Globalisation is under pressure, and with it, various forms of international engagement, from multilateralism and foreign investment to global security and more intrinsically, trade. 

Based on an increasingly populist view that job losses and adverse economic impact have resulted from cross-border commerce, redistribution of manufacturing capabilities and competencies and offshoring, globalisation and trade has taken the brunt of bad press and negative reaction from anti-trade activists.

Geopolitically, trade has long been a channel for the exercise of influence and power. In the current context of populist engagement, trade is one of the targets for feelings of dissatisfaction and disenfranchisement. This is despite the reality that trade has been creating value and enabling engagement around the world for centuries.

Figures from The Economist suggest as many as a billion people have been pulled out of poverty through trade and international engagement. Additionally, advances in business and management practice, technology, safety and security and a range of other areas, have been conveyed to the world through the global supply chains that are the arteries of trade and international commerce.

Beyond traditional trade corridors

The post-crisis context, with various policy and commercially-based efforts to advance economic recovery, has resulted in a disruption and remapping of global trade routes, some in response to post-crisis protectionism and others following a shift in political relationships and market focus.

Among them, south-south trade has been robust and growing despite an overall slowing in the pace of growth of cross-border commerce. Production and manufacturing capabilities have expanded beyond traditional markets in Asia like China, to the next set of producing markets like Vietnam & Bangladesh and to sector-specific supply chain hubs like Indonesia in the auto sector.

Markets across Asia and Africa, as well as Latin America, are evolving from a consumer perspective as well, with favourable demographics and higher levels of disposable income. Historical focus on the United States and Europe as major consumer markets has begun to be counterbalanced by new realities across numerous developing and emerging economies, further stimulating south-south trade, leading to the reshaping of the configuration, composition and hubs of major global supply chains.

This growth of south-south trade and the increasing consumerism across markets in Asia and Africa is expected to reinvigorate cross border commerce and reposition trade as a driver of the global economy and ultimately GDP growth. While WTO data is still showing limited growth, we can suggest at minimum that we have reached a sort of post-crisis “steady state” and are poised to shift into trade-enabled growth in the years ahead.


Figure 1, the latest “World Trade Outlook Indicator” from the WTO provides a succinct look at the state of trade based on selected indices, and suggests that we are getting close to a scenario where the net tendency is upward across that combination of indicators.

Rise of service sector trade

Despite merchandise trade, a traditional area of focus worth in the range of $16.2 trillion in 2015, service sector trade is becoming increasingly significant in the overall composition of cross-border commercial activity. In the same year, WTO Member States engaged in about $4.7 trillion in services-related trade. Service sector trade tends to be high value-added and is seen as an indicator of the maturity of an economy’s trade focus and its ability to move upward along global value chains.

The growth of service sector trade activity, and the evolving ability of bankers, export credit agencies and perhaps FinTechs to finance these intangible trade flows will be a key factor that will reset trade and reposition cross-border commerce as a driver of economic growth.

Evolution in the conduct of trade

The evolution in the ways in which trade is conducted will also be transformational, and will contribute to make trade a high-impact creator of value and an increasingly effective channel for economic inclusiveness and international development.

In some industries (e.g. footware production) fully automated manufacturing facilities complemented by drone-based delivery, or in other industries the ability to place an order and have a product delivered onsite through remote 3-D printing will completely transform the logistics, costs and delivery timings associated with trade activity in some sectors shifting from the trade in goods to the trade in intellectual property.

This has the potential to allow more developing market-based SMEs to engage in export trade, hence facilitating access to finished products for consumers in lower-income or even remotely located communities around the planet. 

The post-crisis environment has brought the importance of real economic activity and the need for nations to maintain technical competencies and manufacturing capabilities sharply into focus.. Given this context, programs to “near-shore” or “on-shore” production capability, effectively compressing supply chains and putting customers within closer reach, have become increasingly common, and will continue to gain prominence in the current anti-globalisation climate.

However, certain industries, such as textiles, are less easily reconfigured in this way, partly as a result of consumer expectations around cost, and partly as a result of limited skilled low-cost labour. These sectors are likely to remain more globalised, with extended supply chains, for the foreseeable future.

Highly integrated industries, such as the automotive sector in North America and in parts of Asia, and complex aircraft manufacturing supply chains likewise will be difficult to restructure, and may well “ride out” the wave of near-shoring, absent a concerted policy effort to mandate changes in the ways these industry sectors operate.

Trade in data and intellectual property will become increasingly important to the overall equation of cross-border commerce with Big Data and issues related to interoperability and the “Internet of Things” linking together to collect and enable access to unprecedented levels of data and analytics. From consumer behaviour to the megabytes of data provided every second by jet engines, that are now as much mechanical and electronic in value as they are data-driven, the trade and protection of such information will play a critical role in the future of trade.   

Trade as a channel for economic inclusiveness and sustainability

Old paradigms of trade based on win/lose propositions, commercial or political leverage or narrow bilateral views of the process of exchanging value have already begun to change to a more holistic and encompassing perspective on trade based upon complex global supply chains. These can involve commercial communities numbering in the hundreds, even thousands, and an acute awareness around sustainable trade, strategic sourcing and inclusiveness, even down to the “last mile” of these arteries of commerce that reach the most remote markets on the globe.

The importance of international trade continues to be recognised in various policy contexts, be they national, regional or international in focus. The roles of multilateral agencies and various forms of export credit agency, together with the contributions of private sector players, continue to reinforce a positive view of trade among business leaders, whilst development professionals likewise maintain that trade can and should continue to be a core element of their arsenal in the fight against poverty.

Trade-enabled financial inclusion is gaining momentum, with various online trade platforms and increasingly digitised trade flows facilitating access to international markets for the smallest firm, and far earlier in the lifecycle of a business than has historically been the case: increasingly, even on day one of operations with the setup of a web presence and instant access to international markets.

Brighter days ahead for trade?

We are seeing fundamental and historically cyclical elements of trade activity, such as commodity trade flows, return to growth mode.   This is a positive sign as even if we do not soon see the return of a commodity super-cycle, the continuing need for commodity-fueled growth across Asia will add to an eventual upward momentum in trade.

Geopolitics has significant potential to impact trade flows, the development of new corridors and the pursuit of new commercial alliances, with the notion of “engagement through trade” potentially making a resurgence as security priorities shift, and as years-long trade and investment negotiations risk unraveling – or at minimum, being put “on the shelf” until a more opportune moment for ratification.

While the immediate future of the Trans Pacific Partnership seems terminal and its counterbalancing objective delayed at a minimum, China’s evolution as a regional and global power continues apace. China is now the champion of free trade and this illustrated in the commercial and trade context by the ambitious “One Belt, One Road” strategy, by the growth of the AIIB and the BRICS Bank, and China stepping up on the world stage. 

Not surprising as China accounts for around 12% of global trade similar to Britain in the 19th Century and latest figures suggest that perhaps 700 million people in the country have been pulled above the poverty line, in no small part through trade.

Linkages between trade, finance and technology will continue to evolve and be the subject of further policy attention as well as financial and resource investment. With the digitisation of trade, increasing commercial activity through online global platforms and the development of a range of new financing options, we will begin to see more tangible work in combining Supply Chain Finance with fast-paced development in FinTech-based development and delivery of financing options.

Just as the rooster crows at the start of a new day, the Year of the Rooster may well mark the dawn of a new era for trade and trade finance and a watershed year in the evolution of international trade and commerce. There is therefore ample reason for optimism for the future of trade-based economic growth, inclusion and development despite the anti-trade headwinds. 

By Michael Vrontamitis, Head of Trade, Product Management, Transaction Banking for Standard Chartered 

As Head of Trade, Product Management, Transaction Banking, Michael Vrontamitis is responsible for the P&L and delivery of the Bank’s Trade Finance capabilities globally in Documentary Trade, Receivables Finance, Supply Chain Finance, and working capital solutions, to all of the Bank’s clients across Corporate & Institutional, Commercial and Business clients. He is also accountable for the Bank’s Trade Finance distribution.

Michael is a member of the BAFT Global Trade Industry Council and the ICC Banking Commission Advisory Board. He chairs the SWIFT Offshore CNY Best Practice Working Group – Cash & Trade Group and in March 2014 he was recognised by The Asset as The Renminbi Banker of the Year in the Industry Achievement Awards of the Triple A Treasury, Trade and Risk Management Awards.

He joined Standard Chartered Bank in 1995 and has worked in Hong Kong, London and Singapore across a number of business areas including Corporate Relationship Management, Cash Management and Trade Product Sales, Investor Relations, Business Planning and Strategy for the CEO of the Consumer Bank, Customer Segmentation and Branding, and Customer Experience Management.

Most recently Michael was the Head of Product Management for Asia, Transaction Banking where he had product oversight and P&L responsibilities across the suite of solutions for Cash Management, Trade Finance, Securities Services and Clearing for the bank's clients in the region. 

He is on the board and the honorary treasurer of KELY support group, a Hong Kong based Charity. KELY is focused on providing education and intervention for youth targeting drugs, alcohol and self esteem issues through peer support.

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