Remarkably in the period since its formation, the European Union has become synonymous with Europe, meaning the robustness of the EU (all things considered) has been assumed to equate to the persistence of stability of European nations’ trade and development, but it is a useful exercise to consider the two ideas as separate from time to time. Particularly when it comes to competitiveness in the global sphere. While the union works as a catalyst to regional trade and development, states still have a role to play in positioning themselves strategically in world trade, particularly as the spheres of interest and influence continue to evolve with regard to trade ties.
Reflections from the Logistics in Europe event:
It was interesting to listen to the presentation by Rem Korteweg of The Clingendael Institute. Two key points he raised particularly stood out to me. First, in light of geopolitical tensions, we are witnessing a period where proximity and cost saving are being challenged as key considerations for choice of trading partners. Increasingly the desire to trade with allies and decamp from perceived enemies has led to a phenomenon that is being referred to as friend shoring. This is where states trade with other states that they consider as having shared values with them. It is still unclear how strict a trend this is, particularly when the desired goods for trade are not in adequate supply from friendly-states. Second, was the extent to which China’s shifting investment outlook has impacted global trade.
After close to two decades of a rigorous global focus, trend analysis indicates that China has been deglobalizing gradually over the past few years. In the image, the prevalence of this effect is illustrated, comparatively depicting Europe, the Americas and Asia. This shouldn’t be mistaken to mean that China has ceased investing in other regions, as the experience with Africa shows, but rather the level of its investments directed at other regions has been experiencing a gradual decline.
Despite the deglobalization effects, transport per ton kilometer is still exponential. Though Europe continues to experience shortages of drivers, road is only one of five main modes of transport (here I’m referring to road, rail, air, inland waterways and maritime). In recent times there has been greater focus on maritime transport with targets to reduce CO2 emissions expanded to include maritime transport since April 2023. What this means in practice is a subject on its own, but the adjustments to social and environmental impact reporting requirements have made shippers and freight forwarders fairly antsy. This shouldn’t be misunderstood to mean a lack of willingness to implement the legislations but rather a nuanced collective question mark on where the responsibility lies when it comes to making the reports. It was suggested that custom officials are not adequately equipped to verify aspects of the ‘Trust and Check’ qualification for instance when it comes to confirming that the supply of a product did not lead to child labour.
Of particular interest is the question of SMEs where it’s been proposed that with regard to supporting the implementation of custom reporting, perhaps the focus should be on SMEs that have regular international transactions. Here it could be worthwhile to recognize the aspect of costs that comes with equipping individuals adequately on the latest reporting reforms. It is perceivably easier for larger corporations to do so than smaller ones. For instance, DHL group holds regular webcasts with its suppliers to update them on expectations and makes linkages with what they stand to gain. As with other things, implementing the sustainability standards could increase the cost of doing business in Europe and lead to a corresponding increase in investments abroad where these requirements are not yet in place. Over time this may be countered, in part, by the EU’s broader frameworks, as explicitly stated in the EU’s Emissions Trading System:
The Carbon Border Adjustment Mechanism…is meant to avoid that the emissions reduction efforts of the Union are offset by increasing emissions outside the Union through relocation of production or increased imports of less carbon-intensive products.
The chair of CLECAT Customs Institute, Dimitri Serafimoff recognized that we are at the beginning of a transition period with regards to the custom reforms and there are many open questions. As summarily well stated by Roman Stiftner the task is to find a way to bring together the notion of a prosperous Europe with that of a sustainable Europe. And I would add, Europe in a global role, whether this means as the EU bloc or individual European nations.
There seems to be an overall feeling of ‘let’s wait and see’ with regard to implementation of the new customs legislations. A clever twist was pointed out whereby companies may update their materiality analysis (overall) in light of the European Sustainability Reporting Standards (ESRS) which require you to report on issues that are material. It would be interesting to look at this from an auditing perspective, either as an internal or external company auditor.
Some points that I challenge:
It was proposed that with a strong supply chain entities can absorb the shock from externalities and remain resilient but is this really true when certain shocks affect virtually all parts of the supply chain?
Are we really witnessing a shift from a more rules based to a more power based economy, or is the phenomenon of uncertainty in the global sphere making it more likely that we notice the power shifts with more alacrity?
The EU as a forebearer in the global sustainability drive is taken as a given, but there are signs of recent balking though progress has been made. What could this portend for the future?
I leave you with this poster from a screen at a station in Brussels. The dream is on the way to being realized, but still there are hurdles to surmount.
