Uzbekistan, 8 November 2018

Thierry Senechal attended the EBRD-Worldwide Expert Conferences in Uzbekistan on 7-8 November. He discussed the future of global trade, in particular the impacts of recent trends on trade inclusion.

He indicated that trade practitioners are now dealing with a complex system, with changes in some elements of the system producing larger changes in other parts of the system. For instance, the aggressive posture of some countries in international trade, e.g. USA, has several possible unintended consequences for the medium term: depressed growth, tariffs escalation, lack of confidence in the business environment, plunge of currencies in some emerging markets, disruption of supply chains, job losses, etc.

In other words, interconnectedness is obvious: Actions of trade partners, no matter how well targeted, have multiple global effects. It also becomes clear that we are all embedded in lots of non zero-sum relationships in which the interacting parties’ aggregate gains and losses could be less than¾or more than¾zero. In world trade, our fates are more than ever correlated!

Thierry Senechal indicated that it is crucial to break from conventional thinking and systematically anticipate elements of surprise and disruptions in global trade. Unfortunately, it is typical for the trade industry to imagine passing clouds to be permanent and not consider the longer-term shifts taking place in full view of the world. Then, he presented a dynamic view of possible futures for global trade under four scenarios, as follows:

Trade inclusiveness scenario: Trade war is eased, and many trade restrictions are lifted; US growth is > 4% in coming years, with positive spillover effects for the global economy; existing and new trade agreements are facilitating cross-border trade; banks and mobile money operators are creating positive synergies for providing access to financial services in underserved markets…

“When the sun rises we’ll see” scenario:  The lack of political will to confront necessary changes leads us without the ability to act; the status quo is preserved (for a short while) and GDP growth remains sluggish in many countries; global macroeconomic uncertainties are prevailing in emerging markets; economic and financial inclusion is halted…

Technology convergence scenario: Technology dominates the trade industry; blockchain technology becomes a reality, starting in energy and commodity trading but rapidly expanding to other sectors; new entrants make it to the marketplace and traditional banks are heavily penalized; traditional rulemaking is unable to keep up with new digital businesses, thus creating frictions and uncertainties in terms of governance and security; technology offers new opportunities for many small businesses and vulnerable populations to get benefits out of the tech revolution in trade…

Dark waters scenarios: US-China trade war is costly (>2% of a $84+ trillion global economy); zero-sum view of trade predominates; emerging markets are heavily penalized with disrupted supply chains, job losses, market volatility, etc.; social exclusion is increasing and regional conflicts is intensifying…

Thierry Senechal concluded by saying that the future of trade is not predetermined. This future is to be dreamed and constructed in an environment of diversity, reciprocal trust and inclusiveness.