The Countries Carefully Weighing Domestic Interest with International Cooperation

Donald Trump reiterated his campaign rhetoric of “making America great again” at his inauguration on the 20th January 2017. Backing his words with action, he embarked on changing the agreements of major trades not in line with the United States domestic interest. Meanwhile, all the talk in the UK was about Brexit, with political relationships and trades across Europe facing unknown future.

Is there a relationship between currents events and strict border policies around the world? If yes, how does this affect global investment plans?

According to the 2018 KMPG’s Growth Promise Indicator report, there has been an increasing level of difficulty when it comes to open trades across the world. The signs have been there way before Brexit and Trump became a headline subject in 2016. The changes can be traced to the previous global financial crisis, which was reflected in the report’s openness measure – a number that is based on correlation of global trades and direct investment (a part of the GDP).

There was a significant rise in openness in 75{b97005fd3d2ebccb983707e33ea3d10a014d52af6c936b6f69a1609f1405c8e9} of the countries in world in-between 2002 and 2007. Suddenly, with the ushering in of the year 2012 a 66{b97005fd3d2ebccb983707e33ea3d10a014d52af6c936b6f69a1609f1405c8e9} decline was reported. A possible reason for these stems from the theory of the protectionist view currently seen or reflected in the slowdown of globalization.

After the great recession, an unsavoury figure of disappointment has trailed trade performances in upcoming experience. Prior to the crisis, global trades far outgrew the GDP with developing countries reporting a 10{b97005fd3d2ebccb983707e33ea3d10a014d52af6c936b6f69a1609f1405c8e9} increase compared to the 3.9{b97005fd3d2ebccb983707e33ea3d10a014d52af6c936b6f69a1609f1405c8e9} growth in developed countries in a number of exports. By 2010, the numbers were 3.8{b97005fd3d2ebccb983707e33ea3d10a014d52af6c936b6f69a1609f1405c8e9} and 2.9{b97005fd3d2ebccb983707e33ea3d10a014d52af6c936b6f69a1609f1405c8e9} respectively. The lack of steady growth has negatively impacted the GPI’s openness measure figures.

Another obstacle facing open trades could be the complexity of outsourcing and supply chain models. It is not uncommon for manufacturers to seek foreign supply specialist in order to optimize their cost of production. However, in time it is simply not plausible to continue breaking supply chains.

While the figure of global trades according to the report from KMPG may have been diverse, FDI has remained significantly buoyant. 72{b97005fd3d2ebccb983707e33ea3d10a014d52af6c936b6f69a1609f1405c8e9} of the 180 countries represented in the report have seen a rise in their GDP as result of the growth in FDI. Its time to figure out the impact of the steady growth of FDI and the decline seen in global trade openness have on policymakers and investors.

Bill Thomas, the chairman of KMPG International has echoed the benefits of a global community working together, stating that global trades will thrive again and more countries will revert to model that provided a room for learning and cooperation with each other.