2014 is a year when world trade made a comeback. According to recent estimates, world trade in goods is poised to pick up to reach nearly 5 percent growth, more than doubling 2013 growth figures. Global trade in services – such as engineering, legal, technical, accounting, architecture, or any service where the provider is in one country and the buyer in another – continue robust growth.
This is great news after the 12 percent plunge in world trade in 2009 and the lackluster growth in trade over the past few years.
The long-term view is even better. HSBC projects that world trade in goods will grow 8 percent annually through 2030. This means that world trade will double between 2013 and 2022, and triple by 2028. Trade will yet again outpace global GDP growth, as it has over the past several years. In 1950-2005, world GDP grew about 5 times, but world trade grew 11 times! According to HSBC, 2016 is a major inflexion point: exports from advanced economies, particularly the United States, are set to expand very rapidly in 2016-2020.
These drivers will still be very important going forward. In the next 5-10 years, trade will be boosted by the global recovery and rise of middle classes around the emerging world, trade facilitation, such as faster port clearance and customs procedures, further reductions in tariff and non-tariff barriers particularly in the context of regional trade agreements, and new technologies such as cloud computing, ecommerce, and high-speed travel that will obliterate distance and cultural barriers that still hamper trade.
These trends favor companies seeking growth through exports: the costs of doing international business have never been as low; the opportunity never so large.
What are some specific trends to watch that open new export opportunities? Some of our favorite demand drivers:
- Expansion of investment in infrastructure and manufacturing capacity in emerging markets boost demand for parts and components required for infrastructure projects, and the investment equipment needed for businesses to increase production – industrial machinery, IT equipment and transport equipment, and so on. Trade in these infrastructure- and manufacturing-related goods will soar to 54 percent of total goods exports by 2030, from 45 percent today. U.S. firms are among the most competitive in the world in transport equipment and industrial machinery, which gives them an edge as exporters to the demand centers – India, China, Vietnam, Malaysia, Indonesia, Bangladesh, and Turkey and Egypt.
- Rise of global middle classes is generating growing demand for a vast variety of consumer goods, electronics, fashion, and entertainment. Emerging market consumption will be $30 trillion by 2030. With smart strategies such as ecommerce and social media and flexibility to satisfy quickly changing consumer fads, U.S. SMEs are extremely well-placed to cater to the insatiable emerging consumer.
- Urbanization and population growth drives energy demand. The world is increasingly urbanized. Between now and 2025, some 600 cities will account for three-quarters of global growth. Only 440 cities across the merging world will generate half of this growth. One offshoot of urbanization, population growth, and increased wealth is rising demand per capita energy consumption.
- Increased focus on sustainability. Countries and cities around the world are now seeing sustainability as a growth lever not a cost. The global market for clean technology products and services is poised for significant growth in such markets as Brazil, India, and China, Colombia, Indonesia, Saudi Arabia, Turkey, and Vietnam. Waste-to-energy too is a huge opportunity, particularly give the elevated electricity costs in emerging markets that waste-to-energy firms can beat. U.S government, including the Export-Import Bank, has established special programs for U.S. clean tech exporters to tap this opportunity.
- Growing water deficit will open opportunities for U.S.-based water technology manufacturers, suppliers, engineers and consultants. According to the advanced countries’ think-tank OECD, global water demand will increase by 55 percent between 2000 and 2050, both for industry and consumption. The demand for water supply, treatment, and distribution will be particularly intense in manufacturing (increase of 400 percent), electricity (140 percent) and domestic use (130 percent), with China to North Africa and India.
- A huge opportunity is in digitization an automation, as individuals, companies and cities will turn to a range of disruptive technologies to leverage Big Data for insight, streamline business, and manage everyday life. U.S. companies are at the forefront the emerging trends, internet of things, data visualization, wireless communications, cloud infrastructure, ecommerce, and others. Together, these rising technologies are creating a $10 trillion-$20 trillion market; the opportunities are particularly great in such low-productivity sectors as government, health care, and education, which already make up a third of global GDP. Consider sensor-based technologies to manage increasingly congested cities and massive online open courses (MOOCs) to offer U.S. university-level training globally via the web and social networks.
Granted, there are many other trends and sectors. Take “Womenomics”: the rise of the emerging market female that controls households’ big spending decisions and has own spending power and appetite for computers and electronics; global obesity, which will increase demand for diabetics and fitness; and aging in Europe, Japan, and soon China, which will generate demand for healthcare goods and services. As markets grow more sophisticated and barriers to trade in service comes down, the United States is yet again poised to gain, as the world’s resounding leader in service exports. And rebound in Japan and Europe will reignite exports to the advanced markets. Europe’s 1 percent growth in 2014 does not sound like much, but it is massive on a $17 trillion economy. The question is not whether U.S. SME exporters have opportunities; it is how to best tap them.