"Friendshoring", chip wars, climate protection: what trends are shaping the future of global trade?

According to the HSG Swiss Trade Monitor, global trade does not appear to be as threatened as the trade conflicts and tariff barriers, particularly between China and the USA, would suggest. However, production is moving closer together due to geopolitical disputes. How do you assess the current global trade situation?
Andreas Klasen: Despite trade conflicts and new tariffs, global trade is showing remarkable resilience, as companies are clearly finding ways to successfully circumvent hurdles and cooperate with new trading partners. However, the export industry in Switzerland and Europe is facing multiple challenges that are driven by various "megatrends" and reinforce each other. These include, in particular, increasing geopolitical tensions and regional conflicts, the transformation of the global economy due to rapid digitization and climate change. The international environment for exporters is becoming increasingly fragmented. This is leading to a reassessment of supply chains and trading partners. 

Kuno Schedler, many people are opposed to state intervention and steering instruments in the economy. How can state institutions and the private sector work together optimally to promote global trade?
Kuno Schedler: There are probably different views on this. An economically liberal view sees the role of state institutions solely as hedging export risks without distorting international competition. A more pragmatic view, however, recognizes that international competition is once again increasingly being controlled and influenced by states – including Western states. There is therefore no such thing as an optimum that everyone agrees on.

In view of the geopolitical situation and our increasingly multipolar world, who needs to sit around the table together on global trade issues in order to find innovative solutions to the current challenges? 
Kuno Schedler: First of all, we need to clarify what role global trade plays in the current challenges. Andreas Klasen has written studies on the subject, showing how trade affects regional economic development and issues such as sustainability. The whole "industry" of export and trade promotion seems to become increasingly political according to our information. And it is also being loaded with new goals. This means that more and more players have to find solutions together.

Which perspectives will be represented at the "IfTI Global Symposium" conference at the beginning of September? Who are you bringing to St.Gallen? And whose perspective are you particularly keen to hear?
Andreas Klasen: It is certainly unique to bring together so many high-ranking government representatives, CEOs of state development banks, representatives of the private sector, associations such as the Berne Union and non-governmental organizations as well as academics from more than 30 countries to discuss this topic in St.Gallen. The members of the Berne Union finance or insure around 2.6 trillion US dollars annually – that is around 12 percent of global foreign trade. It will be interesting to hear numerous different regional and sectoral perspectives – from State Secretary and SECO Director Helene Budliger Artieda to OECD Director Marion Jansen, UNEP FI Director Eric Usher, Afreximbank president Benedict Oramah and our colleague Thomas Hale from the University of Oxford. I am particularly looking forward to that will be presented by US EXIM President Reta Jo Lewis so close to the US elections in November.

Andreas Klasen, you are working intensively on the topic of sustainability in world trade. How can the goals of promoting exports and combating climate change be reconciled? 
Andreas Klasen: State export promotion and climate protection can be combined through the targeted promotion of sustainable technologies. By investing in the research and development of green technologies and focusing export promotion programs on sustainability, Cantonal Councils can both strengthen international competitiveness and advance the green transformation. The creation of green financing instruments for sustainable exporters also would help to ensure that ecological and economic goals go hand in hand.

Green transformation and exporting green energy: How must export trade be structured in order to tackle climate change and at the same time meet the demand for energy?
Andreas Klasen: Export promotion of energy-efficient technologies plays an important role in countering climate change and at the same time meeting the growing demand for energy, especially in emerging and developing countries. This includes financing and risk hedging instruments for the export of solar, wind and hydropower plants as well as innovative storage technologies and intelligent energy networks. By complying with and promoting strict international environmental standards, Cantonal Councils can also ensure that the expansion of energy exports serves not only economic but also environmental goals. In this context, it is exciting that at the IfTI Global Symposium in St.Gallen, we are sure to hear a lot about this from leading representatives of the UN-convened Net Zero Export Credit Agencies Alliance, which was launched at the COP28 world climate summit in Dubai.

Following the pandemic, many countries have begun to look for alternative suppliers and production locations in order to stabilize their supply chains. One example of this is the Mexico effect: Multinational companies are relocating their production processes to nearby Mexico to serve the US market due to the US trade dispute with China. As a result, Mexico has replaced China as the most important US trading partner and even overtaken Canada. How sustainable do you think this trend towards "nearshoring and friendshoring" will be?
Kuno Schedler: From a public management perspective, I can say that complicated barriers in the movement of goods and services are an increasing nuisance – especially in Europe. We are still in a pretty good position here in Switzerland, but cross-border bureaucracy is rampant in this country too, as we are painfully aware in the education and services sector.

Looking ahead: Taking into account the increasing relevance of South-South cooperation, how will global trade develop in ten years' time?
Andreas Klasen: Nobody has a crystal ball, of course, but in my view South-South cooperation will continue to grow in importance. Many countries in the global South will increasingly cooperate with each other and conclude trade agreements based on common interests in areas such as technology, agriculture and renewable energies. The African Continental Free Trade Area (AfCFTA), the free trade zone between member states of the African Union, is certainly an example of this. Cooperation will be strengthened by investing in infrastructure and digitization, among other things, in order to make supply chains more efficient. 

Prof. Dr. Andreas Klasen is a visiting professor at the HSG, teaching and researching in Offenburg and Oxford. He is Professor of International Business Administration and heads the Institute for Trade and Innovation at Offenburg University of Applied Sciences.

Prof. Dr. Kuno Schedler heads the Institute for Systemic Management and Public Governance (IMP-HSG) at the University of St.Gallen (HSG). The professor of Business Administration researches and teaches on public management issues at the University of St.Gallen. 

More on the topic: hs-offenburg.de und unisg.ch

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