike Wilder is vice president of Managed Services at trade services firm Livingston International. He has 30 years of experience in trade compliance. He can be reached at mwilder@livingstonintl.com.

David Merritt is a director in the Global Trade Consulting division of trade services firm Livingston International. He can be reached at dmerritt@livingstonintl.com.