The balance of power is shifting…

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Sitting in an office in western Europe it is all too easy to be drawn into a stereotypical view of how global supply chains work – with the focus firmly on the links between Europe, North America and China.

So, when Pascal Lamy, director general of the World Trade Organisation, starts talking about South-South trade and the shifting balance of power, it is worth taking a moment to consider the implications.

In a recent lecture in Australia, Lamy pointed out that trade between China and Africa is set to hit $200 billion this year – up 25 per cent year on year.

At that rate Africa could overtake the EU and US to become China’s largest trading partner in three to five years.

There is a lot of talk in Europe about the benefits of near-shoring, but it tends not to focus on the possibility that the Far East supplier might have bigger fish to fry.

Lamy also looked at the development of value chains – unbundling stages of production across different countries based on their cost advantages.

Hardly a new idea in itself, but Lamy points out that the importance of value chains is increasing in several regions of the world, such as East Asia and Central and Eastern Europe, particularly for smaller countries as they can lower the bar for entry into the global economy.

“The shift towards trade in tasks creates opportunities that did not exist when trade was dominated by exchanges of final goods,” he points out.

There is plenty of room for argument over the precise impact of these developments on supply chains globally. But there will be change, and change brings opportunities for those prepared to embrace it.

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