Upturn in Global Trade Projected by HSBC
Despite downside risks to the forecast, the next few years will carry the global economy into the next wave of globalization, spurred by digital technology that reduces international trade barriers, improved communications, and levels the playing field for entrepreneurs and startups.
HSBC’s outlook is included in a recently-released white paper, titled Trade Winds: Shaping the Future of International Business, which reviews the history of the last 150 years of trade while projecting the next 35 years.
“Our projections show that world trade is expected to quadruple in value to reach $68.5 trillion of goods,” says the paper.
That growth will initiate what HSBC sees as a third wave of globalization to come about.
Among the factors driving the third wave, plummeting transportation and logistics costs are first and foremost. Improved global connectivity and the lower cost of transportation and logistics “could lead to working with new partners in new countries,” the paper noted.
The continued adoption of sensors and radio frequency identification technology “will ultimately lead to lower costs, safer handling of goods and significant reduction in spoilage and waste.”
China’s One Belt, One Road project and its Asia Infrastructure Investment Bond program could lower transportation costs in Asia through increased infrastructure spending.
Liberalization of trade policies allow new goods and services to flow to new markets but also lead to
“greater economic development and better quality of life.” “Executives should push for more liberal trade policies to drive continued business and macroeconomic growth,” according to HSBC.
Mass production will shift to mass customization in the third wave of globalization. “Companies must consider how to develop products and services that are hyper-localized,” says HSBC. “Some companies have already embraced the concept of reverse innovation, where products and services are developed first in the emerging world and then brought to the developed economies. Executives must reconsider
how and where items are being produced, and an optimal global value chain that serves the specific needs of regional customers.”
Traditional ways of conducting business will evolve over the next several decades, according to the paper, as companies adopt more flexible and agile operating models. “In the future, large multinational conglomerates will increasingly compete with smaller, more nimble networks of micro-multinationals that create their own specialized value chains.”
Companies, concluded the paper, should consider how to strategically position themselves to take advantage of these new business platforms.