Global Changes are Coming – What Does it Mean for Our Industry?

Written by: Constance Cullman   |   December 23, 2019

Trade

Change is afoot. The U.S.-China trade war. Brexit. Russia-Ukraine tensions. Political crises in the Middle East and Africa. North Korea. And shockingly, by the end of 2018, a record 70.8 million individuals were forcibly displaced worldwide or, in other words, 1 out of 108 people globally were refugees.

In November 1989, I sat in my college apartment watching with amazement as demolition began on the Berlin Wall. Everything I understood about the way the world worked was being upended by those images. The Soviet Union was collapsing and the United States was emerging as the dominant world power.

Today, the world is in the throes of the most significant economic and political change since the fall of the Soviet Union. The ongoing changes in the world’s economy are being spearheaded by the top two major economies leading and influencing the changing trends of global production, trade and investment. Introduce the trade war between the United States and China and the instability in this bilateral economic relationship is felt throughout the world. 

China is known for its patience and focus on the long-game. Kishore Mahbubani, senior advisor and professor in the Practice of Public Policy at the National University of Singapore, said, “As well as economics, there is a political dimension, a military dimension, a cultural dimension and an emotional dimension. The biggest challenge for America is that the Chinese consider all these dimensions together. They consolidate and play the long game. They think strategically and in comprehensive terms.”¹

China appears to be aggressively pursuing a reshaping of the global order in a way that advances its interests. It is investing domestically and in other countries around the globe by building infrastructure, conducting research (it passed the United States in 2018 in total public research dollars dedicated to food and agriculture) and establishing political and economic ties throughout the world (China’s Belt and Road Initiative launched in 2013, spanning more than 60 countries and involves investment plans totaling a reported $900 billion.²). This investment, combined with the continued hostility between the United States and China, threatens a decoupling of the two economies and the potential establishment of two sets of supply channels – one Chinese-based and the other U.S.-based – much as we experienced in the Soviet Union-U.S. world.

In the midst of the tensions between the two largest economies is the rise of state-centered politics – America First, Brexit, Japanese nationalism, China’s “great rejuvenation” and Russia’s attempt to regain the influence it enjoyed during Soviet days – which erode multilateral institutions and the rules that govern them. In this environment, smaller countries may strive to create regional centers of power that also establish new rules of engagement.

For our companies in the animal food industry, this instability is likely to introduce a large degree of uncertainty and upend our traditional global supply chains. Sourcing and marketing animal food products and ingredients may require different strategies and risk mitigation tools in this changing global environment. Companies that have a footprint or source or export product outside of the U.S. may need to be prepared to deal with changing standards, disruptions to normal trading rules and even determine who owns decision-making – headquarters or regional offices. Expectations for growth and monetary policy are likely to be impacted and companies are likely to be pressured to make their supply chains nimbler. 

In November 1989 I thought I was seeing the biggest global change I would experience in my lifetime – I was wrong. The pace of change and information flow has only intensified and we are currently taking a step back on the globalization journey that started that year. Preparing and responding to these changes will likely be the new normal for our industry. However, one of my favorite historical figures, Winston Churchill, captured it well. “Difficulties mastered are opportunities won.”

_{¹ https://knowledge.insead.edu/blog/insead-blog/how-shifts-in-geopolitical-power-will-affect-corporate-governance-11246#3fqPDpyfU0dccjzv.99}

_{² Campbell, C. 2017. “China Says It’s Building the New Silk Road. Here Are Five Things to Know Ahead of a Key Summit”. 12 May 2017. http://time.com/4776845/china-xi-jinping-belt-road-initiative-obor/}