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Geopolitics – the good news story

Geopolitics – the good news story

Geopolitics – the good news story

Sophie Heading | Expert,

This blog is the third in a five-part series diving into our latest thinking ‘Growth in a G-Zero World’.

In behavioural science, saliency matters. We tend to filter out information in overstimulating environments by prioritising the simple, accessible, novel and relevant. Decision-makers are also fallible to confirmation bias: the tendency to seek information that confirms your point of view, by failing to search impartially for additional information or by overweighting evidence.

Think about that in the context of the 24/7 media cycle. It often prioritises the downside of the G-Zero world: the geopolitical flashpoints and tail risks, social unrest, drags on global growth, a shift from convergence to divergence in the business landscape. So, let’s escape the geopolitical ‘doom loop’ by highlighting the geopolitical-fuelled good news stories. If trade barriers are going up in some parts of the world, where are they coming down? Where are we seeing stronger multilateral cooperation on global issues? How is geopolitics opening up new and significant growth opportunities?

With too many to cover in a few short paragraphs, here are just two of the ways geopolitics is reshaping the rules of the game for business – for the better.

Trade

You may have balked at that headline – which would be fair, given how often I talk about how ‘Protectionism 2.0’ and the convergence of national security and trade and economic policy is making the business environment more complex, more uncertain, and more costly.

But the whole world is not turning inwards. Here’s just two recent examples: 

  • The 15 or 16-nation Regional Comprehensive Economic Partnership (RCEP), is on track to be signed next year. Whilst the potential withdrawal of the largest partner (India) from negotiations might be categorised as ‘bad news’, the near conclusion of one of the world’s largest trade pacts under conflicting economic and national interests provides a strong counterweight to prevailing trends we are seeing elsewhere. Expect a gradual reduction in tariffs and moderate removal of barriers to market access - good news for regional supply chains. 

  • With an overlap of seven markets, the beefier 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came into force at the beginning of 2019. The pact constitutes 13.3 percent of global GDP and reduces 95 percent of tariffs between members. More importantly, the pact included a panoply of new, high standards on everything from digital investment to labour and the environment. It is part of a change in tenor for the latter: once included to ensure that no (developed) market was at a competitive disadvantage due to looser regulations (in emerging markets), these types of provisions are now more often wielded as a way of addressing core ESG (Environmental, Social, Governance) issues across the world, like climate change and forced labour. 

Technology

A double-take would also be allowed for this one, but it is worth including to highlight the ‘shades of grey’ that permeate the geopolitics of the business environment. It is not all bad. Yes, technology is at the centre of current trade tensions, and our partner Eurasia Group predicts a politically-driven reduction in the financial and human capital available to drive the next gen of emerging tech. But as much as emerging technologies are a focus for national security, they are also hitting headlines by highlighting the growing need for businesses to self-regulate.  

Why? The reduction in multilateral cooperation on a government front is fuelling business-led movements and coalitions to respond to societal pressures, much of which is coalescing around ethically responsible business practices. This is clearly playing out with respect to other ESG issues like carbonisation, but the most interesting facet of the technology debate is that it extends to the realm of possible applications. Leading to very public questions around:

The good news? The resulting saliency of these issues, and attempts by business to respond ahead of stymied public governance, is providing the impetus needed for more concerted action by governments both on a domestic and supranational front – like Singapore’s world-first national framework for governing AI, the EU’s Ethics Guidelines for Trustworthy Artificial Intelligence, and Australia’s voluntary ethical AI principles, all released this year.

So whilst geopolitical risks can feel omnipresent and outcomes hard to control, there are also many geopolitically-fuelled good news stories that should give much cause for optimism to those disciplined enough to cut through the noise to seek it.