World trade is increasingly relying on new technologies to meet demand and Asia is likely to take centre stage in the future of global trade.
Analysts predict Southeast Asia will be the world’s busiest trade area by trade volume.
The International Monetary Fund (IMF) reports that billions of dollars are already been invested in warehouses and distribution centers across with ports investing in automated vehicles and cranes to increase efficiency and cut costs in the long term.
Trade in the modern world is global. Flow of goods, services, capital, people and data connects us all. Value chains of even the smallest of daily consumer products are global. Raw, a raw material from Africa is developed in Asia and consumed in the Americas -, that is the modern world and countries that wish to be competitive must adopt.
However, this view of a ‘world village’ is changing, in the wake of the pandemic, war between global suppliers like Russia and Ukraine, tension between the United States and China and the unfolding friend-shoring reality, all point to a deglobalizing world.
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While this subtle reality unfolds, the overarching long term standing reality is of an interconnected world. The flow of trade and people between countries remains strong and resilience is even resiliently on the rise.
The fact remains that no country, no region is self-sufficient. , Interconnection remains the way of the world, a truth that leaves all regions susceptible to the risks of dependency, like Africa’s ongoing food crisis brought about by the Russia-Ukraine conflict.
Global integration, interdependency, dependency risks and the strong arm of multinational corporations is the discourse of modern economists and the query of the future. It must also be noted that, when we speak of trade, we are no longer limited to the exchange of only goods and services but the exchange of data and knowledge as well.
“Growth in global flows is now being driven by intangibles, services, and talent,” contends an MGI recent report.
According to the report, the new flow of services, international students, and intellectual property actually increased almost twice as much as the flow of goods between 2010 and 2019. This flow comprises of “‘knowledge-intensive services like professional services, government services, IT services, and telecommunications,”’ the report states.holds; in fact, Oover the last decade, ‘data flows grew nearly 50 percent annually.’
Unlike the widespread misconception, even in the face of disruption caused by the COVID-19 pandemic, global flow of services and data continued to grow and even increased right in the middle of the pandemic through 2020 and 2021.
“Overall, flows of intangibles, trade, and capital increased, and their relative resilience was essential to navigating the turmoil of the pandemic,” MGI reports. In that period, flow of data reached all-time high and in part, because of the pandemic itself. On the hand, it is this increased exchange that enabled remote working that was so characteristic of the pandemic period.
It is this continued growth of service, data and intellectual property that largely allowed for the sustained operation of businesses during the pandemic; a period when movement of people and goods was largely restricted.
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It should also be noted that, during the pandemic, especially in Asia, trade of manufactured goods not only increased but actually reached record heights in 2021.
This fact is easily explained by the simple reason that demand for goods grew to all time high levels owing to consumer panicking in the face of lock downs as individuals and whole companies looked to stock up in fear of prolonged restriction of movement.
Even in the wake of the pandemic, throughout 2022, almost every region in the world is reported to have imported 25 percent more of raw material and/or manufactured goods, more than they would usually have in the pre-pandemic times.
The exchange in goods, was global. On one hand, you hand major finished goods exporters from Asia leading the world in export of manufactured goods particularly electronics. On the other hand, the rest of the world, including Africa increase the also o their exports increase but this time, the export of raw material and energy resources.
When it comes to energy resources, you had power players like the Middle East and Russia supplying to China and India. Similarly, since China imports more than 25 percent of its mineral needs, you had countries like Australia, Brazil and South Africa increase their mineral exports to meet China’s manufacturing demand.
Then you had Europe, which prior to 2022 and the Russia-Ukraine war, largely depended on energy from Russia, seeking to diversify their sources of natural gas bringing Africa into play and the larger Asia pacific region.
Similarly, you have resource rich regions the likes of Central Asia, Latin America , North and Sub-Saharan Africa increasing export of the needed raw materials while increasing their net importer of manufactured goods and services.
According to the report, resource rich regions are also often net importers of a different kind of basic need. For example, North Africa; “…while the region is one of the largest net exporters of energy resources, but it depends on other regions for more than 60 percent of the key crops it needs for food.”
You also have regions like Latin America, the likes of Brazil and Argentina, two of the world’s largest grain exporters, yet they all strongly rely on fertilizers imported from all around the world. For example, both Brazil and Argentina source more than 50 percent of their potash imports from Russia and Belarus, which means they have been gravely affected by the war and have been forced to diversify their sources.
You also have big players like North America which is a net importer of manufactured goods as well as minerals getting about 15 percent of its electronics needs from Asia Pacific. The region was also largely affected by the pandemic but unlike popular notion, it did not reduce its imports but rather increased it in fear of future lock down and travel restrictions.
Overall speaking, Recent global events demonstrate that the world trade patterns are changing but the world is not deglobalizing rather it is increasing its integration, although granted the patterns of this integration are changing.
