Dr. Graham Bright Speaks On Global Supply Chain

Описание: Global supply chains. In this blog we look at global supply chains, their fragility, disruption, life expectancy, ownership, control and price. Where in the past economies relied on relatively few products, new technologies have emerged which require and demand raw materials, critical raw materials, for example used in mobile phones and communications devices, powering the internet, and these require lengthy costly extraction processes from small deposits in unique areas.
Traditional sources are in many cases no longer economically viable, i.e. for these special critical materials, where companies are forced to seek materials from further afield in brand new markets or even resorting to moving their manufacturing processes to places they were never before, to bring manufacturing closer to the point of production. But by doing so, they also create a problem of importing of new goods and face restrictions, regulation and risk. And tariffs, either by design or by regulatory retaliatory moves, have certainly been effective means to beat off competition in agriculture, automotive and electronics industries.
And by creating more barriers, nations are creating their own standards and regulatory arenas, pulling away from a once cooperative way of working, again to promoting competition, leaving disruptive fragmented trading and technology landscape. By decoupling technology, stopping collaboration on strategic projects in defense, AI, cybersecurity, blockchain and crypto, all of these are compromised with missed opportunity, additional risk and duplicated excessive cost. Just as important will be the continued renewed dependency on the US dollar.
Wars may rage, but international deals continue, with the majority still undertaken in the dollar, which remains the official currency for reserves and for global cross-border trade. Countries need dollar reserves to pay for imports and to cover local liabilities in dollars, especially in a crisis. But whilst the US seeks to protect its primary position and flex its political muscles through imposition of financial sanctions and tariffs, it's no wonder that effective countries are looking to find alternatives to circumvent the lack of liquidity, the high rates of exchange and contraction of trade through non-participation amongst domestic institutions.
However, as the world's leading reserve currency, this is not likely to change anytime soon, even though challenges seem to be arriving across the financial landscape. Even as China expands use of the renminbi loans for oil and deposits, for commodity deals, the question remains for whether they would effectively open capital accounts and float the currency on world markets. Probably not, with the short to medium prospect of the currency becoming mainstream and eventually eclipsing US dollars remains remote.
More likely is the uptake of unregulated cryptocurrency, consensus in block trades such as BRICS, where a number of countries have come together who were not traditionally in the dollar enclave, to determine their own payments, trade movement and collective currency and further reliance on digital forms of fiat currency through central banks, namely CBDCs, Central Bank Digital Currencies, fully regulated, protected and not wildly fluctuating. Demand for gold as a commodity has certainly grown, forcing up prices by 28% in 2024 and also reaching the highest point ever so far this year. Where the gold standard was once the primary factor affecting currency and limiting the amount of printed money in circulation, it did control volatility, a situation where an increase in the price of gold can create a trade surplus or help offset a trade deficit.
So in conclusion, events are cyclical, from East India Company over 400 years ago with their world domination to independent states today, emerging economies, new supply chains, collective trading blocks, free trade agreements across continents, the breakup of the former USSR, the formation and divergence within the European Union, we see now a return to isolationist, protectionist economic nationalism. World economies have experienced unprecedented challenges, greater fragmentation, unseen cyber security risks from state actors, intellectual property theft, possible destabilisation of economies and trust in fiat currency from cyber and cryptocurrencies, unethical trading, ultimately the growing risk of global political instability and conflict. Ultimately, Euro Exim Bank remain uniquely positioned to assist companies regardless of geography with economic efficient instruments, allowing the wheels of commerce to turn in our ever-changing trade landscape.