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What if the international trade crisis was positive?

on 1 Mar 2022
Person, Face, Human

Caroline Eber-Ittel

Country CEO and Head of CIB France & Southern Europe, Standard Chartered

March 2022

What if the international trade crisis was positive?

Over the past two years, world trade has been hit by repeated health crises and now the war in Ukraine. The price of sea freight, which has increased fivefold since 2019, and which now threatens the recovery of world trade, is symptomatic of these upheavals. We must learn from this crisis to help reshape global trade, so that environmental, social and geopolitical factors are no longer on the back burner.

Supply chains are at the heart of international trade

As we enter a challenging economic recovery marked by war and significant geopolitical tensions, the supply chain must be up to the challenge. Today, we are inevitably moving towards a new model of international trade, where trade corridors can no longer be immune to economic, ecological and technological transformations.

While previously “globalisation” and “sustainability” were irreconcilable, the convergence of both has become a tangible reality for many companies and has changed the rules of world trade and transformed the priorities of leaders.

Beyond awareness, a real strategic commitment from executives

With PWC Singapore, we have analysed this phenomenon. After interviewing more than 500 global business leaders, we found that a strategy based on profit maximisation alone is no longer a viable option for most of them. This is especially true given that our study predicts a 70% increase in global trade over the next decade. Covid-19 has been a real catalyst for supply chain diversification, digitisation, sustainability and inclusion.

Companies are now aware that choosing a policy that combines innovation and responsibility fuels profit for the future and enables them to build a robust and resilient growth strategy. Companies, at the forefront of the changes in our economies, have understood this and are already looking at the profitability of their supply chain differently. New technologies, such as “smart contracts” based on blockchain, which make the terms and conditions of contracts unforgeable, are gradually taking a leading role in their strategies.

In this transition, banks play a decisive role alongside companies. 90% of executives consider that promoting access to financing for robust and inclusive supply chains, in partnership with banks, is a key priority for their internationalisation or cross-border expansion over the next five to ten years.

Like our societies, economies are becoming increasingly globalised, systems interconnected and, as a result, risks are increasingly global. More than half of the companies surveyed consider the prevention of future supply chain disruptions to be a top priority. This risk of tensions is pushing companies to reverse the paradigm by turning to partial relocation of activities.

Like Alcatel Submarine Networks, which has announced strengthening its business in France, with the launch of an industrial 5G network in Calais. And by 2025, Airbus Helicopters plans to centralise all of its helicopter blade manufacturing in Seine-Saint-Denis.

These new priorities for companies are the beginning of a shift in global trade, whether in terms of the fragmentation of production and supply zones or in terms of its ecological and societal footprint. Public authorities, private companies and banks, must collectively give global trade the means to reinvent itself and make corridors a place where productivity meets sustainability and responsibility.