Trading places

Overview

The emergence of new patterns of international trade.

World trade has recovered strongly following the global financial crisis. But does this mark a return to business as usual, or are we seeing new patterns of international trade develop? This report, Trading Places, seeks to provide insight and analysis to help support international trade decisions. Our analysis includes detailed projections to 2020 using Oxford Economics' suite of global economic and industry models, a survey of 690 senior global executives across 17 different markets, and interviews with business leaders to see what strategies they are deploying.

New patterns of trade clearly emerge from our study. The sources of raw materials and low-cost workers have now become highly skilled and wealthy markets in their own right. Today, there is a net redistribution of wealth away from the developed economies - a process accelerated by the financial downturn and the economic recession that it has caused. Companies from those rapid-growth markets are now challenging the titans of the Fortune and Forbes lists.

A great rebalancing of the global economy is therefore in motion. We are witnessing a surge of investment from West to East, some of it speculative, but much of it the result of individual business decisions. Yet this flow of capital is not the only force behind the great opening up of the global economy. Focusing on West to East misses the important East to East and growing East to West dimension. Concentrating on flows to India and China misses the far greater increase that is happening within regional blocs closer to home markets.

Working with Oxford Economics, we have sought to model the future patterns of international trade for the next 10 years. We begin by examining the outlook for the global economy, focusing on where domestic demand is expected to grow most strongly over the coming decade. We then provide an overview of the changing nature of the global supply chain and its future evolution, before presenting our projections for regional and bilateral trade flows. These headline forecasts are then deconstructed to highlight key sectoral trends. Finally, we consider possible alternative scenarios for world trade before pulling together the analysis to emphasise the key insights for business.

The degree of change - if it comes to pass - in both scale and direction of trade will have a profound impact on the competitive environment for all companies, wherever they are located around the world.