Geopolitical tensions, trade disputes and the urgent realities of climate change are fragmenting supply chains and contributing to a more uncertain landscape for global trade.
Public-private collaboration is widespread and can be seen through some immediate resiliency-building measures in supply chains – from reshoring and friend-shoring to decreasing transport costs. But these are not long-term fixes.
To unlock global prosperity through trade, we must fix the barriers that impact the movement of goods – from policies that affect market access to a lack of incentives to attract foreign investment. Resetting the view and involvement of the private sector is crucial.
Protectionism: a growing disconnect between public and private
DP World’s latest Trade in Transition report, led by Economist Impact and released at the World Economic Forum in Davos, revealed that the world has entered a new era of globalisation in which heightened geopolitical risk, climate change, and the advancement of technology are converging to become both business and global priorities.
Yet, the outlook remains positive; a rebound is expected for 2024, with a growth rate of 2.3% in the export volume of goods and services. The World Trade Organization (WTO) has projected a similarly optimistic outlook.
Geopolitics and extreme weather caused by climate change undoubtedly pose risks to global trade; diversions around the Cape of Good Hope – for example – are currently adding days, if not weeks, to current supply routes.
Meanwhile, protectionism’s impacts on global trade and its promise to drive prosperity are limiting. Blocks on products like semiconductors mean consumers have less choice and often face higher prices.
The public and private sectors need to be more connected in their approaches to global trade. Despite concerns over the current landscape, a strong preference for global markets still exists, with 26% of firms citing new markets as a primary growth driver. Governments should resist protectionism and instead look to the private sector and multilateral organisations for opportunities to facilitate a global trading environment that creates growth and prosperity while furthering domestic interests.
Africa: a continent of optimism for trade
I firmly believe in Africa’s ambitions and potential. Whilst Africa currently accounts for only 3% of global trade in goods and services, the African Continental Free Trade Area (AfCFTA) is a powerful example of progress.
By creating the largest free trade area in the world – both by area and number of countries – AfCFTA has facilitation of international trade at its centre. Measures to overcome trade barriers and simplify customs procedures enable African businesses to integrate into global supply chains and attract more business to the continent. The impacts of this for prosperity are threefold: Africa contributes more to the global economy, boosts its income, and helps lift millions of people out of poverty.
For example, economic zones offer a solution that benefits businesses and governments in creating a more agile trade infrastructure and boosting investment. The integration of Berbera port and its new economic zone improves connectivity. It is expected to indirectly support over 53,000 jobs locally and enable trade equivalent to approximately 27% of Somaliland’s GDP and 75% of regional trade by 2035.
The AfCFTA demonstrates what is possible when the private and public sectors collaborate. I urge governments to push forward with the negotiations that will help further realise AfCFTA’s benefits and consider the advantages of other free trade areas and economic concessions worldwide.
The private sector: from economic actors to agenda setters
The public and private sectors must support the good progress of the WTO to strengthen trade governance. But there’s still room to go further.
Governments and multilateral organisations need to view business as an engine of growth in shaping the future of trade, not just as an executor. In most cases, the private sector holds the most knowledge on the global obstacles and opportunities for imports and exports. It can help play a more active role in advocating for multilateral trade negotiations. In the WTO Business Survey, 60.9% of respondents felt business representatives should be permitted at WTO meetings.
To ensure that trade continues to be a catalyst for growth, the private and public sector must redefine their collaboration. Not only to equip existing and emerging markets with the capabilities to overcome challenges; but also to think critically about the policies shaping global trade and advocate for the changes required to build resilience and to facilitate economic growth.
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