Australia’s International Trade Environment

As a trading nation, Australia relies on efficient and effective international supply chains to drive its economic engine room. The modernisation of Australia’s international trade environment requires immediate focus by government and accords similar priority to border security. As such, we believe the time is right for industry to initiate a reform and modernisation agenda which will shift the dial for Australia’s international businesses. In that regard, and as has been demonstrated internationally, Trade and Port Community Systems (‘TCS’) provide significant efficiency and productivity improvements for users through increased visibility, connectivity and interoperability. 

Internationally, these systems are for industry what Single Window proposes to be for government. As the Australian government has indicated it intends on proceeding with a single window system, a TCS will represent a vital component stage of building an end-to-end ecosystem that digitises the flow of trading information, reduces friction for business and supply chain participants and cuts the cost of international trade. With support funding from the Cargo Automation Development Fund (CADF), the Australian Chamber of Commerce and Industry, Port of Brisbane, and PricewaterhouseCoopers Australia have formed a consortium to address this important problem collaboratively.

International trade and supply chains are complex and evolving. Volumes across key channels are rising and will continue to rise. In 2016-2017, the Department of Immigration and Border Protection (now Department of Home Affairs (DHA)) processed 3.2 million sea cargo and 41.9 million air cargo consignments. With the DHA forecasting growth by a further 13 percent and 34 percent respectively over the next four years to 2020-2021 estimates. Driving these increased volumes is the rise of eCommerce and online marketplaces which have created greater interconnectivity between buyers and sellers all over the world.

The rise of global value chains is the other defining feature of 21st century commerce, with the trade in intermediate goods and services representing as much as 70 per cent of total trade globally.  Domestically, the range of intermediaries and service providers embedded in the international supply chains of Australian businesses is growing. Regulators, banks, insurers, ports, carriers, container terminals, customs brokers, freight forwarders and transport providers all have varying levels of influence on the flow of goods in and out of Australia. These intermediaries also often have a defining role in risk mitigation in the supply chain.

The volume, velocity and variability of trade and associated data creates challenges in an already dynamic environment. Notwithstanding this, there are well known benefits for our economy from reducing the cost of conducting international trade.  Reducing red tape for traders increases the size of the market available to exporters through enhancing comparative advantage. This in turn promotes outbound growth. Moreover, lowering the cost of imports benefits both consumers (through cheaper products) and businesses by better enabling Australian participation in global value chains.

However, Australia has recently been ranked 95th by the World Bank at trading across borders in 2017. This is despite a commitment from government to make a ‘concerted effort’ to lift Australia’s World Bank ranking outlined through a 2011 ‘Inquiry into Australia’s trade and investment relations with APEC.’ Predictably this has an impact on productivity, balance of trade and other fundamental economic issues. Four key conditions characterise the state of Australia’s international trade environment:

• Engagement between Industry and Australian government agencies – Australia is advantageously positioned to derive great benefit from growth markets, particularly in Asia. Australian businesses have ample ability to meet the ever-increasing demand of the Asian consumer base, yet, have hitherto failed to embrace this opportunity. Further uptake of Government industry assistance efforts would benefit those businesses seeking to expand their international trade profile. Whether it is fear of failure, or lack of ‘engagement intelligence’ with the region, and capacity to deal with government, Australian businesses are not taking full advantage of the international trade opportunities afforded to them
• Red tape increases cost and inhibits competitiveness – Existing regulation and its related administrative frameworks are often outdated resulting in less efficient administrative processes and procedures. Our trade treaty partners have undergone significant trade reform to increase the ease of transacting international business in their jurisdictions. Australia will remain at a comparative disadvantage until it reforms border regulatory frameworks more comprehensively.
• Inefficient and complex supply chains – Supply chain length and complexity ties up working capital and creates significant uncertainty around the supply of goods to businesses. This is also an impediment to participation in global value chains, the dominant model of conducting international business where ‘made in the world’ is the established best practice.
• Legacy and antiquated systems – Along with other global trends, the adoption of technological innovation in the international trade environment is the hallmark of successful competitive economies, their regulators and as a result, their trading businesses. Australia is yet to embrace disruption in a border and international trade environment.

We believe that the time is right to commence an industry-led modernisation of Australia’s international trade environment, making use of new technologies to enhance visibility, connectivity and interoperability and make possible the digitisation and automation of manual process – and thereby start to address these challenges. The TCS PoC is an important component stage of building an end-to-end ecosystem that digitises the flow of trading information, reduces friction for business and supply chain participants and cuts the cost of international trade. PwC is working on other components with the aspiration that the whole arena of trade will one day be covered.

Our Vision

The Australian Chamber of Commerce and Industry, the Port of Brisbane and PwC have partnered to bring Australian international trade to the 21st century –by removing complexity with a ‘Trade Community System’ (TCS) which links key supply chain information and ensures trust in that information by using blockchain technology.

What we are doing

We propose to commence a national Trade Community System Proof of Concept (‘PoC’) which will quickly build on work already undertaken by the Chamber of Commerce and Industry of Western Australia with the Cargo Automation Development Fund’s funding support. We will:

• Develop an interactive digital TCS PoC application suitable for demonstration purposes using modern technologies (including blockchain)
• Establish a pathway forward to attract seed investment from stakeholders to fund a more substantial pilot system and minimal viable product

What we will deliver

The project will deliver the following:

• A proof of concept technology solution that demonstrates how core users would use a TCS under a single use case to deliver on the service obligations of their respective organisations
• A proposed commercial model for how a TCS would be governed and funded
• A facilitated event for industry and government stakeholders to align on how to proceed with a TCS

What is the timeframe?

We are undertaking this project over the next few months and will be completed before the end of June 2018.