WEBVTT 1 00:00:00.834 --> 00:00:03.712 I'm Edie Lush, delighted to be here with Nikolaus Lang, 2 00:00:03.878 --> 00:00:07.841 Senior Partner at BCG and global geopolitics expert. Welcome. 3 00:00:07.841 --> 00:00:09.300 It's great to be with you. 4 00:00:09.926 --> 00:00:13.847 Let's talk about the thing that is on everybody's mind, global trade. 5 00:00:13.972 --> 00:00:17.684 It's been slowing as a result of the Ukraine war, and other issues. 6 00:00:17.767 --> 00:00:21.688 Talk us through what you see happening in 2023. 7 00:00:22.105 --> 00:00:26.651 Well, not only in 2023, we actually published a report that goes until 2031. 8 00:00:26.651 --> 00:00:30.113 So what will happen in this decade? And looking at that, I see three numbers: 9 00:00:30.447 --> 00:00:34.617 100, 300, and 1,000. So 100 is actually 100 billion US$, 10 00:00:34.617 --> 00:00:38.747 which reflects the decrease of trade between China and the US. 11 00:00:38.747 --> 00:00:42.000 You see that the China tensions between... 12 00:00:42.000 --> 00:00:43.918 the tensions between China and US will continue. 13 00:00:44.210 --> 00:00:47.088 And we see trade reducing by 100 billion. 14 00:00:47.839 --> 00:00:51.551 The interesting second number is actually 300, which is 300 billion US$. 15 00:00:51.676 --> 00:00:55.180 And that's the trade that will decrease from Russia to Europe. 16 00:00:55.263 --> 00:00:56.639 We've seen all the sanctions, 17 00:00:56.639 --> 00:01:00.268 we've seen all the gas and oil exports that were curtailed. 18 00:01:00.477 --> 00:01:04.772 And so 300 billion less trade between Russia and Europe. 19 00:01:05.022 --> 00:01:08.735 At the same time, there is 300 billion more trade from US to Europe. 20 00:01:08.943 --> 00:01:13.281 So you could say simply that Russian pipeline gas is being replaced by American 21 00:01:13.323 --> 00:01:14.157 LNG gas. 22 00:01:14.449 --> 00:01:14.699 Interesting. 23 00:01:14.699 --> 00:01:18.661 And then there's the 1,000, which is actually one trillion US$. 24 00:01:18.953 --> 00:01:22.916 And there we have 1,000 billion, 25 00:01:23.166 --> 00:01:27.170 which is driven by the fact that there is a region in the world like ASEAN, 26 00:01:27.170 --> 00:01:29.380 Southeast Asia and all these countries, 27 00:01:29.380 --> 00:01:32.759 which will be the big winners because we will see an increase of one trillion 28 00:01:32.759 --> 00:01:35.970 dollars in trade in and out of these countries. 29 00:01:35.970 --> 00:01:38.306 These are the big winners of the trade in the next decade. 30 00:01:39.015 --> 00:01:43.770 Tell me about the main shifts in trade that people need to be 31 00:01:43.770 --> 00:01:44.604 aware of. 32 00:01:44.729 --> 00:01:46.314 Well, I think when we look forward, 33 00:01:46.314 --> 00:01:50.527 we see that we will see an increased regionalization of trade. So... 34 00:01:50.527 --> 00:01:52.779 to make it simple, we think of a tripolar world. 35 00:01:52.946 --> 00:01:57.742 So you have on one side the West - US, EU, you have the East - China, 36 00:01:57.951 --> 00:02:02.247 with or without Russia, and you have a third block, which is very interesting, 37 00:02:02.247 --> 00:02:06.876 which is a third block of countries like India, Indonesia, Middle East, Africa, 38 00:02:07.210 --> 00:02:11.297 who want to keep a neutral position among these trading blocks. 39 00:02:11.422 --> 00:02:15.385 But what is relevant is actually that trade will happen more and more within 40 00:02:15.385 --> 00:02:19.931 these blocks, and not only in the old world where the world was flat. 41 00:02:19.931 --> 00:02:24.185 So I think regionalization, compartmentalization of trade, 42 00:02:24.185 --> 00:02:27.105 will be a big point. And then there's a second trend, which is important, 43 00:02:27.147 --> 00:02:30.483 which is what we call nearshoring or friend-shoring. 44 00:02:30.483 --> 00:02:33.361 Instead of getting things over six to eight weeks in a ship, 45 00:02:33.361 --> 00:02:37.365 you try to get them within 10 days. And so countries like Turkey, for example, 46 00:02:37.365 --> 00:02:41.578 with Europe or North Africa or Mexico, are profiting from that development. 47 00:02:41.911 --> 00:02:45.999 What are some of the short-term actions and then the longer-term actions that 48 00:02:45.999 --> 00:02:50.670 companies need to take in order to take advantage of some of the shifts that 49 00:02:50.670 --> 00:02:51.504 you're talking about? 50 00:02:52.005 --> 00:02:53.173 Well, short term, 51 00:02:53.173 --> 00:02:56.676 I think every company needs to think about its supply chain and about the 52 00:02:56.676 --> 00:03:00.180 resiliency of its supply chain. So what does this mean? It means, well, 53 00:03:00.221 --> 00:03:03.474 I don't have only one Chinese supplier. I try to have two or three, 54 00:03:03.474 --> 00:03:05.602 also in Vietnam, in Indonesia, or in Turkey. 55 00:03:05.852 --> 00:03:08.521 So the diversification of your supply base is critical, 56 00:03:08.730 --> 00:03:12.233 but it's also important to get transparency of your supply chain. You know, 57 00:03:12.442 --> 00:03:14.277 I looked at companies during the Covid crisis. 58 00:03:14.277 --> 00:03:17.071 I looked at companies during the Ukraine crisis. Well, during Covid, 59 00:03:17.322 --> 00:03:20.617 people were missing semiconductors... in the Ukraine crisis, 60 00:03:20.617 --> 00:03:22.493 they were missing wiring harnesses. 61 00:03:22.702 --> 00:03:27.540 So it's quite impressive to see that people do need to have much more 62 00:03:27.540 --> 00:03:31.169 focus on understanding the supply chain. Where am I sourcing from, 63 00:03:31.169 --> 00:03:35.924 how much buffer inventory do I have? And what can I do to counteract shocks? 64 00:03:35.924 --> 00:03:38.927 So that's the short-term perspective. And in the long-term perspective, 65 00:03:38.927 --> 00:03:43.932 I think it's about really introducing scenario planning into your way 66 00:03:43.932 --> 00:03:47.393 of running a company. I always tend to say there's not one future. 67 00:03:47.393 --> 00:03:48.478 There are many futures, 68 00:03:48.728 --> 00:03:51.481 and that's very difficult from an accounting point of view. I agree. 69 00:03:51.481 --> 00:03:52.941 But from a managerial point of view, 70 00:03:52.941 --> 00:03:56.027 it's about thinking about the futures that are ahead, 71 00:03:56.027 --> 00:03:59.656 because we are not in a simplistic, mono-dimensional world anymore. 72 00:04:00.281 --> 00:04:03.368 Nikolaus, thanks very much for stopping by the studio here in Davos.