It may be an understatement to say that international trade is going through a period of disruption. In addition to threats to the global trade architecture there are other forces for change at work: the impact of technology, continued globalisation, demographic change, and the results of the long-term shift of the global engines of growth.
Disruption and change manifest in different forms – supply chains are being reformed and rerouted as manufacturing is off-shored, re-shored or redistributed; new platforms dominate consumers’ attention; and intangible digital goods and services are replacing traditional models of consumption.
For businesses, disruption necessitates strategic consideration as new opportunities arise. Operators need to be both resilient and agile, able to change and ready to deploy new products and business models in high growth markets. Nowhere presents as great an opportunity for international trade in the years to come as Asia and it is imperative that UK businesses are well-positioned to engage in the region.
The term ‘the Asian century’ was coined in the 1980s, when US policymakers began to better appreciate the growing economic and political role the Asia-Pacific region would play in global affairs, and leaders such as China Deng Xiaoping and India’s Rajiv Gandhi were paving the way for their respective countries in a new era of globalisation.
China spent 2018 celebrating ‘40 years of openness’ since the reforms started under Deng. The mood in Beijing now is one of concern about the economic impact of trade tensions with the US, which come as the economy shifts down a gear and China searches for a sustainable growth model. Although growth in China has slowed, it will continue to be an extremely important market, and its neighbours in the region are growing rapidly. The Asian Development Bank has moderated its growth forecasts for ‘developing Asia’ to 5.7 per cent in 2019, and 5.6 per cent in 2020. These are not the double digit figures of the 1990s, but they are healthy enough and will present significant opportunities.
Across the region Asian governments are developing and implementing strategies to ensure this next phase of growth. These administrations face the challenge of trying to build an aircraft whilst flying it – channeling economic energy while ensuring adequate infrastructure, labour and expertise. China is becoming a master at this, most recently with the ubiquitous Belt and Road Initiative, but also with more localised projects such as the Greater Bay Area project linking Hong Kong, Macau and the manufacturing hubs and tech cities of Guangdong province.
Other countries in the region are specialising, as evidenced by Thailand’s digital transformation strategy ‘Thailand 4.0’, or Singapore’s sophisticated pursuit of innovation-led growth. Several ASEAN countries are focusing heavily on infrastructure development including the Philippines with its ‘Build! Build! Build!’ programme. There are myriad opportunities to play a role in the implementation of the development strategies of these Asian growth markets.
Markets in the region are also becoming increasingly cooperative, with a proliferation of plurilateral trade agreements in response to the lack of progress at the multilateral level. As the UK potentially strikes out on its own set of trade agreements post-Brexit, UK exporters will need to become more familiar with the cross-cutting trade ties among the Asian growth markets in order to find their niche.
The most advanced of these cooperative formations is the ASEAN Economic Community, under which we can expect deeper economic integration to evolve over time. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), signed by 11 countries around the Pacific rim (not including the US or China), is the third largest trade area after NAFTA and the EU Single Market. The CPTPP came into effect at the end of 2018 and has grabbed headlines in British media as the UK floated a potential accession to the agreement. Meanwhile, the more nascent Regional Comprehensive Economic Partnership (RCEP) will bring together the ASEAN markets, India, China, Japan, South Korea, Australia and New Zealand.
These new trade deals and the proliferation of bilateral deals will promote the sort of growth in emerging markets that enabled China to lift millions out of poverty and will further drive global growth for trading partners. We hope that the current global trade tensions are growing pains towards accepting a new status quo and do not signal a move towards a bifurcated global economic system.
In the meantime, British businesses should continue to prepare to go beyond Europe’s borders. Regardless of the outcome of the negotiations with the EU, the best prospects for UK export growth do not lie in Europe but in the rapidly growing economies of Asia. UK exporters should remain bold, resilient and agile, and should demand the same from the UK government in supporting them in Asia.
This article originally appeared in World Trade Matters, the UK-based Professional Journal from the Institute of Export and International Trade.