Global Trade Strategies

Global Trade Strategies

Interacting with Trade Institutions
and Businesses

Michel Borgeon and Claude Cellich

Global Trade Strategies: Interacting with Trade Institutions and Businesses

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 Abstract
Developing global strategies call for new business models that ensure the
integration of digital technologies in their operations. Traditional ways
of doing business in an interconnected world requires firms to rethink
their strategies. Successful enterprises are recognizing the importance of
data analytics by exploring new insights into customer behavior, expe-
riences, forecasting demand improving supply-chain performance and
overall operational efficiencies. The disruptive global business environ-
ment has led trade promotion organizations to develop innovative tools
and to design trade strategies that take into account digital transforma-
tion, rapidly changing market conditions and the entry of new types of
competitors. To survive in the global digital economy, trade officials and
business executives need to rethink what business they are in and how to
digitalize their operations.

Keywords
artificial intelligence; competitiveness; trade information; trade flows;
trade development; trade maps; SMEs case studies (Finland, Ireland,
Singapore, New Zealand, Mauritius, Republic of Korea); disruptive
­
­innovation; globalization; strategies; value added chain concept
 Contents
Preface��������������������������������������������������������������������������������������������������ix

Chapter 1 International Trade Promotion: Why and How����������������1

Chapter 2 Trade Development: Needs and Strategy Building������������7
Chapter 3 Facing New Challenges of the Most Recent Development
Schemes in a World of Regionalization / Globalization of
Trade������������������������������������������������������������������������������19
Chapter 4 Drivers of Competitiveness���������������������������������������������25
Chapter 5 Strategic Building Tool for Trade Analysis: The TiVA
Concept�������������������������������������������������������������������������33
Chapter 6 International Trade Information and Trade Flows
Analysis��������������������������������������������������������������������������37
Chapter 7 Trade Development Strategic Linkages���������������������������47
Chapter 8 Selected Successful National Case Studies�����������������������63
Chapter 9 Trade Development Strategies for SMEs�����������������������107
Chapter 10 Using the Trend in Value Added Concept Published by
OECD (TiVA Database) and the Canadian Trade Com-
missioner Service (TCS) Offer��������������������������������������115
Chapter 11 Disruptive Innovation: A New Dimension of
Competitiveness Issues�������������������������������������������������121
Chapter 12 Global Competitiveness Ranking����������������������������������127
Chapter 13 Integrating All Factors for Market Development:
Artificial Intelligence Systems, a Future Challenge for
Trade Support Institutions��������������������������������������������137
Chapter 14 Rethinking Global Trade Strategies in the
Digital Era��������������������������������������������������������������������141

About the Authors�������������������������������������������������������������������������������145

Index�������������������������������������������������������������������������������������������������147
 Preface
Business interacting with trade institutions reflects the exponential
changes that have taken place in recent years. The evolution of global
trade, greater competition, and particularly the growth of e-commerce
have drastically revolutionized the playing field. In other words, doing
business as usual is no longer viable. The availability of real-time data and
the integration of digital technologies in their business models enable
enterprises to rethink their strategies. The new realities and global chal-
lenges facing trade officials and business executives call for innovative
business models to pursue global opportunities in the digital era, keeping
in mind the new disrupting challenges and opportunities offered by Arti-
ficial Intelligence models.
Today, business executives are facing increasing pressure from the
marketplace for greater efficiency and lower transaction costs. These new
challenges can be overcome through shorter production cycles, digital
communication and efficient export processes by integrating new tech-
nologies in business models and government practices. In view of global
competition, businesses can no longer compete on price only but on their
enterprise capability to offer a total global response by its capacity to pro-
duce to international standards, deliver on time, faster than competition,
and provide complementary services to customers.
To compete successfully in global markets, trade development strat-
egies must take into account these new imperatives. It is essential that
strategies focus on competitiveness rather than on the traditional market
based approach. This entails the development of both tangibles and intan-
gibles as well as setting up clusters of export-oriented SMEs joining global
supply chains, shorter sourcing and networking among others. Several
countries have recognized these new challenges (Ireland, Finland, Mauri-
tius, New Zealand, Republic of Korea, and Singapore introduced in this
book) by including the private sector in developing trade strategies.
The availability of up-to-date detailed trade statistics by the World
Trade Organization, the World Bank, UNCTAD and ITC provide
x Preface

strategy developers invaluable tools to design trade strategies, export mar-

ket development plans and apply best practices. We trust the the infor-
mation provided in this book is not only helpul but sincerely hope it
would simulate further research in the development of new and innova-
tive strategies.
This book reflects our past association over several decades with the
International Trade Centre (UN/WTO) and our teaching at the Inter-
national University in Geneva. We owe a special word of thanks to the
talented staff of Business Expert Press for their constructive feedback.
Finally, the biggest thanks of all goes to our families for their support,
understanding, and patience enabling us to complete this project.
Michel Borgeon and Claude Cellich
Geneva, Switzerland
January 2020
 CHAPTER 1

International Trade
Promotion: Why and How
With the progressive liberalization of markets on the long term, the global-
ization process implies for local firms as well as for governments more and
stiffer competition, at home as well as on the international marketplace.
Now more than ever, the competitive advantages that any firm or
country possesses become smaller and less durable. Enterprise manag-
ers are facing realities: becoming globally competitive, pursuing new
commercial opportunities (in line with the market liberalization),
or conduct “business as usual,” with inevitably diminishing sales
and profit.
At national level, the long-term implications are also dramatic. In any
country, and more specifically, the concerned government, establishes
and maintains a business environment (even in an increased international
competition) in order to encourage local entrepreneurs to invest, to help
increasing employment, to generate specialized skills and support innova-
tion and new technologies, with the goal of making profits (fairly taxed)
and finally to become a competitive global player.
If none of the above, the business sector will suffer and will not be
able to take advantage of emerging international export opportunities
and trade performance will inevitably deteriorate. This is a particularly
challenging scenario for the public-sector planner and strategy-maker
in a developing or transition economy. There, the private sector may be
fragile, with day-to-day survival concerns rather than long-term develop-
ment, and would be unable to take any kind of leadership role in response
to the rigors of new global competition. Therefore, the challenge is intro-
ducing and managing an effective national export strategy (NES).
2 Global Trade Strategies

How to proceed? Two steps are proposed:

1. Identify some basic principles

2. Analyze examples of best practices (selected case studies developed
in Chapter 8).

What should a national export development strategy encompass, in

the dynamics of today’s international markets? Should it focus on market
development, improving traditional promotional instruments, like trade
fair participation, trade missions, and commercial representation services
in foreign markets, or should NES concentrate on delivery of more efficient
public-sector services that address “persistent market failings,” such as the
reluctance of the prospective exporters.
These trade support institutions may have recurrent obligations to:

• purchase information,
• cover initial market contact and exploration costs, and
• invest in technological innovations.

This should be coupled with NES promotional initiatives, organized

on behalf of existing enterprises, combined with on-profile programs
designed to generate new export capacities.
Assuming that there is a need for the local business community to
achieve international standards of competitiveness, the way forward
consists in expanding the export strategy equation for inclusion of all
the factors relevant to reduce the cost of the export transaction, which
means:

• improving forward and backward linkages within and among

local industries, generating higher value-added production
capacities,
• helping companies to acquire new technologies, and
• developing new, export-oriented competencies.

However, for an NES, to be effective, it must be comprehensively

integrated into the overall economic planning framework. It should not
 International Trade Promotion: Why and How 3

simply deal with offshore market development and promotion, but should
integrate the longer-term onshore challenges of establishing a national
competitiveness framework, creating an export culture and national con-
sensus, thus developing new export industries.
Of course, this building process implies a clear policy statement and
orientation: such a choice is obvious for small or limited resources coun-
tries (e.g., Singapore), but not so for the large ones (Brazil, Indonesia,
even the United States, for which exports represent a relatively smaller
share of GDP component).
In short, export strategy should address the issue of current and
future international competitiveness throughout the country’s supply
chain.
This leads to the conclusion that the process of managing NES
implies the direct and substantive involvement of all relevant min-
istries in the strategy management process: industry, agriculture,
transport and public utilities, labor, education, foreign affairs and, of
course, finance, with interministerial consultations at the highest level
of decision making.
Then comes the fundamental issue of the public–private sector
partnership.
For the strategy to work, the private sector is a key, if not the key player
for the implementation of the strategy, which must be fully involved in
the overall process—not just consulted but involved.
The private sector must ”buy in” and feel responsible for the success
or failure of the strategy. If this is obvious and well understood in many
open markets countries, it is more difficult to put into practice in some
“transition” economies with the former state trading companies.
The next step concerns the process of strategy development and man-
agement, reviewing the basic question of leadership and ownership.

• Should trade development strategy management be a top-

down responsibility (i.e., government-directed) or a bottom-up
exercise (business-led)?
• Should the initiative shift as strategy moves through the
design, implementation, and evaluation/refinement phases?
What are the institutional implications?
4 Global Trade Strategies

One must look at the entire competitiveness platform.

—Michael Czinkota, George Washington University,
Washington, D.C.

There is a need to review the type of institutional linkages and

functional relationships needed to ensure that a broad-based strategy is
effectively formulated, implemented, and reflected in the initiatives of
organizations directly involved in the export development effort.
The goal is to build national consensus and commitment, and to
maintain functioning partnerships at the strategic level within the public
sector, between the public and private sector, among trade institutions,
and within the business community.

Generally, the public-private sector linkage in strategy development is

weak, it lacks structure.
—Cecil Jowell: Private Sector Initiative for Export Promotion,
Cape Town, South Africa.

There is a need to look at the implications of the fully integrated

approach to export development for the National Trade Promotion Orga-
nization (TPO).
Clearly, the TPOs have to be proactive and move to make effective
contribution to the export strategy management process. In some coun-
tries, they unfortunately do not have the proper status or mandate to
enter into (trade) policymaking.
A NES must not only be perceived as being effective, it should also
be confirmed as being so, and not just because the monitoring and eval-
uation of strategy is becoming an increasing preoccupation of authorities
concerned with public budget and expenditure.
The assessment of utility and impact is necessary to refine and adjust
both the strategy itself and the implementation process.
There is a need to look at some of the more important “competi-
tiveness-drivers.” They relate to the implications for the national export
strategy of e-commerce, the increasing impact of multinationals, and the
growing trend of global outsourcing, through the TiVA development
concept (Trade in Value Added, developed in Chapter 10).
 International Trade Promotion: Why and How 5

Some key questions emerged, which should need a clear answer in

building a public sector driven global strategy:

• What is the role of the public sector in assisting local firms to

find their ways along the information superhighway?
• What steps must be taken to ensure that local companies can
engage more effectively in the international outsourcing pro-
grams of multinationals and other foreign companies?
• What should be the priorities of the public-sector strate-
gy-maker?

While going some way in answering these questions, the aim is to

assist the NES process to develop a response to the challenges of today’s
competitive marketplace.
In this area, there are more questions than answers. But this is an
incentive for creating or strengthening partnership all over the global
arena. The following support measures would be to create and maintain

• a stable, predictable macroeconomic environment for enter-

prise development, characterized by low-budget deficits, tight
inflation control, and competitive real exchange rates;
• an outward-oriented market-friendly trade and industrial
regime emphasizing the dismantling of import controls and
tariffs; and
• a proactive foreign investment strategy that targets a few realistic
sectors and host countries, views overseas promotional offices as
public–private partnerships, provides competitive investment
incentives, and streamlines investment approval processes;
• sustained development in human capital at all levels (particu-
larly tertiary, scientific, information technology, and engineer-
ing education) and increased enterprise training (including
assistance for industry associations to launch training
schemes, information campaigns to educate firms about the
benefit of training and tax breaks for training);
• comprehensive technology support for quality management,
productivity improvement, and technical support services for
6 Global Trade Strategies

SMEs (including grants to obtain ISO 9000 certification),

the creation of productivity centers, and commercialization of
public technology institutions;
• access to ample finance at competitive interest rates through
cautious monetary policy management, competition in the
banking sector, training for bank staff in assessing SME lend-
ing risks, and specialist of soft loans for SMEs; and
• an efficient and cost-competitive infrastructure in air and
sea cargo, telecommunications, Internet access, and power
resources (energy saving minded).

This (ideal) list has been constituted by members of the Common-

wealth Secretariat, London, during a brainstorming session, 2015.
 Index
AI. See Artificial intelligence
Alliance Experts, 81–82
Artificial intelligence (AI)
disruptive innovation, 125–126
global competitiveness, 133
integrating market development,
137–139
trade promotion, 137–139
Business competitiveness, 29–30
Capacity building, market analysis, 44
Classification systems, 37–39
Competitiveness drivers
globalization of supply chain,
27–29
NES and, 4
priority of rapid response, 26–27
product’s service package, 29–31
COMTRADE database, 40
CORE™, 12–13
Cost reduction
national export strategy, 2
non-tradeables, 14
strategic challenges, 14–15
Digital information, 20–21
Disruptive innovation
artificial intelligence programs,
125–126
definition of, 121
examples of, 122–124
level of, 122–123
overview of, 121–122
process of, 122–124
for SMEs, 124–125
Ease of Doing Business Index, 128,
129
Effectiveness-seeking transnational
companies, 28
Efficiency seeker, 28
Enterprise Ireland
Business Accelerators Program,
73–74
export assistance overview, 71
export selling workshops, 72–73
International Selling Program, 72
Internet Marketing Unit, 73
mentors, 73
selling to public sector, 73
Strategic Goals 2017-2020, 74–76
structure and organization, 70–71
Enterprise manager, 26–27
Export-oriented clusters and
networks, 56–58
Export-oriented FDI, 59
Export-oriented small and medium
enterprises, 110–111
FDI. See Foreign direct investment
Finland
FINPRO–TEKES services, 66, 68
industrial cluster approach, 67–70
trade–industry linkage, 65–66
traditional export promotion
approach, 66–67
Foreign direct investment (FDI), 17, 43
Foreign investment with right
facilities, 30
Functional linkages, 55–56
Global Competitive Index, 127, 128
Global competitiveness ranking
artificial intelligence, 133
efficiency of business, 133–134
indexes and rankings selection,
127–130
lifelong learning, 130–133
modern infrastructures, 134
overview of, 127
pro-business policies, 130
productivity, 135
traditional functions, 134–135
148 Index
Global Enabling Trade Index,
127–128, 129
Global Innovation Index, 128, 129
Globalization of supply chain, 27–29
Global sourcing, 28
Global standards, 19–20
Global trade strategies
digital information, 20–21
global standards, 19–20
partnerships, identifying and
implementing, 21–22
trade support institutions, 22–24
UNCTAD statement, 19
Harmonized System (HS), 38–39
HS. See Harmonized System
IMD World Digital Competitiveness
Ranking, 128, 129
IMD World Talent Ranking, 128, 129
Implementation and efficiency-
building linkages, 49–50
International Trade Centre (ITC), 18
capacity building in market
analysis, 44
FDI data, 43
Investment Map, 42
Market Access Map, 42
market analysis studies, 44
Market Analysis Tools, 39
Procurement Map, 43
public tenders information, 43–44
Standards Map, 42
tariffs and market requirements, 43
trade competitiveness, 44
Trade Map, 39–41
voluntary sustainability standards, 43
International trade information, 37
Interstice Consulting, 82
Investment Map, 42
Ireland. See Enterprise Ireland
ITC. See International Trade Centre
KITA. See Korean International Trade
Association
Korea. See Republic of Korea
Korean International Trade
Association (KITA), 99
Lifelong learning, 130–133
Market Access Map, 42
Market analysis studies, 44
Market Analysis Tools, 39
Mauritius
competitive advantages, 94–95
economic development success
story, 92
institutional base, 95–99
specific story, 92–93
National case studies
Enterprise Ireland, 70–76
Finland, 65–70
Mauritius, 92–99
New Zealand, 84–92
Republic of Korea, 99–105
Singapore, 77–84
National export strategy (NES)
competitiveness-drivers, 4
cost reduction, 2
development and management, 3–4
obligations to, 2
proposals of, 2
public–private sector partnership, 3
public sector driven global strategy, 5
support measures, 5–6
TPOs, 4
NES. See National export strategy
New Zealand
bottom-up strategy development
case, 84–85
broad-based awareness, 88–89
building strategy, 88
guiding principles, 86
institutional structure, 87
Joint Action Groups, 87
Market Development Board, 87
performance measures, 90–92
realities and perspective, 85–86
tailor trade promotion support
services, 89–90
Non-tradeables, 14
OECD. See Organisation for
Economic Co-operation and
Development
 Index 149
Organisation for Economic Co-
operation and Development
(OECD), 33–35
Orissa International, 82
Performance monitoring and
assessment linkages, 54–55
Planning and consensus-building
linkages, 49
Private sector linkages, 55
Pro-business policies, 130
Procurement Map, 43
Public–private sector partnership, 3
Public procurement, 30–31
Public sector driven global strategy, 5
Public sector over business
competitiveness, 29–30
Public-sector strategy maker, 27
Public tenders information, 43–44
Republic of Korea
KITA goals, 100–102
KITA organization, 99–100
membership services, 102
new export development nursing,
103–105
Singapore
main activities, 78–80
other institutions offering services, 80
overview of, 77–78
Trade Development Board, 80–82
trade promotion, 82–84
SITC. See Standard International
Trade Classification
Small and medium enterprises (SMEs)
competitiveness response capacity,
111–112
disruptive innovation, 124–125
export-oriented, 110–111
export strategy, 108
future prospects, 112–113
innovative instruments/solutions,
110–111
market selection, 108–110
obstacles, 107
SMEs. See Small and medium
enterprises
Stakeholders, 48
Standard International Trade
Classification (SITC), 38
Standards Map, 42
Strategic approaches
implementation, 64
positioning, 64
trade development design, 63–64
Strategic challenges
balancing needs, 8
client selection, 10–13
cost reduction, 14–15
export process with corresponding
firm profile, 15–16
foreign direct investment, 17
generating synergies, 13
needs vs. demand, 8–10
overview of, 7
reorienting trade promotion, 16–17
shortening internationalization
process, 16
total competitiveness response
capacity, 10
TCS. See Trade Commissioner Service
TiVA. See Trade in Value Added
TPOs. See Trade Promotion
Organizations
Trade Commissioner Service (TCS), 118
Trade competitiveness, 44
Trade development design, 63–64
Trade development strategic linkages
export-oriented clusters and
networks, 56–58
export-oriented FDI, 59
functional linkages, 55–56
implementation and efficiency-
building linkages, 49–50
national/international networks,
60–61
other types, 59–60
overview of, 47–48
performance monitoring and
assessment linkages, 54–55
planning and consensus-building
linkages, 49
150 Index

private sector linkages, 55 Trade support institutions (TSIs),

stakeholders, 48 22–24
TPO linkage association, 50–53 Trade support services, 8–10
TPO success, 53 TSIs. See Trade support institutions
Trade–industry linkage, 65–66
Trade in Value Added (TiVA) UNCTAD statement, 19
database, 35, 117 UNDP Human Development Index,
financing, 119–120 128, 129
global value chains components, UNIDO. See United Nations
119 Industrial Development
Organization
global value chains information
United Nations Industrial
links, 119
Development Organization
indicators, 117 (UNIDO), 13
initiative, 20, 34
key services, 118–119 Virtual company, 27
OECD-WTO Trade in, 116–117 Voluntary sustainability standards, 43
selling into global value chain, 119
Trade Map, 39–41 World Economic Forum (WEF)
Trade Promotion Organizations analysis, 23–24
(TPOs), 4 World Trade Organization (WTO),
linkage association, 50–53 33–35, 44–45
success, 53 WTO. See World Trade Organization