We now hear much of trade wars and tariffs. However, whatever President Trump and other world leaders do about their respective trade interests, there are also significant underlying trends that will before long cause major disruption to traditional trade and jobs. We should focus more on these trends and not just on the daily news round.
McKinsey & Company reported this year on the changing pattern of global trade, with global value chains being reshaped.
Apart from increased focus on trade in services rather than goods, the relevance of wage costs is reducing and other factors are influencing decisions on supply chains. There are considerations such as speed to market, environmental sustainability and shipping pollution, and the growth of automation all now counting for a lot in supply chain choices.
There is expected to be a progressive shift to capital investment in AI and automation rather than spending on low cost labour.
This goes along with the trend noted by McKinsey of value chains becoming more regional and not so global. Ironically, as the UK struggles with its Brexit issues, the wider world places more emphasis on regional strategies and benefits of closely integrated value chains closer to market.
At the same time, McKinsey estimates that by 2030 developing countries could account for more than half of global consumption.
It is perceived that production capabilities will be increasing in developing countries, no doubt using new technologies and regional value chains, facilitated by digitalisation.
The labour market in developing countries is under major threat to traditional work opportunities, and future factors of importance will be quick access to consumer markets, work skills related to automated manufacturing, and the ease of doing business generally including the rule of law, political stability and good infrastructure.
Developing countries will need to rapidly equip themselves to attract enterprise, reducing barriers and risks to investment. Education for future skills is also absolutely critical to build resilient economies and provide meaningful work. Multinationals will want to put investment where there are skilled workers, educated and suited to the new technologies that will drive business growth in the next era of global trade.
These major shifts in world trade, and the potential massive impact on workers, deserve much more discussion and planning by national governments and intergovernmental organisations. Trade unions will be placing a lot of emphasis on employers managing technology change in sympathetic and responsible ways to mitigate job losses.
While there is much to be gained environmentally from reduced long distance shipping of manufactured goods and from more efficient automated production, the cost to livelihoods of automation and technology innovation is a massive downside that has to be taken into account in responsible and ethical corporate planning. We need to be talking about this a lot more, and all reports and insightful analysis around this theme will become increasingly important.
If you are interested in how Forbury People can assist you in global trade, supply chains and corporate planning. Please get in touch.
10th June 2019