Trade corridors busier than ever - Supply Management
Value of trade across corridor in 2017 (US$billions)
Value of trade across corridor in 2017 (US$billions)

Trade corridors busier than ever

13 July 2018

As yet unaffected by recent changes to international agreements, activity across trade corridors rose by almost 9% last year, and further growth is predicted

Although global trade agreements are being unpicked and renegotiated at some speed this year, last year saw an increase in the volume of trade flowing around the world – the first time since 2014.

According to the Boston Consulting Group (BCG), which monitors trade finance, global trade rose by 8.7%, with the Middle East showing the greatest increase, at 16%, and non-EU European countries second at 13%. Global flow between regions grew by 9.2%.

Global trade routes 2017

This reverses a three-year decline in the value of trade flow across all regional corridors, and within every region, which is attributed largely to falling commodity prices moving into recovery - particularly in the south to south corridors.

Prospects also look fairly positive, with BCG predicting a 4% annual growth in trade flow from 2017 to 2026 – barring bad economic conditions. This would put trade finance revenue at US$45 billion by 2021, the report states. These figures represent the base prediction of the report, founded on a mature market GDP growth above 3%, an ongoing increase of Chinese GDP, and commodity prices rising steadily on the back of higher demand.

However, that while global trade has not yet been affected by the recent anti-trade rhetoric from major trading nations, the report recognises this could change. It presents two further scenarios, predicting that in a bear market where economies and share prices fall the trade revenues would grow by only 2.6% a year to reach $43 billion by 2021. And in its optimistic scenario of a bull market, growth would grow by over 6% a year, to reach $48 billion by 2021.

The focal point of global trade may shift to Asia, away from the US, with its recent decisions on revoking or changing trade agreements, the authors suggest. They point to the fact that Japan, Australia, Canada and eight other countries are working towards the Trans-Pacific Partnership, and that China is continuing with its One Belt One Road initiative, which will develop trade networks in the region.

This would see Asia’s portion of global trade flow increase from 36% in 2016 to 38% by 2020, while US-based trade flow would fall from 9.2% to 8.7%.

Trade routes in Asia would grow between 4-9% annually to 2026 while growth along the US corridors would be lower at between 2-5% in the same period.

Digital assistance

The figures were revealed in a publication by the International Chamber of Commerce Banking Commission: Global Trade – Securing Future Growth. Surveying 251 banks headquartered in 91 countries, it acknowledges the difficulty in navigating trade in a world of disruption, the concern about regulatory issues, and the prospect of digital technology bringing in a new generation of global trade finance players.

“Reliable and cost-effective financing is integral to the global trading system helping companies to mitigate the risks and costs involved in the international flow of goods,” says John Denton, secretary general of the ICC.

There is also a more informed view of the importance of sustainability in trade and global supply chains, said Alexander Malaket, chair of the ICC Banking Commission market intelligence, and a greater appreciation for the importance of equitably distributing the benefits of trade around the globe.

Prospects for trade flow

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