As 2016 comes to a close, companies across the United States are carefully considering global economic predictions for the year ahead.
Many, including small and medium-sized businesses, have already integrated an international trade component into their business plans, recognizing that 95 percent of the world’s consumers live outside of our borders. Even some of the smallest startups are harnessing the power of e-commerce and advanced logistics to reach previously untapped audiences worldwide.
But with 2017 approaching, many companies are wondering just how robust the global marketplace will continue to be.
One of the best ways to understand the potential for international trade in the year ahead is to consider the true state of globalization today. Recently, DHL released the fourth edition of its Global Connectedness Index (GCI), a detailed analysis of globalization across 140 countries. By measuring the cross-border flow of trade, capital, information and people, the GCI offers an excellent way to assess exactly how interconnected commerce and countries really are. With this assessment as a basis, we can gain insight into the potential of international trade in 2017.
The 2016 CGI reveals an important trend: global connectedness has expanded since the economic crisis of 2007, surpassing pre-crisis levels in 2014 and advancing modestly through 2015. Current evidence, which is preliminary, suggests that the world was approximately 8 percent more connected in 2015 than in 2005.
Another important takeaway from the report: internet traffic is increasingly crossing national borders, and this rise in global internet traffic, along with cross-border phone calls and trade in print publications, showed the strongest growth of all categories between 2013 and 2015. For companies looking to expand their international e-commerce reach, the rise in global information and internet flow is positive news.
What do the CGI findings suggest for your business? While the portion of goods traded across borders has declined slightly since 2012, the rise in connectedness suggests important trade and commerce potential. The report also shows that certain regions of the world are more connected than others, so businesses should carefully consider where they are targeting their growth and expansion efforts.
Emerging economies still lag behind on the global connectedness scale, for instance, and all but two of the top 10 most globalized countries in the world are located in Europe. This is significant despite the uncertainty and controversy surrounding Brexit. The two non-European standouts are Singapore and the United Arab Emirates. North America is the second most globally connected region in the world, and had the largest gain in overall connectedness during the past two years.
The bottom line is that you should be aware of how potential customers in different international markets relate and connect to the world. You should also be aware of how important it is in the year ahead to support efforts that allow globalization to flourish, since it provides people access to information, goods and services that improve their lives – and it allows companies to access new customers.
With the improving state of global connectedness in mind, here are two key international trade trends to consider as 2017 approaches:
- Distance matters: As the GCI report notes, despite gains in technology and logistics, international flows take place more often within regions than between them. Countries that are geographically close or share similarities with each other are more likely to engage in trade. This trend is likely to continue for the foreseeable future.
- E-commerce and mobile commerce will continue to surge: eMarketer predicts that total online retail sales worldwide will reach $1.9 trillion by the end of 2016, and that e-commerce sales will increase to more than $4 trillion by 2020, making up 14.6 percent of total retail spending. Mobile commerce is and will continue to be a rapidly growing piece of the e-commerce pie. In the United States for instance, m-commerce sales will increase 43.2 percent by the end of 2016.
Is your business globally connected and ready to take international trade to the next level in 2017? Let us know on Twitter @DHLUS.