Move with changes in global trade

In Brazil and Argentina they can no longer drag in soy for China. The same goes for cotton from Australia. The face of world trade is changing. At the moment, the trade war is a major driver of this.

For an export country such as the Netherlands, it is important to always keep a sharp eye on things. But if we look at the big picture of global trade over a longer period of time, it is constantly changing face.

The idea is starting to get used that China will become the most important economic superpower in the world this century. The 'low' growth figure (+6,2%) that was recently announced does not detract from this. Marketplaces change. Look what's happening in South America.

China is looking for alternatives to US soy. Because Brazil and Argentina cannot meet the demand, the Chinese have turned their attention to Paraguay and Uruguay. But you can also see trade flows changing elsewhere. For example, cheap production countries in Southeast Asia are taking full advantage of the trade war.

Move production
Think Cambodia, Laos and Vietnam. Nintendo recently decided to move some of its production from China to Vietnam. Under the guise of 'risk spreading'. Apple is looking to countries such as Mexico, India, Vietnam, Indonesia and Malaysia to house some of its Chinese production.

The Chinese Belt & Road Initiative (BRI) is also an important driver behind the changes in world trade. This huge 'expansion project' now covers more than 80 countries, mainly in Asia, Europe and Africa. This area accounts for nearly 36% of global GDP, 68% of world population and 41% of world trade. We expect trade flows between China and BRI partners to grow by +$2019 billion in 117 (from +$168 billion in 2018).

If you take a little more distance and look back over a slightly longer period, you can also see how world trade is changing. In this way the share of the rich western countries is crumbling. Twenty years ago, trade between the US, Canada and Europe comprised more than 60% of all bilateral trade that took place worldwide. Now it's less than 50%. In contrast, the role of emerging markets is increasing. Developing country is now involved in 53% of trade. Ten years ago it was 38%, Bloomberg Media published an interesting article about this.

Doing business with each other
Bloomberg notes that emerging economies are increasingly doing business with each other. It reduces dependence on rich economies and at the same time stimulates its own development. More food, energy, building materials and consumer goods end up in poorer parts of the world, raising local living standards. Did you know that 45% of crude oil from OPEC countries goes to emerging markets? Ten years ago it was 11%.

Do not think that world trade is static. During the life of an entrepreneur, relationships can be completely different. In order to continue to grow, a constant fresh look is required.

Johan Geroms

Johan Geeroms is Risk Director at Euler Hermes, the world market leader in credit insurance and corporate debt collection. In his blogs, Geeroms often focuses on developments in the agricultural sector.

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