The first international freight forwarders were hotel and inn keepers in the city of London. Their guests often carried substantial amounts of luggage which were difficult to move and inn keepers held these personal effects and forwarded them besides other cargo across the Atlantic. Over time, as steamships and regular rail transport made trade much more predictable, international freight forwarding became a specialized industry, serving to smoothen the wheels of trade.
A forwarder performs several essential functions in the international trading mechanism. The forwarding company acts as a logistics expert for shippers, booking space with carriers, helping with documentation at the port of destination and advising on the best routes possible. Needless to say, trade is the life-blood of the forwarding industry; as we look towards the future, some promising trends in both air freight and sea freight volumes seem on the verge of being cut short. How will forwarders survive the coming crisis?
First, for every market that shrinks there is another that shows growth. The future belongs to nimble players; quick-footed freight forwarders would recognize new growth areas and seek to carve out their own niche. One of the major geopolitical developments of recent times affords just such opportunities.
The Belt and Road Initiative of Chinese President Xi Jinping is slowly tying the countries in the Eurasian landmass into a seamless trading zone while defying previously unconquerable natural obstacles. Today there are regular freight trains running from the Chinese interior to cities in Western Europe. The China Pakistan Economic Corridor (CPEC) component of the Belt and Road Initiative is well underway and set to connect western and central China with Pakistan and the Persian Gulf Region. Large, state of the art Special Economic Zones are being built along the CPEC so that industries that can no longer compete from China will be transferred to lower-wage countries. All this is being done that a new China-centered trading zone might eventually cover much of Asia, Eastern Europe and Africa. The institutional framework in which companies will operate is still not entirely clear, but what is evident is there are profits to be made in this inchoate trading zone across Eurasia.
There is then the possibility that a full-flown trade war is not necessarily on us. Most countries are strongly tied to the global trading regime and there is an implied understanding among most populations that trade has raised living standards, lowered political tensions and made the world a smaller place. Accordingly, newer trade restrictions from the US might not invite a full-blown trade war. After US President Trump order the US Trade Representative to slap tariffs on around 60 billion dollars’ worth of Chinese goods, the Chinese have retaliated with a measured response. Only 3 billion dollars of American goods have been targeted, mostly agricultural products. This is a clear indication that major international players are unwilling to upend the liberal trading regime that has given us so much over the last few decades.
In summary, freight forwarders need to exploit new opportunities as they arrive. With sea and air freight volumes increasing over several years, this is the time to invest in refining business operations and consolidating efficiencies. That would help every business survive, regardless of whether there is a trade war on the way.