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The Future of International Trade: Is Globalization Dead?

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The Future of International Trade: Is Globalization Dead?

In this exclusive Q&A, Global Trade Mag hears from Ted Murphy, partner with global law firm Sidley Austin, LLP, on how the international trade and globalization landscapes have changed and what companies can predict as we approach 2021. 

1. What are some of the most significant changes in the global trade landscape? 

The most significant change over the past few years has been the decline of globalization. Up until recently, much of the world was pursuing policies aimed at increasing globalization. This meant that year-after-year it was getting easier and cheaper to move goods, people and data across international borders. While globalization is not dead, the last few years has seen a rise of economic nationalism in places where it had not been prevalent previously — like the United States and the UK. Combined with the economic nationalism that has always been present in places like China, it means that globalization has been in retreat for the past several years. We see that trend continuing, at least for the short-to-medium term (i.e., walls are more likely to go up, then come down, in the short-to-medium term).

2. How can global trade players navigate the new landscape? 

The first thing global trade players need to do is recognize that the paradigm has shifted. Hoping that the past comes back is not productive. Instead, you need to embrace the flux and move forward. No one knows what the future will look like. That said, we know it won’t look like it did 4 years ago. As a result, global trade players need to embrace the uncertainty (it is a reality), throw out the old plans and create new ones – recognizing that they may need to be amended on the fly.

3. What role will technology play in international trade relationships?

This is one of the fundamental trade questions that will get answered over the next couple of years. Will we have one interconnected world, or separate spheres each with its own technology?

4. What are some tips for compliance efforts moving forward?

Trade facilitation/trade compliance will continue to have increasingly important roles within companies going forward. The last few years have shown that trade really matters to most companies and that those that ignore things like trade risk, responsible sourcing, technology transfers and other trade-related issues do so at their peril. For example, as companies realign their supply chains, it is important to understand the trade risk profile of the alternative source – e.g., is the new source country likely to find itself on the wrong end of a U.S. Section 301 investigation for currency undervaluation; is forced labor enforcement a risk; the trade sanction risks; etc. Just looking for the lowest cost supplier is not the answer.

5. How can trade players prepare now for the future? 

In the past, it was relatively smooth sailing from a trade perspective as globalization increased. Expect the future to be bumpier. I am not saying that is necessarily a bad thing – uncertainty often brings opportunity. In order to be best able to take advantage of that type of opportunity, one needs to be well-informed and a bit bold.

This article has been prepared for informational purposes only and does not constitute legal advice. This information is not intended to create, and the receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers. The content therein does not reflect the views of the firm.

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Ted Murphy is a partner with global law firm Sidley Austin, LLP where he counsels companies on international trade and customs law and serves on the firm’s COVID-19 Task Force. He advises clients on international trade, trade policy and customs compliance issues, including actions brought under Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974, as well as the administration of international agreements. Mr. Murphy also represents clients before the U.S. Court of International Trade, the U.S. Court of Appeals for the Federal Circuit, U.S. Customs and Border Protection, the Office of the United States Trade Representative and the U.S. International Trade Commission. Prior to joining Sidley, he was appointed by the Secretary of Commerce and the United States Trade Representative to serve on the Industry Trade Advisory Committee on Customs Matters and Trade Facilitation (ITAC 14) for the 2010–2014 and 2014–2018 terms.

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Free Trade in Free Fall: How Companies Can Navigate the Pandemic

Even before the global pandemic arrived in every corner of the globe, free trade and the globalized trading system were in critical condition. The bruising U.S.-China trade war, along with regional conflicts such as the Japan-Korea trade war, Brexit, import tariffs, the decline of the WTO, left companies struggling to adjust supply chains and many wondering whether the globalized trading system will survive.

Yet these challenges pale in comparison to the trade and supply chain issues the COVID-19 pandemic generates on a nearly-hourly basis. Demand has plummeted around the world for goods and services as vast portions of humanity are isolated in their homes and left without incomes. Export restrictions on medical supplies, food and other critical products, while still limited, are on the rise, creating fears of reverse protectionism. Airfreight capacity has dropped as tens of thousands of flights are grounded. Logistics companies are struggling to deliver goods as nearly every country in the world has implemented ever-tightening border restrictions in a matter of weeks.

As a result, companies and individuals are struggling to keep our grocery stores, pharmacies, and retailers stocked with the cheap and plentiful products consumers have grown accustomed to, not to mention supply the medicine and equipment that our frontline healthcare workers desperately need. While these are dark days in trade, there are ways to immediately protect your company and your supply chain.

First, companies must protect their workers from the disease. Crisis management procedures to keep people healthy, whether that means remote working procedures or social distancing policies to keep production facilities running, should be implemented and revisited as the crisis moves on. While most companies have implemented these policies as a result of government orders, companies should continuously evaluate how to both keep their employees safe and their companies running. Fighting this disease and its economic ramifications is a marathon, not a sprint, so companies should find ways to maintain continuity as long as possible.

Next, now is the time to be hands-on with your supply chain. Companies need to examine every aspect of their supply chain and logistics: every container, every ship, every truck, every port, and every border crossing. In this way, you can understand how your goods must pass to understand how the pandemic will affect each shipment. Seafreight remains stable, though that could change, so companies with any slack in their supply chain should consider moving goods in advance through slower means.

Companies also need a proactive examination of their legal risks.  This assessment must include a review of which contracts may be broken through force majeure and other similar break clauses, whether initiated by you or the other party. At first, only producers were using force majeure as they realized they did not have the raw materials, labor shortages, and logistical support to deliver products. Now, importers and end-users are breaking their contracts as demand drops and shops close. Similarly, insurance markets are struggling to find ways to insure goods, services, and even projects as supply chain issues threaten to slow projects around the world. A holistic examination of your legal risks will save your company money and time when legal challenges arise.

Companies also need to find help from their governments. Governments are looking to help companies stay afloat, keep people employed, and keep goods and services flowing, but they are frequently looking for answers from companies. If you are not part of a trade association, join one. And if you do not have representation in Washington, now is the time to make sure that government authorities know how best to help your company and industry navigate this crisis and to remind them of the value that trade brings to communities around the world, and where you need help.

The COVID-19 crisis will leave the global trading system permanently altered, but it is also a reminder that, just as our physical health is intertwined with our neighbors, our economic health is also dependent. Long-standing trade relationships are under strain, contracts will be voided, and shipments unfulfilled. Yet a healthy dose of compassion and understanding that your business partners are facing the same challenges as your company may help you maintain your trading relationships through these hard times and allow them to rebound faster when the crisis is over.

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Benjamin Kostrzewa is a Registered Foreign Lawyer at Hogan Lovells, working in Hong Kong and Washington serving the needs of clients on both sides of the Pacific. Before joining Hogan Lovells he served as Assistant General Counsel at the Office of the U.S. Trade Representative.

Re-defining “Made in Italy”

Sardinia, the second largest island in the Mediterranean, is known for its contrasting mountain ranges and white sand beaches. Visited by celebrities and thousands of travelers every year, Sardinia is a place where it is possible to visit 16th century constructions, see enchanting woods filled with millenary trees, relax on a picture-perfect beach and enjoy vibrant nightlife, all in the same day.

Chiara and Gloria Piscedda are the twin sisters who, inspired by their homeland, created a fashion label that intends to bring Sardinia to the world. We had a chance to talk with them about their projects and how they envision ChiGlo’ s expansion in to emerging markets.

Tell our readers about the ChiGlo brand distinction within the fashion industry.

ChiGlo  was born out of our passion for fashion and our rich and colorful homeland, Sardinia. Our designs are a mix of traditional and contemporary up-to-date style that combine cultural patterns and themes with high-quality materials and current fashion trends. Sardinian folklore and traditions are part of each collection.

What were the motivations to deliberate upon expanding into the U.S, U.K. and the emerging marketplace?

The fashion industry is vibrant and fast-paced, requiring new brands that accommodate consumer demand for fresh trends. We are receiving so many inquiries from vibrant markets, like South Africa, the US and Latin America, pushing for ChiGlo to share its Sardinian roots with the rest of the world. We are excited to take this next step because of our desire to spread Sardinian style abroad, not only for the benefit of tourism but also to preserve its own history and culture.

Where do you envision the brand in the future?

We believe ChiGlo will have a consolidated presence in the global luxury retail market. We will host strong international distribution, and we are hoping to open a flagship store in New York in the immediate term.

With regard to market strategy, we at ChiGlo not only look to engage and play a terrific role within the influential digital community, but remain open to traditionally collaborating (such as by joint venture) with brand partners in the United States, the Asia-Pacific region, indeed the Middle East and beyond, viewing globalization as a driving proponent of our heritage’s continued expansion.

How closely do you view the correlation between ChiGlo and Sardinian tourism?

ChiGlo’ s uniqueness is rooted in our innate fascination for and appreciation of Sardinian culture, which forms a large part of our identity. We are transferring this culture and passion into a brand that features and reinvents traditional, folk elements into a contemporary but very personal collection. With each piece, we are telling a story about ourselves and our homeland, and we are looking forward to bringing this part of Sardinia to the world.

We hope that when our customers wear ChiGlo, they feel like they’re wearing a piece of Sardinia– and perhaps, this will inspire them to visit our beautiful island.