Trends and challenges for the import-export industry in 2023

Leeann Nash January 5th 2023 - 4 minute read

The import-export industry faced another challenging year in 2022 as the disruption of the Covid pandemic and supply chain constraints gave way to protectionism and Western sanctions on Russia.

Import-export firms are faced with both material and policy-related difficulties. Inflation has sapped demand following a period of intense regrowth; moreover, a series of new regulations threatens to limit export capacity.

This article looks at general and country-specific impediments to trade in 2023 as well as possible solutions proposed by those facing the problem head-on.

2023 trade predictions

According to the World Trade Organisation (WTO), global trade growth is likely to slow in late 2022 and into 2023 because of a series of economic headwinds.

The organisation remarked recently: ‘The downturn in the goods barometer is consistent with the forecast of 5 October, which predicted trade volume growth of 3.5% in 2022 and 1.0% in 2023.’

Negative trends in export orders, air freight and electronic components are blamed upon cooling business sentiment and weaker global import demand. In turn, waning demand is attributed to the war in Ukraine, high energy prices, and monetary tightening in major economies. Furthermore, trade restrictions are crippling an already beleaguered industry.

In a speech delivered on 6 December by the Director General of the World Trade Organisation, Ngozi Okonjo-Iweala affirmed: ‘Since 2020, [WTO] members have increasingly implemented new trade restrictions, in particular on the export side, first in the context of the pandemic and more recently in the context of the war in Ukraine and the food security crisis.’

Examples of nation-specific challenges

A recent article from the World Economic Forum (WEF) highlights specific challenges faced by trading superpowers as 2022 draws to a close, and what these might mean for the year ahead.

USA and the European Union

On top of pandemic-related trade restrictions, the US faces hostility from EU bodies in response to President Joe Biden’s plans to grant tax credits and subsidies to companies making clean technology products in North America.

Countries in the European Union are worried that their companies will lose trade due to Washington’s Inflation Reduction Act (IRA). EU state aid rules prevent European countries from offering tax breaks of the same scale to domestic companies.

There are suggestions that the subsidies in the US violate the rules of the World Trade Organisation. The Economist claims the IRA ‘breaches free-trading principles that are supposed to bind all members of the World Trade Organisation’; yet the Senate passed the Act on 7 August.

Tensions over the Inflation Reduction Act are so intense that there has been talk of a trade war between the US and European Union. Nevertheless, the EU-US Trade and Technology Council met on 5 December and proposed a new transatlantic sustainable trade initiative to maintain demand for EU manufacturers.

‘Green Trade’ incentives and EU packaging rules

As global bodies strive to reduce humanity’s contribution to global warming, the WTO is prioritising green trade initiatives specific to international imports/exports.

Such proposals include advancing low-carbon technologies, cutting tariffs and other barriers for such industries. Although this may make trade easier for some, it will put those struggling to adapt their technologies at a disadvantage.

A case in point is a series of proposed revisions to EU legislation on packaging and waste materials. The new regulations would limit empty space in packaging to a maximum of 40% and may enforce mandatory rates of recycled content that producers have to include in new packaging.

Packaging mandates would address the challenge described by Kira Taylor at Euractiv: ‘Recyclers face an uphill battle to sell secondary materials in a market dominated by cheaper and higher-quality virgin supplies.’

Nevertheless, they would do little to tackle the root of the issue – the price discrepancy between new and recycled materials – instead shifting the cost burden onto business customers.

Free trade talks between UK and neighbours

The UK faces a specific challenge in its trading relationships in 2023, in that it has not yet finalised free trade talks with the US.

The World Economic Forum observes that while a US free trade deal was touted as the one of the biggest incentives for Brexit, Parliament’s official research briefing confirms ‘there is no current trade agreement between the UK and the US; although negotiations started in May 2020, an agreement is not expected soon.’

In more positive news, Australia’s Parliament has passed a free trade agreement with Britain, in return for which the UK’s free trade agreement with Australia will remove most tariffs on trade between the two countries.

Industry response to challenges

In response to the challenges they face in 2023, members of the international import/export industry have proposed various solutions to make such obstacles more manageable.

One solution proposed by UK SME manufacturers is the instatement of a UK Minister for Manufacturing. Currently, the responsibility for the sector comes under the remit of the Minister of State for Industry.

Almost three quarters (71%) of SMEs believe that were such a minister to be appointed, their industry’s fortunes would be improved. Andrea Wilson, Director at engineering company Hone-All Precision commented on SamsonVT’s survey:

‘UK Manufacturing is a huge contributor to the UK economy and deserves a representative within Senior Government to ensure the needs of our businesses are heard.’

Another solution proposed by multinational services group Ernst & Young (EY) is the use of blockchain technology to streamline the administrative process of international trading. The organisation suggests that the use of blockchain could reduce trade friction via automated exchanges of information, as well as increasing trust and authenticity on account of its virtually tamper-proof nature.

EY’s proposal also demonstrates how technology can be used across international trade for good, while also posing new challenges. As eco-design principles in packaging and low-carbon technology present hurdles to which the industry must adapt, technology can also be a part of the solution.

Written by
Leeann Nash

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