Regional trade flows are key to the next chapter of globalisation

The coronavirus continues to re-define how the world stays connected and has triggered an existential moment for free trade and globalisation.

In turn, pressure has mounted on governments and businesses alike to nationalise supply chains, nearshore operations, and set their sights on shorter, nimbler supply chains that don’t depend on trade flows with too few countries, too far away.

But while the trajectory towards globalisation has certainly shifted in the wake of COVID, world trade isn’t fracturing into isolationist deadlock as many feared at the beginning of the pandemic.

Instead, the world trade puzzle is being re-arranged into huge regional pieces that will determine new trade gravities, from the EU and other countries in Europe with which it trades, to The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and much speculated African Continental Free Trade Area.

The Significance of the RCEP

Adding to that list last week was one of the world’s largest ever trade deals, accounting for a third of global GDP: The Regional Comprehensive Economic Partnership (RCEP) for 15 Asia Pacific countries, from Australia to the Philippines and China.

In practical terms, only time will tell how the RPEC rises to the challenges of the post-COVID trade economy. But it is at the very least a symbolic vote of confidence in free trade as a major driver of prosperity, economic growth, and partnership.

Regionalised trade flows will be essential to the next chapter of globalisation and world trade.

Leveraging the business opportunity

This rings true for businesses as much as governments. As McKinsey rightly identified earlier this year: “Successful companies will redesign their operations and supply chains to protect against a wider and more acute range of potential shocks. The once-prevalent global-sourcing model in product-driven value chains has steadily declined as new technologies and consumer-demand patterns encourage regionalization of supply chains.”

Regionalisation is a source of immense opportunity, especially when barriers to trade can be lowered and cargo owners are able to unlock quicker, more cost-efficient methods of moving their goods. Our end-to-end logistics services are designed to help ensure that regional trading blocs create environments for businesses to thrive in, with a deep understanding of the regions we operate in from Latin America to Europe, Africa, the Middle East, and Asia Pacific.

Unlocking new growth with regional trade flows

In Africa for example, we are leveraging our intra and inter-regional logistics capability to strengthen continental integration. Intra-African exports were 16.6% of total exports in 2017, compared with 68.1% in Europe, 59.4% in Asia, 55.0% in America. Through our continued investment in and partnership with the region, we are focused on creating jobs and fostering innovation that will enable Africa to keep pace with other regional trade economies, regardless of how the African Continental Free Trade Area progresses.

However, we recognise that trading zones are not one size that fits all. They look different across the world, bringing with them their own technologies, standards, regulations, and governance frameworks. We partner with these trading zones and businesses alike to help them navigate these frameworks with ease, helping them adapt to and grow within these processes as smoothly, efficiently, and sustainably as possible.

In solving these challenges, our feedering capability has become central to our strategy this year, providing shipping mainlines with regional connectivity using smaller vessels. We have built strong regional capability in the Far East, the Indian Subcontinent, the Gulf and Europe, having acquired companies such as Transworld, Unifeeder, and Feedertech in the past 24 months.

Combining deep sea supply chains with intra-regional hubs allows BCOs to get strategically closer to their target markets, and our comprehensive network presence allows us to reduce inefficiencies across local, regional, and global supply chains to the benefit of all our customers.

A new direction for globalisation

When the COVID pandemic first began to spread across the world, I highlighted the important role trade plays in not just ensuring the smooth movement of goods, but in keeping the world connected. Economically, politically, and socially. This power of connectivity, for the benefit of economies and people alike, is something I am committed to continue delivering.

Globalisation has not reversed this year but has instead been forced to take stock and shift course. As this inevitably re-calibrates the formation of supply chains and trade flows around the world, DP World is prepared and ready to help both businesses and governments make the most of the shifting gravities in our increasingly regionalised post-COVID trade economy.