If you run a small or medium-sized business, international trade could play a powerful role in your pandemic recovery plans. This is especially true for companies engaged in global e-commerce, which has seen rapid change and growing activity as people avoid retail stores and shop increasingly from home.
On the surface, it may seem counterintuitive that cross-border trade would offer so much potential when economic rifts and supply chain challenges generated by Covid-19 continue to be felt. But a new report from DHL and the NYU Stern School of Business offers hard evidence that international trade flows have proved far more resilient than first predicted. The DHL Global Connectedness Index 2020 (GCI), now it its seventh annual edition, measures globalization based on the cross-border movement of trade, capital, information, and people, and it shows that a rebound in world trade after a contraction in March and April of 2020 has been exceptionally pronounced.
Consider the following from the GCI report: “By August, trade in goods had already recovered more than three-quarters of its drop and stood just 3-4% below its pre-pandemic level. As a result, the proportion of real global output crossing national borders will only decline modestly in 2020. Moreover, despite export bans implemented at the height of the pandemic, trade provided a vital lifeline for economies and healthcare systems. Global exports of personal protective equipment (PPE), for example, soared 92% during the second quarter of 2020.”
The fact is, instead of revealing fractures in the move toward globalization, the pandemic has reinforced the value of international connections – the indispensable links across borders that have helped to build economic prosperity while delivering valuable supplies, information and ideas to people everywhere. It is thanks to strong international supply chains and global logistics advances that medical supplies have been able to reach so many healthcare workers and patients around the globe in the past year, and it is this same global connectedness that will help move the Covid-19 vaccine around the world.
All of this suggests that the future is strong for your company’s venture into global trade. Here are some key takeaways from the GCI:
People Flows Down, Digital Flows Surging
Predictably, the movement of people across borders has decreased dramatically due to the pandemic, down nearly 70% for 2020. At the same time, trade and information flows are strong, as people and companies moved to stay connected – and supplied – digitally.
Capital Flows Are Impacted
The pandemic interrupted how companies built and invested in operations abroad, with foreign direct investment (FDI) down by as much as 40% for the year. Quick responses from governments and central banks suggest that recovery will be fast as well.
Europe Leads in Global Connectedness
With eight of the 10 most globally connected countries, Europe is the most globalized region of the world according to GCI metrics that employ more than 3.5 million data points to track the globalization of 169 countries. The Netherlands ranks as the most globally connected country, followed by Singapore, Belgium, the United Arab Emirates and Ireland.
Southeast Asia Is Globally Strong
As a region, Southeast Asia scores high on the global connectedness scale, led by Cambodia, Singapore, Vietnam, and Malaysia.
In the year ahead, DHL will continue to monitor and assess the strength and potential of global connections, offering advice and insight for companies as they enhance their trade strategies. In addition, the DHL Initiative on Globalization at New York University’s Stern School of Business will serve as an important research center on globalization and its implications.
How is your business planning to use global connections to succeed in and after the pandemic? Let us know on Twitter @DHLUS.