DHL is a Business Reporter client.
Despite recent conflicts and geopolitical tensions, we have seen remarkable resilience and growth in global connectivity over the past two years. By analysing trade flows and globalisation rates, our Global Connectivity Report 2024 indicates that the disruptions caused by the Covid-19 pandemic are finally behind us, and that its economic aftermath is also easing.
In this context, globalization reached unprecedented levels in 2022 and maintained this momentum throughout 2023. This upward trajectory of international flows highlights that the world economy is more interconnected than ever, contradicting the idea that regionalization is on the rise.
Leading the way
Singapore has emerged as the most globally connected country. As a member of unions such as the Association of Southeast Asian Nations (ASEAN) and a signatory to vital free trade agreements (FTAs) including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Singapore’s position is a testament to the power of regional integration and FTAs as tools for trade.
In contrast, other CPTPP member countries lag behind Singapore in global connectivity: Canada and Australia rank 29th and 33rd, respectively. Countries with large economies like these typically do not rank as high in global connectivity because, despite having a wide range of globally distributed flows, international trade tends to be low compared to their domestic markets.
In Canada’s case, this is largely due to the dominant nature of its trading relationship with the United States, which accounts for 54 percent of its combined flows of trade, capital, information and people. Meanwhile, Australia’s remote location often makes staying connected more difficult, with businesses in countries like the United Kingdom viewing this market as too geographically distant to trade with profitably.
Despite this perception, the price of goods in Australia means that UK companies can be highly competitive in this market, whilst benefiting from a shared language, similar culture and similar legal systems, as well as a recent FTA – something that UK companies would benefit from leveraging further.
The UK’s network of FTAs helps reduce barriers to international trade, helping the country to have the most widely distributed flows and highlighting its diversified connections. With the UK also about to join the CPTTP, it is important for businesses to continue to research where FTAs exist, particularly in a post-Brexit world.
The exception to the rule
While globalisation remains strong, North America is the only region showing a clear trend towards offshoring. Mexico represents a key destination for the country, boosting intra-regional trade as North American companies look to diversify supply chains that were previously centred on China. However, while 85 per cent of Mexico’s exports went to the US and Canada, these countries provided only 46 per cent of Mexico’s imports, demonstrating that Mexico, a CPTPP member country, maintains diverse connections globally. With an FTA in place between the two countries, there is huge potential for UK-based companies to trade in Mexico.
Despite the trend towards offshoring in North America, it remains the largest market for UK exporters outside Europe, and international flows continue to span stable or longer distances, rather than being confined to major geographic regions. This growing and extensive connectivity of global trade offers significant opportunities for businesses. Trade growth is projected to accelerate substantially in 2024, so now is the time for businesses around the world to rethink their international market strategies.
International expantion
E-commerce has become a key channel for international trade. Although most e-commerce sales occur within national borders, cross-border e-commerce is growing rapidly. Companies engaged in it are benefiting from a strong share of international sales, which reached 28 percent in 2023. In the coming years, cross-border e-commerce sales are expected to surpass domestic sales: Juniper Research predicts an annual growth rate of 16 percent between 2023 and 2028, compared to 8 percent for domestic sales.
By expanding into new markets, e-commerce businesses can access a global customer base, far beyond the limitations of their regional market. By leveraging FTAs and specialized guidance from partners, businesses can expand their operations and diversify revenue streams, reducing risks and creating new growth opportunities that deliver immediate and long-term results.
