The Tradeshift
Index of Global
Trade Health
Q3 2023

The Tradeshift Index of Global Trade Health | Q3 2023

As global
trade slumps,
a new kind of
globalization
is emerging

Global trade had shown small signs of an uptick in
Q2. There were whispers of green shoots pushing
through the cracks, hinting at a possible reboundafter an extended period of declining demand.

The US has traditionally relied more heavily on
domestic demand for growth than its peers. Tradeactivity across the region slowed in Q3, but the rateof decline remains far milder than in other markets.

The third quarter of the year dealt a dose ofreality. Global transaction volumes on our
network dropped 6 points below the baseline,
marking the most substantial downturn since theinitial softening of demand 18 months ago.

India, too, has outperformed many of the world’s
richest countries over the past two years,
thanks in part to a vast domestic market. India’s
economy grew 7.8% in the three months throughJune1, the fastest pace of growth in a year.

The trade slump reflects a slew of temporary
factors, including rising interest rates, a costof-living crisis, and a snapback in business
inventories as global goods shortages ease.

Joining India on this journey are Vietnam, Malaysia,
and Mexico, each reaping the rewards of a shifting
trade axis that prioritizes resilience. Our data
reveals that trade activity levels in these nations
have surged at multiples of the global growthrate over the past year. Vietnam, in particular,
enjoys the benefits of an accelerating ‘China+ 1’ policy, with local trade activity outpacing
the global average by a factor of seven.

But it also results from longer-term changes, including
rising geopolitical tension and more protectionist
industrial policies in the West. As the world pivots fromgoods to services, traditional manufacturing giants
are bearing the brunt of the transition. Simultaneously,
a burgeoning trade finance gap strangles access tocritical working capital, exacerbating the situation.
Export-driven economies, notably Germany, findthemselves in the eye of the storm. Trade activity
within the Eurozone plummeted 9 points below
expectations during Q3, weighed down by sluggish
order books among the region’s manufacturers.
China is also proving highly susceptible to weakened
global demand. In Q3, activity levels within the region’s
supply chains slipped into contraction territory, 6
points below the expected range, something we’ve
not seen since the easing of pandemic lockdowns.
Global trade now casts a more localized shadow. In
the short term, nations with more inward-focused
economic strategies appear better shielded against
the tumultuous macroeconomic environment.

In this evolving global landscape, a new, morepolarized form of globalization is ascending. It
threatens traditional hierarchies and compels
businesses to swiftly recalibrate their strategies. To
thrive in this increasingly intricate and fragmented
trading environment, supply chain operators
must exhibit agility by forging new trading
connections with speed and seamlessness. The
challenges are formidable, but the opportunities
for those who adapt are boundless.

James Stirk
CEO (Interim),
Tradeshift
1 Bloomberg; 31.08.23; Services Sector Fuels India’s Growth toFastest in a Yearp.3

Q4 2023
2022
The Tradeshift Index of Global Trade Health | Q3

Key findings
at a glance1. Global trade activity dropped to 6 points
below the baseline, the most significant lossof quarterly momentum in eighteen months.
2. After a brief spike in Q2, US transactions fellback to 3 points below the expected range
in Q3. Demand is certainly softening but at
nowhere near the pace we see in other markets.
3. Globally, demand for manufactured
goods has weakened sharply. Activity
levels across the sector have fallen to
9 points below expected levels.
4. Export-focused markets are bearing thebrunt of the slump in global goods demand.
Transaction volumes across the Eurozone
tracked 9 points below the baseline in Q3.

5. Activity across China’s supply chains has
also begun to contract. Transaction volumes
dropped to 6 points below the expectedlevel, and the outlook is complex.
6. Vietnam is profiting from an accelerating ‘China+’1’ production policy among Western companies.
Transaction volumes have risen seven times fasterthan the global average over the past year.
7. India, Malaysia, and Mexico are also benefitingfrom supplier diversification, with activity
levels in each country rising at three times
the global average over the past year.
8. Spending on software and IT services bounced backfrom a Q2 slump. Transaction volumes across thesector grew 1 point above the expected range.

p.5

The Tradeshift Index of Global Trade Health | Q2 2023

Volatility
snapshot
Quarterly growth in world tradeactivity across the Tradeshift network
indexed against historical trends.

p.7

The Tradeshift Index of Global Trade Health | Q3 2023

Global trade slows at the fastest ratein eighteen months
Transaction volumes - quarter on quarter
Transaction
volumes- quarteron quarter
growthindexed against historical trends
growthindexedagainsthistorical
trends
20

10

0

-10

-20

-30
Q4’20

Q1’21

Q2’21

Q3’21

GlobalQ4’21 Q1’22
US

Global trade activity faced its most significant setbackin over a year and a half, as the reverberationsof rising interest rates, employed to combat
inflation, rippled through the demand for goods.
Global transaction volumes across the Tradeshift
network slipped to 6 points below the expected
range, with Europe showing particular signs of
weakness. Trade activity across the Eurozone
nosedived 9 points below expectations during thesummer months — a stark contrast to the 3-point
deficit seen in the previous quarter. Meanwhile,
the United Kingdom’s trade activity also suffereda further loss of momentum, albeit at a somewhat
milder rate of 6 points below the baseline.

Q2’22
EUR

Q3’22
UK

Q4’22

Q1’23 Q2’23 Q3’23

CNY

As the appetite for global goods dwindles, China’s
anticipated economic resurgence appears to have hit aroadblock. Trade activity in the region had been tracking
slightly above the expected range for the first half ofthe year but fell sharply in Q3, dropping 6 points below
anticipated levels.
The US remains the growth outlier. Although tradeactivity has cooled notably compared to the previous
quarter, with transaction volumes registering 3 points
below the baseline in Q3, the rate of decline remains far
gentler than in other regions. It’s also worth noting that
US trade activity had been growing at an exceptionallyhigh rate in Q2. Consequently, any reversal in momentum
that we’re seeing this quarter is coming from a muchhigher base than in other territories, where activity levels
have remained in sharp decline for more than a year.

Trade finance gap grows
as order volumes decline

Invoice and order volumes - quarter on quartercomparison, indexed against historical trends

Invoice and order volumes - quarter on quarter comparison, indexed against historical trends
Q4’20
Q1’21
Q2’21
Q3’21
Q4’21
Q1’22
Q2’22
Q3’22
Q4’22
Q1’23
Q2’23
Q3’23
-30.0

-20.0

-10.0

0.0
Invoices

10.0

20.0

30.0

OrdersFollowing an extended period of sharp decline,
the previous quarter’s Index seemed to hint at
a resurgence of consistency in ordering activity.
However, our Q3 data paints a different picture,suggesting that the current trade slump is far fromreaching its nadir.

A recent report by the Asian Development Bank (ADB)2
paints a concerning picture, indicating that the tradefinance gap in 2022 has swelled to a staggering $2.5
trillion, up from $1.7 trillion in 2020 and $1.5 trillion in
2018. As liquidity becomes scarcer, smaller businesses
deemed higher risk will bear the brunt of this tightening.

Companies, wary of an uncertain outlook, areadopting a more pessimistic stance on their near-term
prospects. In Q3, ordering activity took a substantial
hit, falling to 6 points below the expected range. Thisdecline marks the most substantial quarterly reversal
witnessed in over a year.

McKinsey estimated3 that shifting to electronic bills of
lading would unlock as much as $40 billion in additional
global trade volume, particularly in emerging markets.
The rationale behind this is that digital transactions
could render banks more amenable to financing trade forsmaller, potentially riskier counterparts.

As demand declines, invoice volumes on theTradeshift platform have continued to follow suit in
Q3. Tightening restrictions around access to working
capital, particularly in areas such as trade finance,
are also making it harder for small and medium-sizedenterprises to fulfill orders.

This same principle can be applied to other traditionallypaper-based trading documents, including invoices
and purchase orders. The synergy between digitalconnectivity and core banking infrastructure serves as a
primary driver behind our recent decision to establish a
joint venture with HSBC, positioning us at the forefront of
this transformative journey.

2 Asian Development Bank; 5/09/2023; Global Trade Finance
Gap Expands to $2.5 Trillion in 2022

3 Mckinsey; 04/10/2022; The multi-billion-dollar paper jam:Unlocking trade by digitalizing documentation

p.9

The Tradeshift Index of Global Trade Health | Q3 2023

A Global Shift in Supply Chains: Winners
Emerge Amidst Declining Demand

Transaction volume growth - year on year comparison acrossTransaction
volumegrowth benchmarked- year on year comparison
acrossselected
markets,
against therateselectedof growth globallymarkets, benchmarked against the rate of growth globally

Growth multiple compared to global average

8

6

4

2

0

MexicoVietnam

Malaysia

India

Demand for goods may be declining on a moregeneralized level, but a number of countries have seen
their stars rise courtesy of a global reconfiguration of
supply chains.

Other countries across Southeast Asia are also profitingfrom a burgeoning ‘China +1’ movement among Westerncompanies. Our data shows trade activity in Malaysia
growing at three times the global rate over the past year.

The confluence of escalating geopolitical tensions andeconomic factors is expediting the movement to reshore,nearshore, and engage in ‘friendshore’ production.
Notably, countries like Vietnam have emerged as
significant beneficiaries of manufacturers’ endeavors
to mitigate risks associated with their reliance on China
amid mounting geopolitical discord between Beijing andthe Western world.

India’s robust domestic economy has proven its resilienceamid the global trade downturn. The country’s strengths,
particularly in areas such as IT services where global
demand remains comparatively robust, have enabledtrade activity across the region to consistently outperform
other global markets.

Vietnam was the fastest-growing economy in Asia4
last year (8 percent growth) and one of only a handful
globally to achieve two consecutive years of growthsince the COVID-19 pandemic. Our own data shows
trade activity in Vietnam has been growing at aremarkable rate, seven times faster than the global
average over the past year.

On the other side of the world, Mexico is benefiting from
efforts to ‘nearshore’ production capacity, particularly
among American companies.
In this era of supply chain transformation, these countries
and others like them are carving out their niches,
positioning themselves as beacons of economic resilienceand adaptability.

4 Reuters; 11/10/2022; Vietnam economy seen growing 8%
in 2022, beating official target

p.11

Q3
momentumdeep-dive
Quarter-on-quarter world tradeperformance across key territories

p.13

The Tradeshift Index of Global Trade Health | Q3 2023

US: Is the US consumer shopping
spree coming to a close?
US trade activity - quarter on quarter index scores

97

97

Below expected range

95

Within expected range

Above expected range

Swing vs previous quarter:-6-6

After experiencing a resurgence in Q2, activity within
US supply chains encountered a slight reality check in
the following quarter, as transaction volumes slippedback into contraction territory, settling 3 points below
the baseline.
The United States has long been fortified by a robust
domestic market and free-spending consumers, serving
as a protective shield against the turbulence witnessedin other export-dependent economies. However, there
are growing indications that the stockpile of savings
accumulated by US consumers during the pandemic
is dwindling.
Data from the National Retail Federation5 paints a vivid
picture of this shift, showing a significant slowdown in
year-on-year spending growth since the start of theyear. Consumer confidence has also slid to a fourthmonth low6 in September.
5 National Retail Federation; 10/08/2023; NRF Economist Says
Growth in Consumer Spending is Slowing
6 Reuters; 26/09/23; US consumer confidence dives to four-month low-3

In response, businesses are recalibrating their ordering
strategies, adopting a more cautious approach.
US order volumes within the Tradeshift network
experienced a notable dip, falling 5 points below
the expected range during Q3—marking the mostsubstantial quarterly growth decline witnessed thus
far this year.
In hindsight, the unusually high level of activity
observed within US supply chains during Q2 appears
to have been more of an aberration than the inceptionof a sustained upward trend.
One plausible explanation for the brief spike in invoices
during Q2 could be residual order backlogs making
their way through the supply chain. The landscape in
Q3 aligns far more with the overarching pattern seenin the US over the past year. It reflects an economy
that continues to outperform its global counterparts
but is now poised for a landing. The nature of thatlanding, whether gentle or turbulent, will become
clearer in the forthcoming quarter.

Eurozone:
Hard times ahead
Eurozone trade activity - quarter on quarter index scores

91

90

Below expected range

Within expected range

92

Above expected range

Swing vs previous quarter:-6-7

Once hailed as the Eurozone’s trump card, global
trade currently stands as its Achilles heel, as adeteriorating macroeconomic landscape leaves
order books across the bloc scarily vacant.
In Q3, quarterly transaction volumes plunged
at a pace not seen in two years, signaling a
concerning trend. Consecutive quarters of loworders meant invoice volumes suffered an alarming
reversal. The forecast does not appear any better.
Ordering activity across the region dropped to
8 points below the expected level in Q3.
Economists at the European Central Bank (ECB)
are increasingly concerned about the deteriorating
outlook across the Eurozone. They attribute
this downturn to tighter financing conditions,a pervasive lack of business and consumer
confidence, and feeble foreign demand, all set
against the backdrop of a strengthening euro.
7

7 European Central Bank; 14/09/2023: Eurozone Economic Forecast-4

The persistent specter of high inflation further
dampens domestic consumers’ willingness to spend.
At the epicenter of this economic turbulence stands
Germany, grappling with the brunt of declining demandin global markets. The slowdown in China, one of thelargest markets for German exports, is weighing heavily
on the nation’s economic prospects. According to theInternational Monetary Fund, Germany is the sole
major economy expected to contract8 this year, with aprojected decline of 0.3%.
While the policy of raising interest rates may eventually
yield the desired results, current evidence suggests that
this remedy is a hard pill to swallow. The prospect of a
hard landing looms ever larger on the horizon.

8 Euronews; 30/07/2023; Germany expected to be only major
economy not to grow this year

p.15

The Tradeshift Index of Global Trade Health | Q3 2023

UK: Small mercies amid
ongoing stagnation
UK trade activity - quarter on quarter index scores

94

94

Below expected range

96

Within expected range

Above expected range

Swing vs previous quarter:-1-1

The narrative of trade growth within the UK’s supply
chains has been one of stagnation over the past two
years. This trend persisted into Q3, with trade activity
dipping to 6 points below the anticipated level.
While order volumes had exhibited a degree of resilience
until recently, there are now unmistakable signs ofa decline. The trajectory of invoice traffic appears to
be following suit, and it seems increasingly likely thatfurther deterioration awaits in the coming quarter.
S&P data shows factory output slowed sharply
in September9, but the UK’s relatively limited
manufacturing footprint meant the impact of thisdownturn wasn’t as apparent as in other markets.

9 S&P / CIPS UK; 02/10/2023; UK Manufacturing PMI-3
A strong services sector, where demand remains
relatively robust, has left the UK in a slightly
better position than its European neighbors.
Though growth is undeniably under significant
pressure, the decline in trade activity largely
mirrors the global pattern. A survey conductedby Lloyds10 shed light on UK business confidence,
which surged to an 18-month high in August.
This optimism is closely tied to the anticipationof a market recovery and the prospect of a morestable inflationary environment, offering a glimmerof hope amid the prevailing uncertainty.

10 Yahoo News; 31/08/2023; UK business confidence at 18-monthhigh despite inflation and cost of living crisis

Manufacturing slump spreads
to logistics providers
Quarter-on-quarter transaction volumes - Index scores by sector
T&L

Manufacturing

Retail

Tech

Q2’22

96

97

97

101

Q3’22

92

89

91

98

Q4’22

89

93

97

101

Q1’23

91

99

88

99

Q2’23

98

97

93

87

Q3’23

94

91

94

101

significantly
below expectation

below
expectation

withinexpected range

The demand for freight capacity dropped back into
the red zone in Q3. Shipping giant Maersk is warningof a steeper decline in global demand11 for shipping
containers by sea this year. The industry heavyweight
does not see a recovery happening until at least 2024.
The ailing manufacturing sector plays an undeniably
pivotal role in this slump. What seemed initially a
relatively stable year for the sector has taken a turn for
the worse. Our data shows growth falling to a yearlylow, 9 points below the expected level.
Trade activity across the retail sector also remained
below the expected range in Q3. High inflation meansthat real-term activity levels across the sector are likely
much lower than what we’re seeing. Higher prices arealso beginning to impact US consumer spending as a
post-Covid spending spree nears its end.
11 Reuters; 04/08/2023; Maersk warns of slower demand forcontainer shipping
12 Washington Post; 27/09/2023; Retailers May Want to Hold Off
on Christmas Cheer

above
expectation

significantly
above expectation

Retailers could also face a challenging Q4. Some 30%of people surveyed by PwC in mid-September12 said
they intended to spend less this Christmas than inprevious years.
Technology is one of the few sectors that appears to
be on the up. Our latest data shows activity across thesector climbed back above the expected range in Q3.
According to Gartner13, CIOs are shifting spending totechnologies that enable automation and efficiency todrive growth at scale with fewer employees. Analysts
at the firm predict worldwide IT spending will total $4.7
trillion in 2023, an increase of 4.3% from 2022.

13 Gartner; 19/07/2023; Gartner Forecasts Worldwide IT Spending
to Grow 4.3% in 2023

p.17

The Tradeshift Index of Global Trade Health | Q3 2023

Perspectives
on the roadahead

Regulatory compliance:
The new rules for
Resilient supply chains
Following the launch of Tradeshift’s Q3 Index of Trade Health,
we invited Karen Lobdell, Senior Product Manager for Thomson
Reuters, ONESOURCE Global Trade, to give her perspectiveon the broad reconfiguration of supply chains we’re seeingin our data. Karen delves into how the renewed emphasis
on supply chain resilience in the post-pandemic landscape
has profoundly reshaped how senior leaders perceive
regulatory compliance within corporate strategy. She goeson to explain how a new generation of digitally empowered
trade compliance professionals now has the opportunity
to shape a more sustainable future for global trade.

Hi Karen, thank you so much foragreeing to talk to us. Tell us a little bit
more about yourself.
I work on the product side for ONESOURCE
Global Trade, our global trade management
solutions, which includes everything
our customers use from a technology
standpoint to manage their worldwide tradecompliance and duty-savings programs
and automate trade operations for crossborder goods, anywhere in the world.
I have over 25 years of experience
working in global trade policy, logistics, risk
management, and consulting. During thattime, I’ve covered the whole spectrum of
global trade, from the logistics side to thesales side, business development, technology,
trade policy, regulatory and legislative.
Our Q3 Trade Index points to a significant
reconfiguration across global supply chains.
Why do you think that is happening?
Prior to COVID, a lot of supply chains were
either single-sourced or heavily sourced in one
region or with one country. When that equation
broke down, things went awry quickly. Pivoting
from one supplier to another isn’t something
you can do overnight. Even the lucky ones
who did manage to find a new supplier often
had to take a significant hit on their costs.

More recently, inflation, rising costs,
and shortages are playing a keyrole in supply chain shifts.
The lack of a plan B and even a plan C forced
businesses to start asking some pretty hard
‘what if…’ questions. If I single-source a criticalcomponent for my production line, what
happens if something goes wrong with that
supplier or they go out of business? What
if I can’t import from that region anymore
because of a new regulatory requirement ora risk? How quickly can I pivot? Because you
can’t just pick up and move a plant overnight.
Is it fair to say that the pandemic
triggered a change in attitudes towardrisk and compliance?
When you talk to people who work in areas
such as global trade management, logistics,
or compliance, they’ll say that, before thepandemic, they were viewed mainly as a
cost-center to the business. The shift in
attitudes we’re now seeing is remarkable.
The C-Suite is now far more in tune with
the impact a disruption in their supply
chain can have on their ability to operate.
The list of potential risks is varied, and it’s
expanding across multiple vectors, fromnatural disasters and weather-related issues
to geopolitical tension and new regulations
in areas such as ESG. We’re also seeing a
massive rise in the risk businesses face due tocybersecurity breaches.
The same people who could never get anaudience at a senior level are now being
called into the boardroom and asked to
explain why a certain component now has a
25% tariff on it and what they’re going to do
to make the problem go away. They’re now
getting the recognition they deserve. They’realso getting the executive support andbudgets they need to bring about genuine
and long-lasting change.

p.19

What additional complexities mightbusinesses encounter as they take a moreproactive approach to risk mitigation andresilience across their supplier base?
There’s a lot more to consider. I spent the earlypart of my career in the logistics space, where
decisions were traditionally based on two
primary factors: cost and speed. Most people
were looking at the cost of purchasing an itemfrom a supplier, moving it from A to B, andthe speed at which that item could reach its
destination. If you could get really good quality
along with that, then that was a bonus.
What you see now is a much broader scopeof what is included in landed cost. What is
my duty rate for importing that good? Do I
have the ability to take advantage of a free
trade agreement to lower the cost? Theremight be government agency fees to consider
if it’s something that’s controlled by the
Food and Drug Administration, for example.
Geopolitical tension means we’re also seeing
a rise in governments placing retaliatory
fees on items from certain countries.
ESG has also become a major factor in thedecision-making process. A good example
right now is the intense focus on the social
aspect of ESG, such as the allegations offorced labor among the Uyghur population in
China. Any goods coming out of that region
have the presumption that they’re madewith forced labor and, in many countries,
prohibited from import. You also have thepotential reputational damage from sourcing
goods in regions that don’t adhere to highethical and environmental standards.
Due diligence is absolutely crucial. From both acost and a risk perspective, businesses need to
do their homework, and they need to be able
to do so in the most efficient way possible.
What you’ve described sounds complex
and potentially very time-consuming.
What steps can businesses take toovercome these challenges?

Supply chains are still heavily reliant on paper
trails. That’s a barrier to building transparency
and automating the processes that feed into
effective decision-making. On a positive note,
we’re seeing a clear acceleration in the movetowards digital.
There are a lot of great tools out there that allow
companies to analyze large amounts of theirown data, as well as shared data points thatare publicly available to give them the insights
they need to make informed decisions.
Solutions like the ONESOURCE Trade Lane
Analyzer, part of the ONESOURCE Global Tradesuite from Thomson Reuters allow businesses
to conduct detailed analysis and scenario
planning on sourcing from multiple locations.
For businesses evaluating different sourcing
options, it will give you a very granular viewof all the different considerations you need tofactor in, from duty rates to preferential trade
agreements, controls and regulations, risk offorced labor, and even elements such as taxes
and fees. It’s thorough and digestible at alevel that would be almost impossible for any
individual to achieve on their own manually.
Businesses can also take advantage of
automation like ONESOURCE Global Trade
Supply Chain Compliance to conduct further
due diligence assessments on their suppliers
based on company values – focusing on key
areas of risk such as forced labor, cybersecurity,and environmental practices.
ESG is high on the agenda for mostbusinesses. What are some of the key
challenges from a compliance perspective?
Part of the challenge with ESG right now stems
from the fact that the regulatory landscape isstill evolving. Companies are trying to get theirarms around these environmental regulations, butthere’s no clear global standard yet regarding how
they report. CBAM (Carbon Border Adjustment
Mechanism) in Europe is a good example. It’s up
to the importer to report the data, but it’s up to
the suppliers to provide that data. When suppliers
outside Europe start getting requests to provide
carbon emissions information, how many will beready to deliver that information?

What complicates things even further is thequestion of who owns the problem within
a company. Whose responsibility is it tocome up with a policy procedure and way tomanage the reporting of these environmental
requirements? Is it in a sustainability group,a trade compliance group, a legal group?
With so much uncertainty around ESG
reporting, what practical steps canbusinesses take right now to stay agile?
Identify owners within your organization.
We’re seeing individuals in global trade
management and global trade compliancetaking a front-foot stance in this area. Given
the breadth of ESG as a risk category, one
thing that’s clear to me is that this will requirea team approach, bringing stakeholders fromlegal, HR, finance, IT, and beyond. That breadth
requires C-Suite oversight. We’re seeing arise in the number of Chief Sustainability roles
created to deal specifically with these issues.
Digitize your relationships with suppliers.
There may be a need for more consistency
in terms of how and what businesses shouldreport, but the basic principle of having
reliable and transparent data to call on isa constant. If your systems and processes
don’t already allow that, you need to makethat change now. Think beyond your own
four walls and look at how you connect with
suppliers through the tiers of your supply
chain. Is that connection 100% digital?
Stay up to date. There’s plenty of technology
out there that allows you to monitor regulatorychanges coming within the global trade
management and compliance arena, suchas ONESOURCE Global Trade. Additionally,Thomson Reuters has products that deal
with tax and accounting software to help
businesses with the tax side. We also havetools for monitoring regulatory issues froma legal perspective. Trade and industry
associations are also a great source of
information on what’s around the corner.
Those communities also provide an excellent
way to benchmark with other people withinyour industry to get best practices.

What role do you see technologies suchas generative AI starting to play from a
regulatory and compliance perspective?
We’re very focused on how we can use AI
to make our products more efficient for ourusers. And we do this by helping highly trained
people make good decisions based on fast andaccurate data.
Say you’re working for a business that ships
globally—every product you import and export
must be appropriately classified under the
harmonized Tariff schedule. Classification isusually a challenging and lengthy process
where someone must have good subject matter
expertise. AI won’t necessarily give you a 100%
final answer on classification codes (at least
not yet), but what it will do is take the data you
have and narrow the focus down to a handful oftrustworthy options.
If we’re talking about regulation andcompliance, then the development and usageof AI is a topic in itself. This is a fast-evolving
area. We need to be certain that the data that
any AI provides is genuinely accurate and thatit’s secure. We must also consider the generalpublic’s concerns over how AI is used.
What role do you see technologies suchas generative AI starting to play from a
regulatory and compliance perspective?
Definitely. There’s been a massive shift inmindset from seeing compliance as a necessary
expense to viewing it as a source of costsavings. Add to that the reputational risk thatbusinesses face from a lack of due diligence,and it’s no exaggeration to say that complianceis vital to running a viable business.
Compliance is now firmly on the C-Suite
agenda. The risks are too abundant, and thecost of failure is too great to ignore.

p.21

The Tradeshift Index of Global Trade Health | Q3 2023

FINAL THOUGHTSThe Great Supply Chain
Reset: Navigatinga New Era
James Stirk
CEO (interim),
Tradeshift
From financial crises to the impact of deglobalization, from climate change to the seismic
shockwaves of COVID-19, our world has enduredan unprecedented series of once-in-a-generation
shocks. However, we can no longer attribute thisturbulence to mere bad luck.
The volatility that has characterized the past two
years transcends cyclical fluctuations; it signifies
a systemic shift with profound and enduringconsequences for the business landscape andglobal trade.
Many of today’s supply chains have grownexcessively lengthy, fragile, and shrouded in
opacity, rendering them ill-equipped to adapt to anincreasingly turbulent world. The obscurity inherent
in these legacy models continues to generate
friction that impedes the efforts of supply chain
managers to enhance responsiveness, strike abalance between supply and demand, and monitor
Environmental, Social, and Governance (ESG)
performance—especially in the face of heightened
regulatory scrutiny.

Tomorrow’s supply chains will evolve into more
intricate, interconnected networks involving a blendof onshore, friendshore, and farshore stakeholders.
This transformation, bolstered by investments indigitalization, will necessitate the cultivation of new
relationships across a multitude of jurisdictions, eachgoverned by its unique set of regulations and policies.
Rarely do the words ‘compliance’ and ‘sexy’ findthemselves in the same sentence. However, in thecontext of the profound supply chain reset now
unfolding, we may need to make an exception.
The success of this new ‘networked’ supply chain
model will hinge heavily upon strict adherence toan intricate and evolving set of rules, spanningfrom tax compliance to carbon reporting.
Navigating this intricate web of regulations canbe exceptionally time-consuming, underscoring
the urgency for heightened digitalization. Beyond
the inefficiencies stemming from a persistentreliance on manual and paper-based compliance
processes, non-compliance poses tangible
risks for businesses, including penalties, delays,
strained supplier relationships, and reputationalharm for companies found in breach.
Data, visibility, and control—byproducts of a digitizedcompliance environment—will play an increasingly
pivotal role in enabling businesses to maintainagility in an increasingly complex macroeconomic
landscape. Armed with the right automation andreal-time decision support capabilities, digitalization
presents a gateway to potentially substantial
cost savings and efficiencies spanning the entire
lifecycle, from sourcing through to payment.

p.23

The Tradeshift Index of Global Trade Health | Q3 2023

About
Tradeshift’sIndex ofGlobal Trade
HealthPurpose

Methodology

Many of the world’s largest buyers and their
suppliers use Tradeshift’s trade technology
network to exchange digitized purchasing andinvoicing information. The data these transactions
yield provides us with a unique awarenessof trading activity between businesses.

The Index of Global Trade Health comparesbusiness-to-business transaction volumes (orders
processed from buyers and invoices processedfrom suppliers) submitted via the Tradeshiftplatform against a ‘baseline’ we have created byanalyzing medium-term seasonal trends in thetransaction data that flows across our platform.

Tradeshift’s Index of Global Trade Health analyzes
anonymized world trade data flowing across
our platform to reveal a timely perspective of
how external events are impacting businessto-business commerce around the world.
We acknowledge that there are limits to how
accurately our view of what is happening on our
network can reflect how complex global supply
chains are reacting to a variety of external factors.
What our world trade data does provide is a
useful snapshot that provides clues as to whatmight be happening to the global economy.
The patterns we see in our data become morevaluable as we combine them with other thirdparty data and expert insight, something which
you will see us draw on throughout this report.

A reading that meets the baseline indicates growthin line with expectations against historical trends.
Readings greater than and below the baseline
indicate above-trend and below-trend growth.
Looking at the data in this way helps give asense of how volatile activity is across different
sectors and geographies. For example, a sudden
rise in orders might trigger orders to jump at
a rate that exceeds what we would consider
normal. By contrast, waning demand might
trigger volatility in the opposite direction.
We consistently strive to improve and evolve
the accuracy of our analysis. As a result, it
is possible that from time to time, you may
see small revisions to historical numbers
reported in previous versions of the Index.

p.25

About Tradeshift
Tradeshift is the business commerce platform that redefines the way
B2B buyers and suppliers connect, transact and grow. We’re a leader ine-invoicing and AP automation, offering tools for compliant e-invoicing in
50+ countries, including China. We’re an innovator in B2B marketplaces
and embedded fintech services that bring value, opportunity andgrowth to any business that joins the network. Tradeshift’s vision is toconnect every company in the world, creating economic opportunity
for all. Today, the Tradeshift platform is home to a rapidly growing
community of buyers and sellers operating in over 190 countries.
Find out more at: www.Tradeshift.com©2023 Tradeshift Holdings Inc. or a Tradeshift affiliate company. All rights reserved.
The Tradeshift Global Health of Trade Index and this report are copyrighted
works. This document is protected by U.S. and international copyright andintellectual property laws. It may be linked to and referenced with thefollowing attribution: “Tradeshift © 2023 Tradeshift Holdings Inc.”
Tradeshift is a registered trademark or trademark of Tradeshift Holdings Inc.
in the United States and/or other jurisdictions. All other marks and names
mentioned in this article may be trademarks of their respective companies.
This report is intended for information purposes only, is based on a segment of industry
data, and may not prove to be an accurate representation of total trade volumes.
Tradeshift makes no warranty or representation as to the accuracy of this information.