Executive Insights is a series by Shipping and Freight Resource that provides insights and thoughtful analysis about the industry..
This series features selected individuals from the industry and is aimed at enriching the knowledge of the readers with what is happening in the shipping, freight, maritime, logistics, and supply chain industry..
Executive Insights also gives you a chance to pick the brains of these industry veterans, leaders, and enablers..
In this edition of Executive Insights, we caught up with Jan Hoffmann Chief, Trade Logistics Branch of UNCTAD, on what drives Trade Logistics and how UNCTAD is enabling trade and helping various countries achieve their full potential..
SFR : What are the main drivers of trade logistics and are you seeing those drivers in play in the current global trading scenario?
JH : I see two key drivers: Decarbonization and digitalization. They reinforce each-other. Decarbonization in trade and transport demands paperless solution, and the optimization of processes.
Take, for example, port call optimization. Rather than arriving in time – before the vessel starts loading or unloading operations – better planning can help reduce speed as it suffices to arrive Just On Time, which in turn helps reduce CO2 emissions.
Digitalization in a broad sense includes all kinds of reforms and improvements, making use of latest technologies, such as Artificial Intelligence (AI), distributed ledgers (such as blockchains), and improved cargo and vessel tracking (e.g. through Automatic Identification Systems – AIS).
Decarbonization is a double-edged sword for international transport providers. In shipping, for example, about 40% of cargo volume is energy – oil, coal, gas.
If in some decades from now we no longer need to transport this cargo, we also need 40% fewer ships.
On the supply side, in the short term the energy transition will lead to higher costs. In the longer term, however (possibly very long term, admittedly), the use of renewable energy will reduce the costs of moving goods.
SFR : What is your forecast for trade logistics in view of the ongoing COVID-19 pandemic. What needs to be done within the industry to alleviate possible downturns.
JH : The industry responded quite well to the pandemic.
Especially ports and shipping services remained largely unscathed.
Land transport, on the other hand was more severely affected, as trucks and trains depended on transport workers to cross borders, and the border crossings of people became complicated in view contagion risks.
Air cargo was affected by the downturn in passenger flights, which in turn reduced the available space to transport air cargo in the belly of passenger planes.
Those who have been most severely affected are the seafarers. A complicated challenge. Crew changes are already complex under normal circumstances.
You need to ensure that the replacement crew arrives in time for the current crew to start their leave. And you need to coordinate with numerous stakeholders, including the ship operator, crewing agent, port, local transport and airlines, and immigration and health authorities.
If this “supply chain” just one link is weakened due to corona related restrictions, the whole crew-change system breaks down.
As regards forecasts, that’s a difficult one. While we were writing our latest Review of Maritime Transport, we had to adjust our forecast for seaborne trade several times. And the adjustments were mostly upwards, i.e. in the end the downturn of seaborne trade has been much less bad than we expected at the start of the pandemic.
As mentioned above, the maritime sector actually managed to remain fully operational; and on the demand side, the pandemic did not lead to much of a decline in trade in goods.
The economic downturn mostly affected services (restaurants, hairdressers, tourism), but not consumption of food and consumer goods. In fact, in many cases thanks to the facilities of e-commerce, demand for goods trade has gone up.
What do you and I do in lock-down? We buy more things! But how much longer this will continue, and which changes will be lasting and in what areas will we get back to normal is impossible to foresee.
What I do see is that many of the reforms that have been achieved in logistics – such as more automated processes, electronic submissions and payments, and a further push to solutions such as Single Windows – will likely remain. The challenges for policy makers is to lock-in the progress made during lock-down.
SFR : How is UNCTAD helping emerging economies and LDCs achieve their full potential specifically in the logistics spectrum?
JH : Several of our long-standing programmes have become more important during 2020. Customs automation, port reforms, transport and transit facilitation, single windows, trade information portals and other UNCTAD programmes have seen a surge in the context of COVID-19.
At the outset of the pandemic we produced a 10-point action plan in a Policy Brief. This went along the supply chain, from the ship, through the port, the gate, Customs, transit, border crossings and the legal and regulatory framework.
One point we highlight in the Policy Brief is that the solutions we promote help achieve both: The facilitation of trade and better controls.
Unfortunately, I often see people claiming that there is some sort of “trade-off”, or a “balance” to be found between either facilitating or controlling.
The opposite is true: All the concrete solutions we work on, or those promoted by the World Trade Organizations Trade Facilitation Agreement, or by the World Customs Organization, such as risk management, more transparency, automation, post clearance audits, authorized economic operators and so on and so forth – say all achieve both objectives.
SFR : Do you think the Chinese domination of global trade and logistics will continue much longer or is there a new force in the horizon?
JH : Well, at the outset, I would not say that there is a “domination”. But yes, China has a growing share in the supply of many key maritime transport sectors.
We just recently updated and expanded our Maritime Country Profiles, and it is impressive how China is among the very few countries that have a sizeable market share in almost all maritime businesses.
But China is also a leading trading nation, i.e. a country that needs access to competitive logistics services. It is not in China’s interest – from the shippers’ perspective – to end up in a scenario where the importers and exporters depend on oligopolistic or even monopolistic markets.
SFR : In all your years handling Trade Logistics within UNCTAD, which year would you say has been the toughest for global trade and why?
JH : Well, I do think it’s the year 2020. The additional demands for our work are felt by the entire team of the Trade Logistics Branch and colleagues in other units who work on related issues, such as port management, trade information portals and Customs automation.
We all had more work to do, while at the same having to adjust to our own working methods, with more telecommuting, fewer options to travel and work on the ground, and responding to Member countries’ requests to assist them, too, through remote research, advice and technical assistance.
But I am optimistic. We have coped very well and are emerging even stronger from this challenge.
SFR : What are some of the priorities that UNCTAD will be working to achieve in 2021?
JH : In April, UNCTAD will holds its 15th quadrennial ministerial conference, in Barbados. During that conference, our member states will update our mandate and we in the Secretariat will need to prepare for the conference.
We are preparing several sessions for the conference, including on ports, Customs and trade logistics.
I expect that the key challenges I mentioned above – digitalization and decarbonization – will be high on the agenda. So, the main challenge for 2021 is to continue our work on strategic and longer-term issues.
And as we said above, these issues have become more important in the Covid-19 year of 2020.