Strengthening of regional trade in the face of global trade tensions ‘only one part of the picture’, says John Pearson, as group unveils fifth ‘Global Connectedness Index’.
Rising protectionism and anti-globalisation movements have not so far prevented global ‘connectedness’ increasing to record levels, according to a new report by DHL.
The fifth edition of the DHL Global Connectedness Index (GCI) – an analysis of globalization measured by international flows of trade, capital, information, and people – found that connectedness reach an all-time high in 2017.
Launching the latest report, John Pearson, CEO of DHL Express, declared “globalisation is too big to fail”. He argued that even as the world continued to globalise, there was still ample untapped potential.
“The GCI shows that currently, most of the movements and exchanges we’re seeing are domestic rather than international, yet we know that globalisation is a decisive factor in growth and prosperity,” he added. “Increasing international cooperation continues to contribute to stability, so companies and countries that embrace globalisation benefit tremendously.”
DHL claimed its new GCI report represents the first comprehensive assessment of developments in globalization across 169 countries and territories since the Brexit referendum in the United Kingdom and the 2016 presidential election in the United States.
The 2018 index measures the current state of globalization, as well as individual rankings for each country, based on the depth (intensity of international flows) and breadth (geographical distribution of flows) of countries’ international connections. The world’s top five most globally connected countries in 2017 were the Netherlands, Singapore, Switzerland, Belgium and the United Arab Emirates.
However, its findings sit uncomfortably next to recent reports that globalisation is slowing. The Economist, for example, argued late last month that trade tensions were exacerbating the ‘slowbalisation’ of global commerce, a trend that has been consistent since the financial crisis of 2008-09.
This view of globalisation contends that stronger links within regional blocs such as North America, Europe and Asia are being forged, prompting more intra-regional trade and near-sourcing. “Cross-border investment trade, bank loans and supply chains have all been shrinking or stagnating relative to world GDP,” concluded the publication.
Speaking to Lloyd’s Loading List on the sidelines of the launch event, Pearson said ‘slowbalisation’ and the strengthening of regional trade in the face of global trade tensions was “only one part of the picture”.
He added: “There are trends that say a lots of things are being sourced regionally and the emerging trade corridors are regional because the long-haul trade corridors [are suffering from] protectionism. We’re the beneficiaries of some scenarios more than others.”
According to the new DHL report, eight of the top 10 most-connected countries are located in Europe, helping make it the world’s most connected region, in particular for trade and people flows.
“The five countries where international flows exceed expectations the most are Cambodia, Malaysia, Mozambique, Singapore, and Vietnam,” said DHL.
“Four of these top five countries are located in southeast Asia. Southeast Asian countries benefit from linkages with wider Asian supply chain networks as well as ASEAN policy initiatives promoting economic integration. This is positive news for the region, because deeper global connectedness can help accelerate countries’ economic growth.”
North America, the leader in capital and information flows, ranked second among world regions, followed by the Middle East and North Africa in third place.
“Surprisingly, even after globalization’s recent gains, the world is still less connected than most people think it is,” commented GCI co-author Steven A. Altman, senior research scholar at the NYU Stern School of Business and executive director of NYU Stern’s Center for the Globalization of Education and Management.
“This is important because, when people overestimate international flows, they tend to worry more about them. The facts in our report can help calm such fears and focus attention on real solutions to societal concerns about globalization.”
At the global level, for example, the GCI revealed that just about 20% of economic output around the world is exported and only 3% of people live outside the countries where they were born.
“The report also debunks the belief that distance is becoming irrelevant,” said DHL. “Most countries are much more connected to their neighbours than to distant nations. Emerging economies remain less connected than advanced economies.”
Nevertheless, air freight organisations such as the International Air Transport Association (IATA) have for years highlighted the fact that since the global financial crisis (GFC), the ration of world trade to GDP has fallen, from around 2:1 prior to the GFC to around 1 today – a transition associated with greater national protectionism and leading to lowered rates of freight growth.
And IATA has noted that in the fourth quarter of 2018, a new factor has been that overall world trade stopped growing – a sign, it believes, “of the wider pressures from protectionism”.
Source: Lloyd’s
