Getting rid of barriers in supply chain could increase global GDP, employment opportunities

As the world emerges from the smoldering mess that was the global recession of late 2008, policymakers and economic analysts in the international community are looking for ways to repair the fiscal foundation and pave the way for future growth.

Such a discussion took place recently last month when world economic leaders and investors gathered in the scenic ski resort town of Davos, Switzerland, to ponder the fiscal future of the world. During the summit, the World Economic Fund (WEF) debuted a new report that suggested reducing the barriers to supply chain processes has the potential to significantly increase the global gross domestic product (GDP) and provide opportunities new for jobs, which businesses and supply chain recruiters can work together to fill.

Eliminating tariffs not the best option
In “Enabling Trade: Valuing Growth Opportunities,” the WEF said if all countries decreased the amount of supply chain barriers enough that they’d be halfway toward achieving global best practices, the world’s GDP could increase by 4.7 percent and world trade would tick up by 14.5 percent.

The report found improvements to border administration, transport, telecommunications, infrastructure and services would go a long way in advancing supply chains across the world. The study also pinpointed several examples where reductions in supply chain barriers can occur.

The WEF gave the examples of hidden costs of manufacturing in Mexico, vague technology regulations in emerging economies like Brazil and India and relaxing cabotage – the transportation of goods in one country by way of a vehicle or vessel registered in another country – restriction concerning the United States and China.

Comparably, just opting to eliminate international tariffs would only marginally increase the GDP by 0.7 percent and trade by 10.1 percent.

Increase in supply chain jobs a noteworthy byproduct of larger action
In the upper range scenario in which supply chain barrier reductions would raise global GDP 4.7 percent, total employment across the global could increase by an astounding 110 million jobs.

The report noted that such a situation would markedly help countries struggling with high unemployment rates – like the United States – create additional jobs and decrease short-term unemployment, kicking business and supply chain recruiter talent searches into high gear.

“Lowering these barriers will reduce costs for businesses, and help generate more jobs and economic opportunities for people,” said Bernard Hoekman, director of international trade for the World Bank.