The Empire Strikes Back, Luke Skywalker is tasked with raising his X-wing from the swamp but he complains that it is too big, which frustrates Yoda — size matters not when it comes to the Force and to life. It is certainly one of the most memorable quotes from the Emperor’s “little green friend.” Yoda is an icon and his nuggets of wisdom (often in his backwards speak) do resonate with all of us, including economists.

While resilient (so far), the global economy is experiencing a succession of little (and not so little) crises from Brexit to the end of the BRICS armour, which can break the compass of many companies, especially those who still want to try their luck abroad. Trade, as a consequence, has been seriously disappointing over the past couple of years (deceleration of China, the US and the recessions in major emerging markets, the commodity counter shock, lack of forward visibility).

More importantly, it appears that trade will never grow the same again, staying below the +4% growth mark in volume per annum. Why? Because of three major transformations: first, consumers all over the world demand more services(and experience) than goods; second, trade financing has become more complex and costly (longer delays of payments,
currency risk, uneven credit conditions); and third, political risk and protectionism are on the rise (700+ protectionist measures per year).

So now what? Is it the end of globalization? Certainly not. Does it mean we need to rethink globalization? Yes, we do.

Once a panacea, and the very objective (for survival) or many mercantilist countries (China, Germany, Canada) and companies, it looks like the recipe for globalization will have to evolve to be more inclusive, trust-based and handled differently by policy-makers and CEOs alike. The public and private sectors have indeed had a hard time adapting to the new trade paradigm. Hence the relative fiasco of mega trade deals (TTIP between Europe and the U.S. for instance). At this point you may wonder why a Yoda quote in the title, right? In fact, what looks like impediments to global trade could actually become opportunities for smaller — and more agile — countries and companies in their quest to go global.

Like a canoe in high tide, a younger company or a smaller (but grittier) country can succeed better under turbulence than the Titanic can. Examples range from Singapore and Dubai to Israel and Morocco. First, the digitalization and servitization of trade enables companies to immediately become multinationals (micro ones though) and not be limited to their catchment area or by very costly physical operations. Second, the fast-moving liquidity, which spurs cross-border M&A deals, enables companies to become international by acquiring others, thereby expanding their influence, their brand, their footprint. This happened even without a proper manufacturing base. Last, the defiance between countries will help rediscover regional blocks and allies, and align interests. This is particularly important for smaller countries and companies to grow their influence abroad, slowly but surely. In the end, this report also is a reminder for every company out there to commit itself to trading safely, win or lose. Or as Yoda said it: “Do. Or do not. There is no try [for trade].”

You can read the complete article on the Euler Hermes Website here: Trade Wars: The Force Weakens