Geo-political disruption is stalling global trade growth

There is much pessimism around in global trade at the moment. The World Trade Organisation’s chief economist Ralph Ossa, in his most recent report, had downgraded his estimate of growth in total global trade in 2023 to 0.8%; although he is more optimistic in his forecast of world trade growth in 2024, his views are couched in uncertainty.

This is all in such contrast to the optimism about growth in imports and exports that existed in the two decades up to 2010 and to a lesser extent in the 2010 - 2020 decade, when relatively strong increases in exchanges in goods and services were consistently being observed. In analysing the changing trading environment, experts are pointing to three factors that are causing the stalling in progress:

• The increased scepticism about the economic benefits of world trade. This partly resulted from the experience of many people in the major industrialised countries during the boom period of 1990 to 2008 who were receiving little direct economic benefit from these higher trading volumes. Nothing was filtering down from increasingly affluent large companies and organisations to those lower down the chain.
• Greater concerns about national and food security issues have become more prevalent – particularly with the concerns about disrupted supply chains in recent years. Some politicians have taken up this cause and introduced more protectionist policies. The possibility of another Donald Trump US Presidency from November, which appears to be committed to a minimum 10% tariff on all goods imported into the US, only exacerbates this fear.
• Greater geo-political tensions which have appeared in the post-Covid period with inevitable trade disruption implications – these have included Covid-19, the war in Ukraine, followed by the situation in the Middle East and now the disruptions to free movement of certain consignments through the Red Sea.

Changes in trade flows resulting from geopolitics and protectionist policies

The immediate impact of these factors is already apparent. China’s trade with the US is declining significantly and is moving a far higher proportion of its business to Russia and other Asian countries. There is also a trend amongst western businesses towards greater trading with political allies or neutral countries. In general terms, it is slowing down the growth in world trade, which has the consequential negative implications of reducing economic growth rates in many countries and increasing poverty levels in several less developed economies.

US beef exports expected to decline by 8% in 2024

Turning to the meat industry, the latest USDA Livestock and Meat outlook report was published in early 2024. This shows a lower growth expectations for trade in the meat sector than in previous years (see Table One). Beef imports are forecast to rise by around 1% in 2024. China accounts for over 30% of all imports and is not expected to increase its import volumes significantly in 2024 in view of the lower economic growth anticipated. Small increases are expected in Japan and South Korea; the US is also likely to import more due to reduced home production levels. However lower imports are expected for Canada and Mexico. The major increase in beef exports in 2024 is likely to be from Australia, where production levels have been rising strongly; shipments from Brazil, Argentina and Mexico are also forecast to increase; by contrast an 8% drop in beef exports is projected for the US and export declines are also envisaged for Canada and the EU.

Brazilian pork exports to rise by 6% and US exports to exceed EU volumes

Table One also shows that expected growth in pork trade in 2024 is less than half the annual average increases in the last five years. However, increased import volumes are forecast over most major importing countries, including China, South Korea and Japan. Brazil is forecast to increase its pork exports by 6% and small rises are anticipated for the US and Canada. By contrast, EU pork exports are expected to remain stable and their export volumes are projected for the first time in many years to be overtaken by the US.

US and Brazil remain the dominant chicken exporters

The biggest rise in world meat exports in 2024 is likely to be for chicken meat; however, even the 2.5 growth rate is lower than annual average of 2018–2023 (see Table One). Japan and Mexico provide the largest import markets; however, import volumes are forecast to increase into Saudi Arabia, Iraq and the UK in 2024. A small reduction in Chinese imports is expected. Brazil and the US are the dominant exporters – whereas Brazilian exporters are forecast to increase by 3% to almost 5 million tonnes, no change in export volumes from the US are expected. EU exports are not predicted to grow but a small rise is forecast for Thailand.

Is life going to change for export dependent countries?

In these times when trade flows are threatened by greater disruption for the national meat industries, most vulnerable might appear those most dependent on export business. Table Two shows examples of such country situations. It can be seen that over the past 15 years, when for much of the period this has been a good time for world meat trade growth – particularly sparked by China and other Asian markets, all four of these countries increased their export dependency ratios. They have built up professional meat structures and developed profitable business. However, are they going to be more vulnerable in this new trading climate? Particularly as in most of these cases they do not have a large domestic market to fall back on.

Table Three makes a comparison of export growth between Uruguay and Canada and two competitor exporting countries, Brazil and the US, who are less export dependent (ED). Over the same period, US and Brazil can be seen to have increased their exports volumes much more than Uruguay and Canada. It might appear that the non-ED countries may have been in a position to take greater risks in developing export markets. Whatever the reason, the ED countries will doubtless be analysing the extent of risk being taken by exporting to one or other countries. For each ED country it will be very different. For one country it may be more important to be sure that political links at the highest levels are the important issue; for another it may simply be a case of having a diversified market strategy so that they are not over-dependent on one or two key export markets.

Whatever develops over the next few years, it seems clear that export strategies by major companies in exporting countries will be more complex that in the past!