International trade secretary Liz Truss, ahead of her promotion today (Wednesday 15 September) to Foreign Secretary, laid out the government’s post-Brexit trade strategy with a focus on encouraging more companies to seek out new export markets.
Truss is a "known figure on the international diplomatic circuit, having negotiated trade deals that had to be replaced after Brexit," the BBC reports.
IOE&IT director general Marco Forgione congratulated Truss on her new appointment, saying it had been "a pleasure" working with her as the Institute "looked forward to continuing our support" in growing UK exports.
Think tank address
Before being appointed Secretary of State for Foreign, Commonwealth and Development Affairs today – replacing Dominic Raab – Truss yesterday addressed think tank Policy Exchange.
Truss said the UK needs to grow trade with the fastest-growing parts of the world, 'turbocharging' digital and services commerce.
“We are building a global network of next generation trade deals that are advanced in services and digital trade, and forging closer economic ties with markets in East Asia and the Asia-Pacific,” she said.
Five key takeaways
1/ Global growth
Global GDP will continue to grow but at a slower rate due to slower population growth and ageing workforces.
After recovering from the shock of Covid-19, trade is projected to grow broadly in line with global GDP over the next 30 years, doubling in real terms and quadrupling in dollar terms to reach $100 trillion by 2050.
2/ Regional shifts
The world’s economic centre of gravity will shift eastward, with the seven largest emerging economies – the so-called E7 of China, India, Brazil, Russia, Indonesia, Mexico and Turkey – projected to overtake the G7 in economic size during the 2030s.
Other countries, such as the Philippines and Vietnam are set to grow rapidly and become more integrated in global value chains.
Globally, the top 30 countries accounted for more than 80% of global import demand in 2019 and will continue to account for three quarters of the increase in import demand between 2030 and 2050.
3/ Sectoral shifts
The structure of the global economy is becoming more services-oriented, as rising incomes in emerging markets shift spending patterns. By 2030, service sectors are expected to account for 77% of global GDP, up from 75% in 2019.
Trade is also expected to gradually become more services-oriented. Service sectors are expected to account for 28% of global trade by 2030, up from 25% in 2019.
Truss’s speech underlined the importance of booming demand for industries that the UK excels in, such as digital and financial services.
As covered in the IOE&IT Daily Update, recent trade talks with Singapore have aimed to produce the world’s first digital economy agreement (DEA).
Chancellor Rishi Sunak sees divergence from the EU over financial services regulation as an opportunity for the City of London to target growing global markets such as China, Reuters has reported.
4/ Income trends
Rising incomes could see the number of high-income countries going up from 60 in 2019 to 70 by 2030 with this growing middle class a key source of demand.
As reported in the FT, the government has encouraged UK food producers to target this growing sector with high class products such as British beef and whisky.
Speaking at the launch of the Open Doors campaign to encourage exports, Truss said: “By the end of this decade, 66% of the world’s middle-class consumers are expected to be found in Asia. They are hungry for top-quality food and drink.”
5/ UK growth prospects
The UK was the sixth largest economy in the world in 2019. As living standards rise overseas, the UK’s share of global GDP is projected to fall from 3.3% in 2019 to around 2.7% by 2050. However, the opportunities for the UK to grow via trade will increase, Global Outlook claims.
As previously mentioned, UK exporters are well-placed to capitalise on the growth of the global middle class, which tends to buy more of the high-value goods and services that UK businesses specialise in.
The UK should remain one of the top 10 trading nations in the world by 2050.
However, rapid trade growth in other regions means that, assuming past trends and without policy changes, the UK’s share of global exports is likely to fall from 3.6% in 2019 to around 2.6% by 2050.