In fact, the G20 summit in late 2018 closed on a pro-trade and pro-investment note. Global trade: evolution, not revolutionĭespite the significant attention global trade received during the past two years, evolution, not revolution, has been the overriding paradigm in global trade relations. President Trump has repeatedly questioned the need for NATO the US has imposed tariffs on European steel and aluminum imports and threatened tariffs on automotive imports and it has expressed support for Brexit, suggesting the UK would be “better off” without the EU, prompting European leaders to question US commitment to shared transatlantic objectives. Meanwhile, European leaders have been flummoxed by the US. Immigration and refugee flows have been managed in an ad hoc manner at best, and Russia’s military and cyber threats have grown. While Europe faces profound internal challenges, external ones loom large. French President Emmanuel Macron, who positioned himself as a pro-European integrationist, is facing stiff resistance against his ambitious domestic reform agenda. Meanwhile, Angela Merkel, who has mediated critical European crises over the past 10 years, stepped down as the leader of her party and announced she will end her political career in 2021. The nationalist challenge to EU cohesion has driven the negotiations over the UK’s withdrawal from the EU, the ascendance of the Five Star Movement and the Northern League coalition government in Italy, and the standoff between the EU and Poland over the supremacy of EU law. US national security, including cyber threats and China’s stronger presence in Asia.
The Fourth Industrial Revolution (4IR), combining big data, analytics and technology, promises not only to disrupt industry structures, wealth distribution and labor markets, it will also reshuffle the geopolitical order. Global leadership has always been anchored in technological superiority. What we see today is that alternative political systems have proved resilient and are often seen by their proponents as more stable, less fractious, and able to appropriately and judiciously deal with global challenges. Western democracies that championed global economic integration in the late 20th century believed that a prospering world would trend toward democratic transformation and overall stability. The US position of global dominance is beginning to erode, in part due to globalization’s successes (growth in emerging economies) and its failures (growing inequality and political discontent in developed markets).Īs a result, we may be moving to a multipolar world, a world in which geopolitical rivals set the rules of the game in their respective “spheres of influence.” This process, from global political integration to fragmentation and geopolitical competition, will result in profoundly higher levels of complexity for businesses that span the globe.Īs part of this re-balancing, Western democratic models are being challenged. These undercurrents affect established norms of doing business and global governance, causing uncertainty in the business environment and adding complexity for long-term planning. Managing geopolitical risk begins with understanding the source of geopolitical disruption – the three key geopolitical undercurrents that drive and generate the breaking news we see every day. That resilience will be tested as the global economy enters a new cycle and geopolitical tensions continue to increase. For the time being, the global economy remains strong not because of positive geopolitical developments – but despite negative ones. But we are now living through a paradigm shift, a transformative age in geopolitics that is impacting the outlook for the global economy and global businesses. Since the end of World War II, businesses have been operating on the hypothesis that the integration of global markets would promote political cooperation and the harmonization of the rules of the game around the world. Geopolitics is changing the world that businesses have grown and operated in for 70 years.