Globalisation Under Fire – Smith & Williamson
First Brexit, then Trump and now the prospect of pro-nationalist parties gaining influence across Europe – globalisation is under fire across the western world.
Against the backdrop of a more challenging and unbalanced global economic environment and with people and businesses everywhere facing greater uncertainty, free trade has become an easy target for politicians and some sections of the media who blame globalisation for a widening gap between rich and poor.
The great debate
The rise of the populist, protectionist agenda is just the latest reaction to a global economic system that many believe still hasn’t recovered from the 2007/08 financial crisis. Western voters are trying to ‘take back control’ by electing governments that promise to put a stop to the perceived excesses of globalisation.
Yet in China and other emerging economies the appetite for globalisation and trade understandably remains strong, given the benefits these economies have enjoyed over the past few decades thanks to external demand for their cheap labour and goods. China’s rise has been fuelled by exports, so it was no surprise to hear President Xi Jinping at the World Economic Forum defending the ability of globalisation to lift people out of poverty in Davos.
New world order?
The impact of Brexit and Trump is still unfolding, but it’s clear that the established order of global trade will change. The rules, freedom and ease of trade with the EU are our immediate focus and businesses will have to adapt accordingly. But the benefits of trade are so strong for both parties that it seems implausible that the EU won’t continue to be the UK’s most important market, followed by the US, for many years to come. Even so, British businesses may need to rethink their focus.
Refocusing our exports
Once free of EU restraints on trade with the rest of the world, the UK will be able to negotiate new trading relationships. According to the Office for National Statistics, UK exports grew at a faster rate than total world export growth last year for the first time in over a decade, with businesses already increasing exports to non-EU countries.
UK exports to emerging markets are still much smaller than to the EU or US, but they’re already becoming more important, partly driven by the successful economic growth of these economies, their emerging middle classes and growing consumer spending.
The UK’s largest export sectors are machinery, transport and business and financial services, with services in general rapidly closing the gap on exports of goods. But there’s a world of opportunity out there for scale-ups across innumerable sectors and there are good reasons to believe that May’s vision of the UK as a hub for international trade may be realistic.
Building global trading relationships
In January, the government published its new industrial strategy green paper, which sets out how it will support businesses to develop in new sectors and increase exports. The paper calls for protectionism to be resisted and for global trade to remain free and open in order to support investment and exports – all integral to the UK’s industrial success.
The UK is the world’s fifth largest economy, with enviable businesses, scientific research and cultural prowess, enabling us to attract investment and talented individuals from around the world. China, Canada, India, Mexico, Singapore and South Korea have already said they want to discuss future trading relationships, and the Government has established working groups with key trade partners such as India and Australia.
‘Made in Britain’ still carries considerable kudos across the world and the UK’s long-established reputation for high standards, quality of workmanship, creativity and, increasingly, our technological know-how can give exporters a head start in new markets.
Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International.
This post was created on July 25 2017 by Oliver Woolley