Renowned international economist Dr. Rebecca Harding recently delivered a compelling presentation at the Trade Week organised by the MCB, last June, highlighting the need for sustainable globalization and trade in the face of mounting challenges. Dr. Harding, a leading expert in trade, supply chains, and trade finance, co-authored the influential book, “The Weaponization of Trade: Great Unbalancing of Policy and Economics,” which had become a benchmark for US EXIM Competitiveness reports.
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Dr. Harding echoed the sentiments of United Nations officials who stressed the continued importance of international trade. “We must not take our eyes off the need for international trade. We still needed globalization, and it was incredibly important that we start to think about how we could figure that out around sustainability and sustainable trade in the future.” Reflecting on the tumultuous events of the past year, Dr. Harding described 2022 as a “nightmare” for trade and geopolitics. The Russia-Ukraine crisis, which had unfolded unexpectedly, unleashed widespread uncertainty and upheaval across the globe. “We started off thinking at the beginning of 2022 that everything was going to be okay and that things were quite positive. But then the Russia-Ukraine crisis kicked in, and it unsettled the entire world,” she lamented.
The economist highlighted that the geopolitical tensions had raised fundamental questions about energy transitions and the future of inclusive globalization. She identified rising energy and food prices as significant challenges triggered by supply chain disruptions resulting from the Ukraine conflict. This situation particularly affected Africa, which heavily relied on imports of wheat from the conflicted region. Harding underscored the urgent need to enhance intra-African trade to mitigate the impact of such crises and build long-term sustainability.
Furthermore, the economist explored the non-military economic confrontation that had unfolded between the United States, Europe, the United Kingdom, and Russia. “We had traditional warfare, which was old school warfare, in Russia and Ukraine, but it was being countered by the Western allies through something that was not traditional warfare. It was economics. It was trade.” Additionally, Dr. Harding stated, “We had a situation where trade was being used—sanctions, export controls, and so on—to try and limit the amount of trade that was happening.”
Explosion of Berlin’s Radisson Blu aquarium
Dr. Harding also shed light on the technological disruptions affecting global trade. “We had a technology meltdown. We had blockchain companies collapse. We had crypto valuations collapse. We now had artificial intelligence, which was coming in and threatening the way that we did things,” she remarked.
Drawing a parallel to the explosion of Berlin’s fish aquarium in December 2022, Harding emphasized the underlying issues associated with unsustainable trade practices. “The significance of this incident extended beyond its seemingly bizarre nature. The aquarium represented the unsustainable practices associated with transporting fish from their natural habitats to a large tank in the Radisson Blu hotel in Central Berlin,” she explained. The economist argued that the incident mirrored the unsustainable approach to globalization and international trade, which had gradually developed cracks, eventually leading to its potential collapse.
As the world entered 2023, the challenges faced in the previous year persisted. “These circumstances had compelled us to reimagine our supply chains and reshape our approach to international relations,” she stated.
The economist illustrated the significant spike in trade values immediately after the crisis, particularly affecting intra-African trade due to Africa’s heavy reliance on commodities. Dr. Harding explained, “Intra-African trade was most severely affected by the rising prices. The increase in value was particularly significant due to the impact on grain shortages and prices.”
The economist cautioned that inflationary pressures were beginning to emerge globally, driven by external factors beyond the control of central banks. These pressures, she warned, could have far-reaching consequences for the global economy. “There was a lot of fear out there. We still had these supply chain pressures. We were still not sure about what was going to happen in China.” She pointed out the potential deflationary period that China might be entering due to the lingering effects of the pandemic, emphasizing the broader consensus that supply chain disruptions and energy transition efforts worldwide would continue to impact prices.
The economist emphasized the dual impact of such disruptions on the African market, explaining, “What it did was it said, well, prices were going up. Therefore, there was more revenue that we could get from our international trade. That was a good thing. But on the ground, it created more pressures on people, more pressures on the communities across Africa who were concerned about rising food and commodity prices.”
Dr. Harding discussed the prevailing geo-economic pressures within the larger global power struggle between the United States and China. While commenting on this issue, she stated, “The tensions between the U.S. and China are not going away. These tensions continue to influence global trade dynamics and impact various regions, including Africa”, she said.
Dr. Harding insisted on the concept of hybrid warfare. She explained, “This conflict is not fought with conventional military means alone. It extends to technology, finance, and industrial policy. This transformation marked a significant shift in the playing field, with China leading the charge by investing heavily in Africa and other regions. The economic power once held by the United States and Europe is waning, leaving Africa positioned squarely amidst this global economic struggle”, she said.
“Africa is right in the middle of this economic conflict,” emphasized Dr. Harding, underlining the region’s increasing importance on the global stage. As the conflict unfolded, businesses had to grapple with uncertainty and adapt to a rapidly changing landscape.
The tensions between the U.S. and China are not going away. These tensions continue to influence global trade dynamics and impact various regions, including Africa…
Dr. Rebecca Harding | Economist
Weaponization of Sustainability
While economic conflict took center stage, sustainability also emerged as a critical component of the overall picture. Dr. Harding stated, “Sustainability is something that is so important to the world, and it is about understanding what that means in an African context.” However, she noted that sustainability itself had been weaponized in this conflict, as different parties projected their own set of values onto African businesses.
Delving deeper into the reasons behind the conflict’s timing, Dr. Harding unveiled her analysis of sustainability in global trade. “Only one dollar in every five in trade finance terms is associated with positive contributions to sustainable development goals,” she revealed. This alarming statistic called for immediate action to rectify the imbalance. The collapse of the established order in 2022 served as a stark reminder of the consequences of disregarding the pressures of globalization, reinforcing the urgency to promote sustainable trade in all its dimensions.
Addressing the regulatory landscape, Dr. Harding highlighted the challenges posed by sustainability reporting requirements. “The regulators are putting sustainability reporting requirements against businesses, which are very concerning because it requires so much data,” she explained. This has created a burden for banks and their corporate clients as they strove to navigate the intricacies of the regulations.
While regulations predominantly focused on environmental aspects, Dr. Harding pointed out the need to consider social changes and contextual nuances specific to Africa. “All of these regulations are affecting the SME base—the small and medium-sized companies in emerging markets and particularly in Africa,” she emphasized. Consequently, these businesses are facing significant obstacles in their quest to contribute to sustainable economic development.
According to Dr. Harding, “That’s a sustainability shift, though it’s going to be very expensive. It involves a lot of infrastructure building again. Africa is in a good place because it can start with sustainable infrastructure and actually skip some of the things that maybe we’ve spent a long time building and polluting in the global North.”
She further explained that the regulations imposed in the global North to address sustainability concerns would ultimately result in increased pricing and inflation: “All of that is going to be passed on in terms of pricing as well. So this is actually inflationary again.”
Highlighting the need for emerging technology solutions, Dr. Harding pointed out the immense potential of Africa’s fintech market and data innovation. She stressed the importance of promoting these advancements and their integration with sustainability efforts. She expressed, “The emergence of technology solutions is crucial in addressing these challenges. Africa boasts a substantial data conundrum and a thriving fintech market, along with growing opportunities in data and its collection. It is imperative to promote and support these advancements.”
She stressed the positive impact of these advancements, stating, “Digital trades in negotiable instruments are gathering pace because that is going to make life a lot simpler.” However, Dr. Harding also acknowledged the challenges faced by the technology market, stating, “The valuations of shrinking technology markets are challenged at the moment by the need to create a return and also by the geopolitical and Geo-economic crises.”
Addressing the importance of data regulation in ESG practices, she emphasized the need for standardization and the opportunities for integrating ESG agendas with the digital ecosystem. She said, “Data has become Key regulation in ESG. But at the moment it’s not standardized. So there are huge opportunities to link an ESG agenda with a digital agenda.”