I'm Edie Lush, delighted to be here with Nikolaus Lang,
Senior Partner at BCG and global geopolitics expert. Welcome.
It's great to be with you.
Let's talk about the thing that is on everybody's mind, global trade.
It's been slowing as a result of the Ukraine war, and other issues.
Talk us through what you see happening in 2023.
Well, not only in 2023, we actually published a report that goes until 2031.
So what will happen in this decade? And looking at that, I see three numbers:
100, 300, and 1,000. So 100 is actually 100 billion US$,
which reflects the decrease of trade between China and the US.
You see that the China tensions between...
the tensions between China and US will continue.
And we see trade reducing by 100 billion.
The interesting second number is actually 300, which is 300 billion US$.
And that's the trade that will decrease from Russia to Europe.
We've seen all the sanctions,
we've seen all the gas and oil exports that were curtailed.
And so 300 billion less trade between Russia and Europe.
At the same time, there is 300 billion more trade from US to Europe.
So you could say simply that Russian pipeline gas is being replaced by American
LNG gas.
Interesting.
And then there's the 1,000, which is actually one trillion US$.
And there we have 1,000 billion,
which is driven by the fact that there is a region in the world like ASEAN,
Southeast Asia and all these countries,
which will be the big winners because we will see an increase of one trillion
dollars in trade in and out of these countries.
These are the big winners of the trade in the next decade.
Tell me about the main shifts in trade that people need to be
aware of.
Well, I think when we look forward,
we see that we will see an increased regionalization of trade. So...
to make it simple, we think of a tripolar world.
So you have on one side the West - US, EU, you have the East - China,
with or without Russia, and you have a third block, which is very interesting,
which is a third block of countries like India, Indonesia, Middle East, Africa,
who want to keep a neutral position among these trading blocks.
But what is relevant is actually that trade will happen more and more within
these blocks, and not only in the old world where the world was flat.
So I think regionalization, compartmentalization of trade,
will be a big point. And then there's a second trend, which is important,
which is what we call nearshoring or friend-shoring.
Instead of getting things over six to eight weeks in a ship,
you try to get them within 10 days. And so countries like Turkey, for example,
with Europe or North Africa or Mexico, are profiting from that development.
What are some of the short-term actions and then the longer-term actions that
companies need to take in order to take advantage of some of the shifts that
you're talking about?
Well, short term,
I think every company needs to think about its supply chain and about the
resiliency of its supply chain. So what does this mean? It means, well,
I don't have only one Chinese supplier. I try to have two or three,
also in Vietnam, in Indonesia, or in Turkey.
So the diversification of your supply base is critical,
but it's also important to get transparency of your supply chain. You know,
I looked at companies during the Covid crisis.
I looked at companies during the Ukraine crisis. Well, during Covid,
people were missing semiconductors... in the Ukraine crisis,
they were missing wiring harnesses.
So it's quite impressive to see that people do need to have much more
focus on understanding the supply chain. Where am I sourcing from,
how much buffer inventory do I have? And what can I do to counteract shocks?
So that's the short-term perspective. And in the long-term perspective,
I think it's about really introducing scenario planning into your way
of running a company. I always tend to say there's not one future.
There are many futures,
and that's very difficult from an accounting point of view. I agree.
But from a managerial point of view,
it's about thinking about the futures that are ahead,
because we are not in a simplistic, mono-dimensional world anymore.
Nikolaus, thanks very much for stopping by the studio here in Davos.