In the future, over half of global exports are expected to come from the BRIC countries.
World trade is rapidly changing. Increasing globalization, the emergence of new markets, the impact of the global economy, natural disasters and political turmoil are all making world trade more volatile, complex and less predictable than in the past when it centered around the US and Europe. WWL pinpoints some of the key trends shaping world trade patterns, and their impact.
1. Increased globalization
New emerging markets and the increased mobility of goods have led to the development of new trade routes. For example, in 1985 around 85 percent of deep-sea light vehicle trade was out of Japan and 10 percent out of Europe. But by 2015, Japan’s share will shrink to 30 percent while light vehicle trade out of other Asian markets will be around 40 percent. As a result, trade routes are becoming increasingly fragmented.
2. Growing trade imbalances
The emergence of new production centres in Asia, Brazil, India and Russia – and the increasing wealth of other emerging markets – means trade imbalances between mature and developing markets are growing. For example, container cargo volumes from Asia to the US today are almost three times higher than the volumes from the US to Asia, while cargo shipments from Asia to Europe are almost double those found on the Europe-to-Asia routes. This poses a challenge for shipping companies to find return cargo and optimise vessel utilisation and profitability.
3. Trade volatility
Natural disasters like the recent earthquake in Japan, the Icelandic volcanic ash cloud and extreme weather conditions; volatility in the global economy fluctuating exchange rates; and political instability are all having a serious impact on world trade. The latest political upheaval in the Middle East and North Africa resulted in oil supplies from Libya being cut off and reduced shipments of other goods to and from the region. Shipments of cars and H&H equipment to the region stopped overnight and have not yet returned to previous levels.
4. Heightened political interference
The current economic uncertainty is causing countries to implement local trade barriers such as tariffs, quotas, subsidies and trade bans which impact trade volumes. For example, when Russia increased tariffs on tractor imports in 2009, shipments dropped by almost 80 percent. More recently, Brazil increased taxes by 30 percent on cars, tractors, buses, trucks and light commercial vehicles imported from outside the Mercosur – Argentina, Brazil, Paraguay and Uruguay – countries. Taxes were also increased on cars produced within the trade block if less than 65 percent of their parts came from the region.
5. Changing global economy
The economic power balance is shifting, towards Asia and away from the “old” developed world. Markets such as China which were largely ignored in the 1980s have become a source of supply today and are increasingly becoming a strong source of demand. Today, China is the world’s fastest-growing exporter and market. In the future, over half of global exports are expected to come from the BRIC countries (Brazil, Russia, India and China). This is having a direct impact on shipping and logistics companies’ strategies when developing service networks and allocating vessel capacity.