What are the futures for world trade?

What are the futures for world trade?

“Globalisation is dead.” It is argued that the rise of populism, and its two most obvious successes – the Trump administration and Brexit – have proved it. “America First”, claimed Mr Trump in his Inaugural Address. The British government focus on sovereignty above all during the Brexit negotiations could have had “UK First” written as its headline. President Macron has called for a “European sovereignty”. The Biden administration seems to be pursuing the main core of the Trump “decoupling” from China. “Onshoring” is rising as jobs are brought back to the countries that only ten years ago, had happily farmed them out overseas. The goal of a worldwide marketplace is collapsing in the face of protectionism, a fear of China, a rise of bilateral agreements over international ones and a worldwide growth in nationalist sentiment.

So many analysts would have you believe. It is possible they are wrong.

The first reason is that there is not, and never has been, the sort of globalisation implied by the term “globalisation”. The post-World War II trade environment exemplified by such bodies as the WTO, and such concepts as the rule of law, developed a common basis for trade between nations. But the world never became a common marketplace. There were always barriers – of distance, of cost, of availability of raw materials, even before one looks at the artificial barriers of tariffs, taxation and quotas. It is easier to sell and buy, to move people and products, yes – but this varies from place to place, from product to product. “Globalisation” is a grand term for “more trade”, but fails to live up to what is claims to be.

The second reason is more practical. Business, of any kind, has dependencies. Consumers want cheap products. Businesses need to attend to the bottom line. Resources – wood, steel, iron, diamonds, rare earths, farmland, plentiful productive agricultural land – only exist in certain places in the world. Those resources need to be moved from where they are to where they need to be simply for economies worldwide to function. “Deglobalising” is impossible, unless nations are prepared to do without. Pressingly, in an era of digitisation, rare earths are overwhelmingly in China, Vietnam, Brazil and Russia. Without them, not only are there no computers, no electric cars, no wind turbines, and also no meeting of the 1.5% climate change target.

Where globalisation is useful is as a rallying cry for those who want to restrict trade – it sounds like a bad thing, taking away jobs, work and livelihoods.

What does this mean for the future? When we look forwards, we tend to use one or other model to organise our thinking: the two most common being PESTLE and STEEPLE. Both are derivations of Francis Aguilar’s 1967 PEST methodology (in “Scanning the Business Environment”, now out of print) and cover Political, Economic, Social, Technological, Legal/Regulatory and Environmental factors (STEEPLE includes Ethical, and many of the headings can be reworded to meet specific needs). Trade fits into, and is influenced by, all of the categories, as well as – it seems to me, one which is not included, which one could describe as “Compulsion”. Some things about trade are simply compulsory – if you want to have something, whether it be cheap clothes or rare earths, spices or vaccines, one has to trade, and that almost always internationally.

So if trade is compulsory (as an aside, it is also a source of employment, tax revenue, increasing the quality of life of oneself and one’s country, as well as a powerful tool of international diplomacy) then what should futurists make of the view that trade is changing, and will change, as a result of the retreat of globalisation?

Three factors have affected international trade most substantially in the last fifteen years. The financial crash of 2008 damaged the world economy so badly it has still not recovered, and led almost directly to the rise of populism. China’s attempts to conquer more of the world’s physical and economic space have led to a backlash against it, and its trade. And the collapse of supply chains during the pandemic has been a stark warning that international trade is fragile, leading to a wholesale re-evaluation of its benefits. All of these factors will continue to play out. Populism is now part of the body politic, leading to its co-option by mainstream political parties (by, for instance, the concept of “European sovereignty”, or the acceptance by the Labour Party(!) in the UK of the Brexit vote and its consequences). China, Asia and India will be the focal point of world growth and development in the twenty-first century, through simple population size, let alone anything else. And the breaking of supply chains, the failure of just-in-time manufacturing, and the fight over access to vaccines, will prove to states and companies that having suppliers close, and developing local supply networks, makes good business and good politics.

Should populism return (and it will – that genie is once again out of the bottle) then the support for international structures such as the WTO will decrease as nations seek individual advantage over the collective. Trump understood that withdrawing from these organisations has political power, but defunding them kills them, and it would not take much, despite its efforts to regain relevance, to kill the WTO.

Further, we have said much in our recent work about the rise of a “multipolar world”. Such a world sees the rise of regional power and trading blocks, replacing the globalised order with a regional one, replacing the US hegemony with a more distributed, and confrontational, power structure of blocs.

Globalisation is not dead. It should remain as a potential future, simply because the world is small, and the resources we all need are not equally distributed around it. But there are other futures alongside it – of interregional trade assuming ever more importance, of jobs, skills, and employment being reshored; of trade regaining its nineteenth century use as a tool of diplomacy and quasi-warfare (imagine if China refuses to export rare earth metals, accruing all the benefits of digitisation and clean energy to itself whilst depriving the west of technological leadership).

We cannot stop trading with each other. We cannot – yet – leave the planet. Trade will remain global. But it may look very different in many of our possible futures.

Written by Jonathan Blanchard Smith, SAMI Fellow and Director

The views expressed are those of the author(s) and not necessarily of SAMI Consulting.

Trusted strategic foresight techniques help you make better decisions today and ensure your future success. Since its founding in 1989 by Shell and St Andrews University, SAMI Consulting has delivered scenario planning projects nationally and internationally and provided the link between futures research and strategy enabling organisations to take “robust decisions in uncertain times”

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