The Future of International Trade: Is Globalization Dead?
In this exclusive Q&A, Global Trade Mag hears from Ted Murphy, partner with global law firm Sidley Austin, LLP, on how the international trade and globalization landscapes have changed and what companies can predict as we approach 2021.
1. What are some of the most significant changes in the global trade landscape?
The most significant change over the past few years has been the decline of globalization. Up until recently, much of the world was pursuing policies aimed at increasing globalization. This meant that year-after-year it was getting easier and cheaper to move goods, people and data across international borders. While globalization is not dead, the last few years has seen a rise of economic nationalism in places where it had not been prevalent previously — like the United States and the UK. Combined with the economic nationalism that has always been present in places like China, it means that globalization has been in retreat for the past several years. We see that trend continuing, at least for the short-to-medium term (i.e., walls are more likely to go up, then come down, in the short-to-medium term).
2. How can global trade players navigate the new landscape?
The first thing global trade players need to do is recognize that the paradigm has shifted. Hoping that the past comes back is not productive. Instead, you need to embrace the flux and move forward. No one knows what the future will look like. That said, we know it won’t look like it did 4 years ago. As a result, global trade players need to embrace the uncertainty (it is a reality), throw out the old plans and create new ones – recognizing that they may need to be amended on the fly.
3. What role will technology play in international trade relationships?
This is one of the fundamental trade questions that will get answered over the next couple of years. Will we have one interconnected world, or separate spheres each with its own technology?
4. What are some tips for compliance efforts moving forward?
Trade facilitation/trade compliance will continue to have increasingly important roles within companies going forward. The last few years have shown that trade really matters to most companies and that those that ignore things like trade risk, responsible sourcing, technology transfers and other trade-related issues do so at their peril. For example, as companies realign their supply chains, it is important to understand the trade risk profile of the alternative source – e.g., is the new source country likely to find itself on the wrong end of a U.S. Section 301 investigation for currency undervaluation; is forced labor enforcement a risk; the trade sanction risks; etc. Just looking for the lowest cost supplier is not the answer.
5. How can trade players prepare now for the future?
In the past, it was relatively smooth sailing from a trade perspective as globalization increased. Expect the future to be bumpier. I am not saying that is necessarily a bad thing – uncertainty often brings opportunity. In order to be best able to take advantage of that type of opportunity, one needs to be well-informed and a bit bold.
This article has been prepared for informational purposes only and does not constitute legal advice. This information is not intended to create, and the receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers. The content therein does not reflect the views of the firm.
Ted Murphy is a partner with global law firm Sidley Austin, LLP where he counsels companies on international trade and customs law and serves on the firm’s COVID-19 Task Force. He advises clients on international trade, trade policy and customs compliance issues, including actions brought under Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974, as well as the administration of international agreements. Mr. Murphy also represents clients before the U.S. Court of International Trade, the U.S. Court of Appeals for the Federal Circuit, U.S. Customs and Border Protection, the Office of the United States Trade Representative and the U.S. International Trade Commission. Prior to joining Sidley, he was appointed by the Secretary of Commerce and the United States Trade Representative to serve on the Industry Trade Advisory Committee on Customs Matters and Trade Facilitation (ITAC 14) for the 2010–2014 and 2014–2018 terms.
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