Global trade is undergoing a profound shift. Mutual consensus and predictability seem to be principles of the past. Rising protectionism, geopolitical tensions, and regulatory divergence are reshaping how goods, services, technology, and data move across borders. Businesses must now contend with a landscape where trade rules are increasingly politicised. While this fragmentation increases risk, the right mindset enables nimble corporates to identify opportunities.
A Shifting Global Trade Order
The multilateral institutions and frameworks underpinning global trade since the late 1940s are increasingly in doubt. Long-standing partnerships are being replaced by a patchwork of new bilateral and regional agreements, each with its own standards, enforcement mechanisms, and strategic implications. Trade is also becoming a tool of national security and foreign policy. The decoupling between China and the West, the race for AI dominance, EU regulatory assertiveness, tariff disruptions, and sanctions regimes targeting Russia and others have created fault lines affecting everything from market access to compliance risk.
Supply chains are being reconsidered and restructured. Nearshoring, friendshoring, and dual sourcing are no longer theoretical-they are strategic imperatives. These shifts bring complex legal challenges, including origin rules, customs classifications, export controls, and sanctions compliance.
Business and Legal Risk in a Fragmented World
Trade-related business and legal risks are intensifying across jurisdictions. Businesses face growing exposure to direct and secondary sanctions and tariffs. Regional conflicts can trigger material effects even in jurisdictions once seen as neutral, as companies in India are witnessing firsthand.
Diverging customs enforcement and increased scrutiny lead to more audits, penalties, and disputes. National security concerns now influence investment decisions, prompting government scrutiny on both inbound and outbound flows. Additionally, varying ESG standards, digital trade rules, and carbon border mechanisms create compliance burdens and strategic uncertainty.
These challenges are compounded by the politicisation of trade. For example, export restrictions on critical minerals or strategic technologies-often framed as national security measures-can ripple across supply chains.
Risk and Legal Foresight for Business Resilience
To navigate this complexity, businesses must move from reactive compliance to strategic foresight. Key recommendations include:
1. The current disorder will likely persist; companies must adapt sooner rather than later.
2. Companies need to diversify across supply chains, customer bases, data storage, and investments to reduce vulnerability.
3. Understand bilateral agreements' nuances, as multilateral frameworks give way to fragmented arrangements. Local expertise provides critical advantages.
4. Embed geopolitical, trade, and legal risks within core business planning and risk assessments to anticipate shocks.
5. Seize opportunities-the new order creates risks but also openings for those attuned to shifting trade and legal trends.
The global trade landscape may be fractured but is navigable. Success depends on foresight, adaptability, and strategic legal insight. In a world where trade is increasingly shaped by politics and policy, legal and trade strategy must be central to commercial resilience.
(The author is Global Chair-elect of Baker McKenzie. He will be speaking at The Economic Times World Leaders Forum in New Delhi)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
A Shifting Global Trade Order
The multilateral institutions and frameworks underpinning global trade since the late 1940s are increasingly in doubt. Long-standing partnerships are being replaced by a patchwork of new bilateral and regional agreements, each with its own standards, enforcement mechanisms, and strategic implications. Trade is also becoming a tool of national security and foreign policy. The decoupling between China and the West, the race for AI dominance, EU regulatory assertiveness, tariff disruptions, and sanctions regimes targeting Russia and others have created fault lines affecting everything from market access to compliance risk.
Supply chains are being reconsidered and restructured. Nearshoring, friendshoring, and dual sourcing are no longer theoretical-they are strategic imperatives. These shifts bring complex legal challenges, including origin rules, customs classifications, export controls, and sanctions compliance.
Business and Legal Risk in a Fragmented World
Trade-related business and legal risks are intensifying across jurisdictions. Businesses face growing exposure to direct and secondary sanctions and tariffs. Regional conflicts can trigger material effects even in jurisdictions once seen as neutral, as companies in India are witnessing firsthand.
Diverging customs enforcement and increased scrutiny lead to more audits, penalties, and disputes. National security concerns now influence investment decisions, prompting government scrutiny on both inbound and outbound flows. Additionally, varying ESG standards, digital trade rules, and carbon border mechanisms create compliance burdens and strategic uncertainty.
These challenges are compounded by the politicisation of trade. For example, export restrictions on critical minerals or strategic technologies-often framed as national security measures-can ripple across supply chains.
Risk and Legal Foresight for Business Resilience
To navigate this complexity, businesses must move from reactive compliance to strategic foresight. Key recommendations include:
1. The current disorder will likely persist; companies must adapt sooner rather than later.
2. Companies need to diversify across supply chains, customer bases, data storage, and investments to reduce vulnerability.
3. Understand bilateral agreements' nuances, as multilateral frameworks give way to fragmented arrangements. Local expertise provides critical advantages.
4. Embed geopolitical, trade, and legal risks within core business planning and risk assessments to anticipate shocks.
5. Seize opportunities-the new order creates risks but also openings for those attuned to shifting trade and legal trends.
The global trade landscape may be fractured but is navigable. Success depends on foresight, adaptability, and strategic legal insight. In a world where trade is increasingly shaped by politics and policy, legal and trade strategy must be central to commercial resilience.
(The author is Global Chair-elect of Baker McKenzie. He will be speaking at The Economic Times World Leaders Forum in New Delhi)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
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