HomeServicesadvisoryThe Trends & Gov Behaviour Transform International Trade Policy

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For decades, companies built their global strategies around a set of basic premises. International trade and investment would grow ever freer, continue to drive global GDP growth, and be governed by multilateral rules and institutions. To secure a cost advantage, companies should build vast global footprints that enable them to manufacture and source in low-cost nations, and sell into virtually any national market.

Geopolitical shifts, disruptive technologies, and changing cost structures around the world are shattering assumptions of international business. The rapidly evolving, increasingly complex international trade environment certainly presents great risks. But it is also creating enormous opportunities for companies that know how to navigate it and are agile enough to adapt.

The Trends Transforming International Trade Policy

Economic nationalism is rising

Anti-globalization movements on both the left and right of the political spectrum have fueled Brexit, trade wars, and renegotiation or withdrawal of multilateral agreements such as NAFTA and the Trans-Pacific Partnership.

State capitalism is expanding.

The global footprint of state-owned enterprises, especially from China, is growing, even though they remain protected in their home markets.

Supply chains are becoming more local

Decreasing “labor arbitrage” driven by automation and increasingly flexible Industry 4.0 advanced manufacturing systems are making it more economical and practical to produce goods closer to customers, while diminishing the need for long-distance global supply chains.

The digital economy is supplanting the physical economy

While growth in cross-border merchandise trade slows, international, trade in services and value-added solutions via digital platforms is expanding.

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Assess exposure

The first step for a company to take is a hard, analytic look at their manufacturing, supply, and distribution footprints to assess their exposure to changes in trade rules. Quantify the potential impact on revenues, costs, and production assets throughout the value chain.

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Understand dynamics

Abrupt trade policy changes can shift the entire competitive landscape in different ways for different companies. Determine the strategic implications of new trade rules for each product in specific markets, such as their price competitiveness and market access. Also assess the exposure of each competitor and its suppliers to understand the relative impact and identify potential opportunities.

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Identify potential levers

Develop a set of all potential actions that can be taken in response to trade policy changes under different scenarios in order to both mitigate risk and gain competitive advantage. Identify proactive as well as reactive actions, as well as triggers that indicate when to pull these levers.

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Strategy development

Range of markets

Build resilience

Identify no-regret moves that can be taken preemptively at little cost, such as prequalifying new suppliers, in order to create options and flexibility to move quickly in case of a sudden change in international trade rules.

Create a playbook

Develop a set of actions to be taken under different scenarios, and make sure leadership is aligned on which moves to make in certain circumstances.

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