Globalization 4.0: Trade’s New Center of Gravity
How logistics and other key elements are helping Asean members thrive in today’s rapidly changing global marketplace.
In the wake of the economic downturn, global trade is entering a new phase – an era I call “Globalization 4.0.” This era is distinguished by an uptick in trade – a distinct shift in its center of gravity from developed nations like the U.S. to emerging economies.
As the hard-hit developed economies
recover and consumer spending in the U.S.
is weak, trade lanes are growing in emerging
economies, particularly in Asia. Over
the past seven years, trade within Asia has
risen 75 percent faster than its trade with
Europe and the United States.
In the last several years, emerging nations made trade agreements with each other and lowered tariffs. Asean has been a free trade agreement leader. In fact, when the Asean-China FTA was signed with China earlier this year, it created the world’s largest free trade area in terms of population (1.9 billion people) and the third largest free trade zone in economic size (a cumulative gross domestic product of US$5.8 trillion).ii
But as trade-oriented Asean nations drive more global growth, other countries – especially in Western Europe and North America – are pulling inward. With high unemployment and slow growth, major developed nations are threatening to raise barriers to commerce. The United States is a case in point. Troubling signs of protectionism include tariffs on Chinese aluminum.
Major U.S. trade agreements with South Korea, Colombia and Panama are stuck on the docket, and a few industry-specific disagreements are blocking legislation that would boost U.S. trade and growth. These moves threaten to impede U.S. exports and imports and even increase the risk of a trade war in which everyone loses.
The second factor of Globalization 4.0 is investment in transportation and technology infrastructure. This is an area where Asia also leads the way. After the Asean-China agreement was signed, Indonesia, one of the largest exporters of raw materials in South East Asia, pledged to triple spending on ports and airports this year to support trade.iii And in China, the government is building new highways to open western provinces to development and bring even more people into the global economy. Contrast that with the United States’ crumbling transportation infrastructure, which hasn’t seen a major influx of investment since the 1960s.
Another critical part of the Globalization 4.0 story is logistics, which underpins all global trade. Logistics is the art and science of moving something exactly where it needs to be, exactly when it needs to be there. Logistics is the key to ensuring that global trade continues to expand and thrive, and it helps companies compete. ..............................