The escalation of COVID-19 over the past weeks has had a profound impact upon every element of society. The word which has been quoted most in conversations I’ve had with colleagues, clients, friends and family in recent days, is surreal – an overwhelming sense that those things that we once held as normal may never quite be the same again.
The decade post the global financial crisis has been a buoyant one for global trade, with trade growth consistently surpassing overall GDP growth in the 2010-2018 period. Over this time, global trade benefited from a number of accelerators – the growth of emerging markets driving not just their own export volumes, but providing new markets for others to serve their growing industrial and consumer bases; the on-set of the information age which made it easier for exporters to identify markets for their goods, as well as increasing global connectivity brought about by the growth in capacity and routes within the global travel transport sector.
The last couple of years had presented a reality check; a slowing in global growth, a ramping-up of trade disputes, and a populist attach on the benefits of globalism.
And then COVID-19 arrived.
We are beginning to see changes in behaviour that we believe may be long-lasting, and political and policy changes taking shape that we predict will fundamentally re-shape international trade in the post COVID-19 world.
Below are initial OCO’s predictions. We’ll doubtless evolve and refine these as we move through this period. We don’t expect things to be the same again.
Love thy neighbour
For several centuries, international trade was influenced by two predominant factors: cultural association and proximity between trading partners. Globalisation of the last quarter century changed that and supply chains have increasingly lengthened in a relentless drive to reduce costs.
Post COVID-19, we predict companies will actively seek to shorten supply chains to manage risk, and to enable them to reinstate elements of both flexibility and control (e.g. intellectual property) that have been sacrificed. Whilst globalisation will remain, we expect to see greater regionalisation of supply chains.
Drown out the crowd
Fuelled by lower costs of international travel, visitor experiences more akin to rock concerts, and relentless marketing targeting to our innate FOMO (fear of missing out), the global trade show circuit has become must-attend events.
Despite the hype, our client’s experiences are invariably mixed about trade shows. Too many times, clients have commented that desired meetings didn’t take place, the volume of deals weren’t as expected and the total cost in time and expenses was not worth it. As the trade show industry is shuttered for the foreseeable future, we expect it to play a smaller role post COVID-19.
Trade goes Tinder
There is a significant opportunity to leverage and interpret data, connect buyers and sellers digitally to create a global marketplace that would be substantially more efficient and drive better outcomes for trading partners. We estimate that such a system could improve margins for companies in the post COVID-19 world.
You got a friend
In the new world, we predict collaborations will increase. This will likely take multiple forms. The current emphasis on ventilator production demonstrates that companies can support each other and create value through partnerships, IP and technology transfer as much as the physical export of product. We also predict that point-to-point collaborations between regions or sector clusters will increase as exporters embrace shortened supply chains and a more targeted. In fact OCO are already seeing examples of these collaborations emerging between clients in all parts of the globe.
Over the coming days and weeks, we will be sharing insights from across our global markets as developments progress, on our latest page and on social.
We will also be running a regular audio broadcast of market and insight updated over the coming weeks to keep our followers up to speeds on developments. To register your interest please click HERE and we will ensure you are notified.