Asia trade at crossroads
The future of Asia’s international trade hangs in the balance as global forces shift amidst pandemic-induced economic scarring and political rivalry, according to the latest economic research by trade credit insurer Atradius (www.atradius.co.uk).
The shift comes after three decades of globalization which facilitated the geographic diversification of supply chains away from domestic markets. Over this time, improved technology and innovation have enhanced logistics while investment liberalisation and free-trade agreements lowered the barriers between countries, enabling firms to benefit from lower costs from international markets. In particular, Asia has been at the heart of global supply chain developments and benefited enormously.
“The combination of the pandemic and trade war has prompted businesses and governments to reconsider their reliance on foreign suppliers and international production networks. To reduce their vulnerability and mitigate risks that may arise from future external shocks, corporate leaders and governments will need to make adjustments, relying more on the supply of commodities and intermediate goods from nearby countries or regions as they exchange efficiency for resilience,” explains Oliver Ford, Global Country Manager, Atradius. “The pandemic is certainly likely to strengthen the onshoring or near shoring trend that started during the US-China trade war. That said, a complete disintegration of international trade relations is unthinkable, only time will tell to what extent protectionism tendencies will prevail.”
“Whether corporate decision makers opt for optimal efficiency or reduced vulnerability, and whether governments choose cooperation over rivalry, will have a significant impact on future trade patterns in the region and beyond. While economic recovery has started and companies are trying to normalise their operations, the business environment certainly seems more risky than it once was. With an uncertain future, a comprehensive trade strategy is essential for any business; equipping them with intelligence on buyers and wider market trends so risks can be quickly identified and managed, alongside protection against non-payment,” adds Ford.
Looking forward, the Atradius report, entitled ‘Covid scars and political rivalry: Asian trade at a crossroads’ (https://group.atradius.com/publications/economic-research/asia-covid-scars-and-political-rivalry.html), forecasts a positive outlook for economic growth and trade in Asia. It assures businesses that supply chain disruptions will ease and recovery will gain momentum with strong GDP growth likely in coming years. However, the long-term trade outlook remains clouded by the ongoing trade war despite a new US President in the White House.