Carney and DP-DHL think about changing trade patterns

On Tuesday, Mark Carney, Governor of the Bank of England, used a speech on the British economy to address wider issues of the structure of global trade. Mr Carney suggested that Britain and the World were experimenting to see if “a new form of international cooperation and cross-border commerce built on a better balance of local and supranational authorities” could be developed to facilitate greater levels of free-trade without undermining the democratic accountability of political institutions. Mr Carney, who is Canadian, cited services as a particular opportunity for higher levels of liberalisation that such new structures might enable.  

Tuesday also saw the publication of the annual DP-DHL ‘Connectedness Index’. This is a survey of what DP-DHL describes as “a detailed analysis of globalization, measured by international flows of trade, capital, information and people”. This report’s statistics suggested that global movements of physical products, capital, people and information had reached an “all-time high” over 2017. The report’s authors said that this represented the condition of global trade before the latest outbreak of trade tensions between China and the US, however the underlying trends they measured seemed to be long-term ones and unlikely to be reversed in the short-term.

One of the remarkable pieces of data that the Connectedness Index produced was a measurement of the level of exposure to different aspects of global trade. The obvious candidates topped the list, with logistics hubs such as Singapore, the Netherlands and the UAE being prominent. However, of larger economies the most connected were the UK and Germany, a reflection of how their trade patterns were more global and less regional both in-terms of the geography of their markets but also how they traded. The UK had a particularly high depth of what logisticians would call ‘supply-chain integration’ with the rest of the world. The report appears to imply that the UK is in the vanguard of such a trade pattern.

Both the comments of Mr Carney and the statistics presented in DP-DHL’s report are important indicators about the future structure of world trade and thus the nature of demand for logistics services. What we appear to be moving away from are the patterns of trade seen between the 1990’s and 2010’s. In the 21st century supply chains are likely to continue to become more global and more integrated but the means of regulating this process are not yet in place.

Source: Transport Intelligence, February 14, 2019

Author: Thomas Cullen