WEBVTT
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(upbeat music)
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We've recently witnessed an unprecedented number
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of new trade deals
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seeking to change the corridors of global commerce.
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How can companies and governments
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manage in this new environment?
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One scenario we're looking at
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is what we call the global patchwork scenario,
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where global trade drifts into different nodes
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that are somehow connected
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but perhaps not as much as an open trading system would be.
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This will require policymakers and executive leaders
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to exercise geopolitical muscles
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and trade muscles they haven't had to use ever before.
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So what are these trade nodes we're talking about?
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Let's start with the two largest economies in the world:
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the United States and China.
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The United States will see its share of global trade
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in the next 10 years go from 12% to 9%
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as it pursues its current trade policy
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and seeks industrial reshoring
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and focuses on its domestic economy.
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China, which has had a very successful domestic
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industrial policy over decades, will continue that
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and also seek ways to diversify its trade
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away from the United States
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and more with countries in the Global South.
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The third group is the BRICS.
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Now, this group does include China,
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but as China is a node unto itself,
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we're looking at the other members of the BRICS:
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Brazil, Russia, India, South Africa,
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and several others who joined more recently.
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And what they will seek to do is find ways also
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to increase trade among themselves.
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The next group we're talking about
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is the most heterogeneous.
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It's called the Plurilateralists.
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But what these countries have in common
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is a deep commitment to open trade,
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and these are countries that have signed multiple
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proper free trade agreements over many years.
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We're talking about the 27 members of the European Union,
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Canada, Mexico, Peru, Chile, Singapore, Australia,
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New Zealand, Japan, South Korea,
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and even some smaller, more developing countries
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like Costa Rica or Morocco.
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And finally, we have the rest of the world,
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which will seek to be multi-aligned
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with all of these different trade notes.
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So it's going to be a very interesting time
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in the next ten years.
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What are no-regret moves for leaders
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in a world of ongoing volatility?
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Number one, companies need to embed geopolitics
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into decision-making, both to boost growth,
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but also to maintain resilience.
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Critical will be the growth of the Global South,
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and having this geopolitical acumen
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will enable companies to navigate the complexities
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of these many, yet growing, markets.
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Number two: Companies need to strengthen
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their supply chains.
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Companies should insist on greater transparency
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to ensure they're complying with new rules.
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This transparency will also help them understand
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where they're exposed to mission-critical sectors
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such as rare earths or semiconductors.
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Number three: Companies need to be thoughtful
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about driving cost productivity.
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In the current trade environment,
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costs will go up for companies.
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Companies need to be thoughtful about what they pass on
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to consumers versus what they absorb.
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Trade compliance can also be a strategic muscle
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to think about how to minimize tariff exposure
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to different products and different geographies.
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We expect global trade to remain resilient
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over the coming decade.
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Companies that are thoughtful around their global strategy
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will be able to take advantage of this trend.