Geopolitics and international market access: what importers and exporters need to know

Everyone involved in the food products ecosystems, whether food buyers or producers would agree about how today’s geopolitics is affecting the dynamics of international market access.

Market research by the Economist, in a recent piece titled “Globalisation in Reverse”, points to how geopolitical tensions, economic uncertainties, and protectionist policies are changing cross-border activities and impacting international market access.

On Bloomberg, Karen Karniol-Tambour, Co-Chief Investment Officer of Bridgewater Associates – the American investment management firm founded by Ray Dalio in 1975 and some $125 billion in assets under management – talked about how this deglobalisation and international market access concerns were becoming a key part of the industrial strategy of companies with supply chain resilience efforts leading to the doubling up and eventual increases in costs.

With deglobalisation emerging as a prominent market trend, what does it mean for importers and exporters? Understanding these changes is crucial to planning which new markets to target, which existing ones to invest in and which to plan contingencies, mitigating risks and exit. Here’s what you need to know about the current state of international market access and how to navigate the new normal of market expansion.

The rise of deglobalisation

Recent years have witnessed a growing market trend towards deglobalisation, driven by geopolitical tensions (Russia-Ukraine, China-US) economic uncertainties, and protectionist policies. Countries are increasingly prioritising local production, bilateral agreements like free trade agreements and economic self-sufficiency within blocks over global integration. This shift poses both challenges and opportunities in international market access for businesses engaged in cross-border trade. They could get access to new markets or be locked out of some other markets.

Protectionist measures and trade barriers

Governments around the world are adopting protectionist measures to protect their domestic industries.

The last major effort to expand free trade was the Doha Development Round of negotiations launched in 2001 under the World Trade Organisation (WTO). It faced significant hurdles, primarily due to disagreements between developed countries – such as the United States and the European Union – and developing countries – such as India, Brazil, and China – on various trade-related issues. Major points of contention included agricultural subsidies, international market access for industrial goods and services, and special treatment for developing countries. After more than a decade of negotiations without reaching a comprehensive agreement, the Doha Round effectively stalled.

The collapse of the 12-year-long negotiation to expand free trade and the imposition of new trade barriers signal a move towards more controlled and less open international trade access environments. Importers and exporters have and will continue to see this market trend and must stay informed about changes to navigate potential international market access barriers effectively.

Economic nationalism on the rise

Economic nationalism is reshaping trade policies, with major economies like the US, China, and India focusing on boosting local industries and reducing reliance on foreign imports. For instance, India’s Prime Minister Narendra Modi is heavily investing in local manufacturing, while former US President Donald Trump pushed for significant tariffs on Chinese goods. Importers and exporters need to assess country risks when considering international market access and be selective.

The impact on multinational businesses

Multinational companies are facing increasing challenges in maintaining profitable international operations. The withdrawal of Western firms from key markets like China and Russia underscores the risks associated with geopolitical tensions and regulatory uncertainties. Importers and exporters need to carefully assess the political and economic stability of the markets they operate in for current and future market access.

Price volatility across markets

The global economy is witnessing increasing divergence in prices for the same goods and services across different countries challenging economic theories. This price variation complicates operations for businesses that rely on a seamless global market. Importers and exporters must adapt their pricing strategies to account for these disparities and ensure competitive positioning.

Looking ahead: strategies for success

As the deglobalisation market trend gains momentum, the challenges and opportunities for businesses engaged in international trade are likely to increase. Here are some strategies to help importers and exporters navigate this new landscape:

1. Monitor geopolitical developments: stay informed about geopolitical tensions and trade regulations in key markets to anticipate potential risks and opportunities.
2. Reassess global strategies: evaluate your global operations and supply chains to identify vulnerabilities and areas for improvement.
3. Diversify markets: explore new market opportunities to reduce dependence on any single market and spread risk. Can you help companies with new sources to mitigate risks?
4. Monitor and adapt pricing strategies: monitor and adjust pricing fast to reflect variations in global markets and maintain competitiveness.
5. Enhance risk management: it might sound like the kind of stuff banks do but implementing robust risk management practices in trade to mitigate the impact of geopolitical and economic uncertainties will be key.
6. Consider new technology: efficiency, speed and intelligence are becoming increasingly important in a fast-changing geopolitical environment.

If the above seems like a lot of work, that is where international food buyers like AI First Trading with AI can help. They can take risks away from producers, use AI to monitor masses of data on prices and threats, and leverage and share insights into risks and opportunities for action.

In conclusion, the landscape of international market access is becoming more complex as deglobalisation trends take hold. By understanding these changes with some help from AI and trade partners to proactively adapt strategies, importers and exporters can navigate the challenges and leverage opportunities in this evolving market environment.

If you are a producer who wants to stay ahead of the curve of deglobalisation and ensure your business is resilient and prepared for the future of global trade, Contact Us.