There is no doubt that European businesses are in a privileged position, operating in one of the world’s largest trading regions and it is a region that will continue to play a central role in both existing and emerging trade corridors with other key markets around the world, says Andrew Betts, HSBC’s Head of Trade and Receivables Finance, Europe.
There are some resounding figures that help to put Europe's role in global trade in context. With a population of over 740 million, a collective GDP bigger than the US and China, and the 28 EU members accounting for 16% of global trade in goods and services 1, Europe is truly a trading powerhouse.
Indeed, it is the world’s largest exporter of manufactured goods and services and is itself the biggest export market for around 80 countries – by comparison the US is the top trading partner for just over 20 countries.
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All of which puts the region and those businesses operating within it, in a prime position to benefit from new and established trade corridors.
Those trade corridors describe trade and capital flows between high growth or established markets. Historically, they have been between trading partners in the developed markets of Europe and the US but with the impact of the economic crisis businesses are increasingly looking to the faster-growing markets of Asia, the Middle East and Latin America.
It is not just markets like China which, despite the recent slowdown, is still showing strong growth, several other Asian countries, such as Vietnam, India, and Indonesia are also rapidly enhancing their trade performance and expanding their share of global exports.
The emergence of these new trade corridors reflects the changing nature of global trade. For example, a large percentage of global trade now involves component parts being bought and sold across borders.
Supply chains are increasingly complex and often involve numerous countries. There are millions of products where supply chains involved a single product, moving multiple times, across borders and between companies of all sizes.
The changing trade landscape will inevitably offer opportunities for European businesses as growth in world trade and cross-border capital flows continue to outstrip growth in average GDP.
And it is to the emerging markets that businesses can continue to look for growth potential. Of the world’s top 30 economies, we expect those in Asia, the Middle East and North Africa to increase in size approximately four-fold by 2050, driven by favourable demographics and increasing urbanisation. By this time, those economies will be larger than those of Europe and the USA combined, while we expect Asia alone to contribute nearly 50% of global GDP growth between now and 2050.
As those economies grow so their demand for European goods and services is likely to increase. China is a case in point and remains a hugely exciting, if challenging market with a growing demand for both luxury goods and everyday consumer staples.
There will also be an increasing demand for infrastructure investment as China has plans to construct 15 ports in line with the New Silk Road initiative and to improve connectivity for international trade. At the same time, there is significant investment underway in the Pearl River Delta, which is now the world’s most populous area, bigger than Tokyo and with a matching economy.
It is all part of the orientation of the West towards the East. As China and other Asian economies increasingly rebalance away from exporting and towards importing, the scale of the opportunity for European businesses will only increase.
There is no doubt that tapping into new and established trade corridors both with Asia and other markets, is a great opportunity for European businesses, and at HSBC we are well placed to support those endeavours.
As companies look to exploit the opportunities that come with an ever-changing global trade landscape, they need a bank that can help finance across borders seamlessly and efficiently.
Our geographic footprint allows us to add real value by being at both ends of all the major trade corridors in the world today, while a strong presence in Asia means we are very well placed to support companies as they look to tap into the enduring growth potential in the region.
That same global network and our established relationships with companies of all sizes, from SMEs to multinationals, enables us to support entire supply chains throughout the world.
It is an exciting time to be in international business as global trade-flows continue to grow and shift. For those companies that can position themselves to play an increasing role in new and established trade corridors, the opportunities for sustainable growth are outstanding.