ICE foreign trade report: tension on the global market

The ICE report on foreign trade estimates a recovery in world trade over the next two years; last year world imports of manufactured goods grew by only 1.2%, demonstrating a global market conditioned by political tensions

20
Ice report

by Greta Gironi |

The 2019 edition of the Ice - Prometeia Report "Developments in foreign trade by area and sector", drawn up before the outbreak of the Coronavirus epidemic disrupted world trade, estimates that world trade will accelerate again (+2.4% from 2020, with a rate of change of over 3% in 2021 and double-digit peaks. Coronavirus The 2019 edition of the Ice - Prometeia Report "Developments in foreign trade by area and sector", drawn up before the Coronavirus epidemic disrupted world trade, estimates that world trade will accelerate again (+2.4%) starting from 2020, with a rate of change of over 3% in 2021 and double-digit peaks in some new markets such as India, Vietnam and sub-Saharan African countries.

For Italian companies, these growth rates are significantly higher than those expected for domestic demand, confirming foreign markets as an essential channel for their development.

Protectionist pressures

After years in which the process of global integration had kept the risks associated with protectionist pressures contained, 2019 has felt the tensions of the scenario more directly. Last year, world imports of manufactured goods grew by 1.2%, the lowest level in the last decade, after 2016, and with a slowdown spread to all the main areas.

The trade war between the United States and China, the Airbus affair and the consequent countervailing duties, and the uncertainties linked to Brexit were the elements that during the course of the year made the trade situation much more uncertain than in the past and conditioned the performance in 2019. However, the Report looks beyond the current economic situation and in particular highlights the opportunities for the next two years.

World trade accelerating, Coronavirus permitting

Already from 2020, world trade as a whole is expected to be positive and accelerating compared to 2019 (+2.4%), but it will be in 2021 that the world economy will experience stronger growth and a further improvement in imports estimated at 3.7%. A rate sufficient to bring the ratio of trade change to GDP change back above unity.

Several underlying assumptions feed into this favourable scenario, which for example sees a more limited impact of two major penalising factors in the recent past: tensions between the US and China and the Brexit process.

India and Vietnam among the areas to watch

It is estimated that over the next two years we may see a return to an expansionary phase of Chinese imports, which will make the largest contribution to world trade growth in terms of imports absorbed. The US will be the second largest market for increasing import levels from the world.

The list of the fastest-growing markets along the scenario continues with smaller countries, but of definite interest both in terms of the speed of growth and their medium/long-term prospects. India, Vietnam and the countries of sub-Saharan Africa in particular represent the most attractive destinations from this point of view, with double-digit rates in the outlook to 2021. The boost of demographic growth, the recent opening up of domestic economies, and growing urbanisation are some of the enabling conditions for sustainable development, including in terms of internationalisation.

As far as sectors are concerned, the forecasts show that while the automotive sector has put a brake on the growth of world trade, after having been very supportive in the past, for other sectors the trend is far more favourable.

Already in 2019, important sectors for the Italian manufacturing industry have recorded a growth in world imports that is higher than the average figure; these include the fashion and home system, pharmaceutical chemicals and mechanics. The list of the most dynamic sectors will expand to include food in 2020.

Italy: the ability to intercept demand

Italy's success on international markets depends on its ability to intercept the demand segments that are most congenial to national production. This is the case in China, where Italian exports have grown beyond the average of their competitors thanks to the evolution of the Chinese consumer of Italian products, who is now sophisticated and knows how to evaluate and reward the quality of goods.

This maturation has allowed an increase in the Italian share in the fashion system and in the home system over the last five years. This process can be extended in the immediate future to two other pillars of the Italian offer:food and mechanics.

The Report also highlights a further opportunity linked to strengthening Italy's presence abroad in connection with China. This comes from industrial cooperation between companies from the two countries in third countries and, more generally, from the possibility for Italy to enter with its own premium specialisations where the Chinese mass market has already led the way, as in the case of African markets or countries along the Silk Road. A similar mechanism may arise from the war on tariffs.

Whileprotectionism remains a negative-sum game for international trade, this does not mean that individual countries and sectors do not present some opportunities from the disruption of established balances caused by the sudden increase in duties. In the case of wine, for example, the countervailing duties affect France and Spain, Italy's main foreign competitors on the US market with a share of 34% and 6%. It is clear that a weakening of their competitiveness due to higher customs duties could accelerate the already ongoing increase in Italy's share, which reached 30% in 2018.

An issue that is always relevant, and where Italian production already shows a competitive advantage, is that of the environmental sustainability of exported products. World imports of environmentally related goods have in fact grown much faster than the average world trade in recent years.

Looking at the so-called megatrends that are sweeping through the global economy, the scenario presents Italian companies with a number of challenges: from electric mobility, which calls into question a supply chain that is essential for the manufacturing dimension of a country, to investments in digitalisation, which are necessary and enabling factors for growth in the markets (e-commerce and Big Data being the most obvious cases), for promoting product innovation (design and 3D printers) and for protecting company assets (cybersecurity).

Previous articleFour-output µModule Dc/Dc regulators from Analog Devices
Next articleNew dates for Mecspe: the exhibition is postponed until the end of October

LEAVE A COMMENT

Please enter your comment!
Please enter your name here