Global trade is at a crossroads. The traditional rules-based, multilateral approach that underpinned growth for decades now faces new challenges in an increasingly interconnected and digital world.
What this means was discussed at the 2019 European Business Summit in Brussels by an influential panel, including Jean-Luc Demarty, Director-General for Trade at the European Commission, and Dr S. Jaishankar, President in Global Corporate Affairs, Tata Sons.
Although tensions between major trading blocs grab the headlines, there are other perspectives that will affect how trade continues to develop in a Business 4.0 world.
Rules for a digital economy
Most of the institutions, regulations and policies around trade focus on the transfer of physical goods. But borders and tariffs are increasingly meaningless in a digital service economy that deals in flows of knowledge, expertise and data.
The current framework needs to adapt to deal with the needs of truly globalized digital trade. Governments are already negotiating what the new framework will look like, as seen by recent proposals on e-commerce at the World Trade Organization.
The outcome of these initiatives is uncertain, but Europe has taken a lead in many areas, such as GDPR and the Digital Single Market. Businesses have an opportunity to get ahead of the curve by adapting to the European regulations that are rapidly becoming the global gold-standard.
Growing importance of India
As India’s former foreign minister, and ambassador to both China and the United States, Dr Jaishankar has a unique perspective on the issues facing global trade. His message to Europe is simple: if you are looking for a partner that shares democratic values, look to India.
India is on track to become the world’s third largest economy within the next decade, as well as the most populous country. How India performs will matter to the global economy as a whole. The country’s transformation will be on the same scale as China’s a decade ago, with the potential for similar innovation and disruption.
The economic ties between India and Europe are already strong. The EU is India’s largest trading partner. India is currently the EU’s 9th biggest trading partner; within the next five years trade with India could be as valuable as trade with Japan, the subject of what has been described as the world’s most important free trade agreement.
The opportunities of a closer relationship are immense. Urbanization and digitalization are transforming Indian society and interests at an extraordinary pace. Both Dr Jaishankar and Director-General Demarty see investment as a particularly fertile area for further cooperation.
Seeing both sides
With the stakes so high, trade negotiations of any kind are naturally tense. But from the wider business world there is a plea for flexibility and optimism. What one side can see as intransigence, the other may view as the right response to unreasonable demands. In any event, continued dialogue and conversations are essential.
What businesses want is a pragmatic approach that recognises the need for compromises. As Dr Jaishankar stresses, no negotiation can work on the assumption that one side’s position is set in stone, and that all the movement must be done by the other.
Business carries on
Whatever the outcome of trade negotiations and strategies, business carries on. Global trade is now so tightly interconnected that talk of national boundaries and interests sometimes miss the mark. Tata Group is itself an excellent example: it earns as much revenue in Europe as it does in India. So it has a much of a stake in the success of European trade policies as anyone.
In the world of Business 4.0. corporate interests, national interests and social interests align in the same direction – growing prosperity for all.