Most of us strive to see things more clearly. We relish high-definition television, 3-D films and high-res screens on our multiple mobile devices. When it comes to digital cameras, the more megapixels it has, the better it is. And when surveying a new landscape, we seek higher ground for a better view, often bringing a pair of binoculars along for good measure.
With this in mind, DHL has embarked on a unique effort to gain a clearer picture of the state of globalization around the world. After all, if electronics makers can harness data and technology to provide progressively enhanced images on our flat screens, shouldn’t we, in the global trade business, be able to improve our view of how those televisions move around the world? Of course, the answer is a resounding yes.
Our efforts to refine our analytical snapshot of the global economy take the form of the DHL Global Connectedness Index (GCI). First released in 2011, the third edition of the GCI was released earlier this month, and it offers critical findings in “3-D.” The GCI analyzes three distinct areas of globalization and global connectedness: the depth of international interactions, their geographic distribution (breadth), and their directionality (outward versus inward). Unlike other analyses of globalization, the GCI offers a multi-layered perspective and assesses the data on both the regional and country levels, covering 140 countries that account for 99 percent of the world’s GDP and 95 percent of its population.
The findings, when viewed through our 3-D lens, offer valuable insight – and hopefully motivation for organizations to double their international efforts. Overall, the report notes that global connectedness, as measured by cross-border flows of trade, capital, information and people, has recovered most of the losses that were incurred during the global financial crisis.
According to the “depth” aspect of the GCI, which measures the international flows of countries relative to their domestic economy, globalization began to gain momentum in 2013, but capital flows have not yet returned to pre-crisis levels. As the GCI report indicates, the depth of global connectedness remains quite limited; in other words, countries are not moving goods, information or people to the extent that you might think. The leading countries and territories in the depth area of connectedness are by and large wealthy, yet relatively small, including Hong Kong SAR (China), Singapore and Luxembourg.
The “breadth” aspect of the index measures how closely a country’s distribution of international trade flows across its partner countries matches the global distribution of the same type of flows. The index reveals that breadth of global connectedness is declining because advanced economies have not kept up with the big shift of economic activity to emerging economies: their breadth is declining while that of emerging economies is increasing (albeit from lower levels).
Still, overall, the countries with the greatest breadth of connectedness are generally larger and wealthier, like the United Kingdom, the United States and the Netherlands.
Finally, in the “directionality” area the index looks at the distinction between inbound and outbound flows of goods, information and people. In this area, merchandise trade is the most balanced, despite the great public concern about trade imbalances among policymakers.
For more information on the state of globalization, including detailed insights into the connectedness of individual countries and regions, please review the full GCI report. At the same time, consider how your organization fits into the changing picture of global connectedness.
In the end, the GCI makes one point quite evident: The potential for more international flow of goods, services, information and people is huge.
Are you accelerating your international trade strategy, through increased imports and/or exports? Is your organization expanding overseas? What is your emerging economy strategy?