Why global trade is at an inflection point and what this means for multinational businesses
Trade conflicts, a rise in protectionism, and political and economic uncertainty are just some of the reasons why global trade has never been more complex. At the heart of the global trading system, the World Trade Organization (WTO) is under pressure and in need of reform.
Various bodies have put forward WTO reform proposals, including the EU, in an effort to address US concerns and find a way through the crisis. Implications for multinational businesses include a shift from global to regional supply chains, particularly as investment agreements and technology emphasise the growth of intra-regional trade.
These immediate challenges, as well as the opportunities presented by new trade agreements and rapid technological advances, were discussed during the AIG Global Trade Series (GTS 2019) event at the Port of Rotterdam in May. The event brought together policymakers, business leaders and trade experts.
The outlook for global trade is far from bleak, according to Victor Schoenmakers, director of corporate strategy at the Port of Rotterdam Authority. "In spite of the threats of deglobalisation, trade will always go on," he said. "The people in these fragmented blocks still need each other and need the products that are made worldwide. So I am still quite positive."
The use of containers has both reduced the cost of transporting goods around the world while also making it more difficult to track their movement and gain insight into where goods are accumulating. This is resulting in a heightened exposure to maritime choke points.
Scenario analysis and portfolio stress testing, with insurer and broker partners, can help insurance buyers better prepare by understanding where their risk accumulations exist and how supply chains might be disrupted in the future.
Meanwhile, multinational insurance programmes ensure admitted cover is in place in all territories an organisation is active in. This is particularly important as developing markets open up, with an emphasis on compliant coverage and local knowledge and assistance.
"There is an insurance policy behind every international business transaction, protecting businesses and helping to keep the economic engine running - both at a national and international level," said Thomas Lillelund, chief executive of AIG Europe in his opening remarks at GTS 2019. Insurance therefore plays a vital role in supporting economic development, growth and resilience."
For more editorial and video insights see AIG’s Global Trade Series web page at https://www.aig.com/business/l/global-trade-series/insights.