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Global trade has reached its peak and globalisation is giving way to localisation, which is one of the most “profound changes” currently facing the global economy, says Paul Donovan, global chief economist at UBS Wealth.

Accounting for about a quarter of the world’s GDP, global trade is at a record high. “This is as good as it gets. What we are now starting to see is localisation returning to the manufacturing sector,” Donovan said on Tuesday, speaking at a Sasfin Wealth event.

Advances in robotics and artificial intelligence, collectively referred to as the fourth industrial revolution, mean that factories are mechanising, and are placed closer to companies’ consumer markets.

Swedish retailer H&M is using robotics, manufacturing most of its clothing in Europe, not Asia, enabling it to respond to consumer demand more effectively, Donovan said.

This allows the fast-fashion front-runner to quickly respond to consumer demand and even unseasonal weather.

“The fourth industrial revolution will dramatically alter investment, economics and society.”

At SA’s recent inaugural Singularity University event, disruption innovation expert David Roberts said that 40% of the S&P 500 companies would disappear in the next 10 years as exponential technologies disrupted a host of industries. The average lifespan of an S&P 500 company had decreased from 67 years to 15 years, he said.

While only about 9% of jobs would disappear altogether, automation and digitisation would affect about 40% of jobs, said Donovan. This would require people and companies to adapt to new ways of doing things.

“If your university degree is reliant on memorising a textbook, you are a low-skilled worker. We need companies and countries with workforces that are flexible.”

Donovan predicted a return to the imperial model of trade, where raw materials and intellectual property were imported, while “everything else” happened close to the consumer. “Raw materials will still be globalised, but finished products will be declining as a force for global trade in the years ahead.”

Source: Originally published in Business Day, Ziady. H, September 6, 2017. Globalisation gives way to localisation, in profound change, UBS economist says.

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High Density Container Terminal  (Picture credit - Getty Images)

High Density Container Terminal (Picture credit – BBC News/Getty Images)

Thanks to the kind reader who passed me this story. BBC News Environment correspondent, Matt McGrath, reports that current methods of measuring the full material cost of imported goods are highly inaccurate. In a new study, researchers have found that three times as many raw materials are used to process and export traded goods than are used in their manufacture.

Richer countries who believe they have succeeded in developing sustainably are mistaken say the authors. The research has been published  (click hyperlink to access the report) in the Proceedings of the National Academy of Sciences.

Many developed nations believe they are on a path to sustainable development, as their economic growth has risen over the past 20 years but the level of raw materials they are consuming has declined.

According to  Dr Tommy Wiedmann University of New South Wales “We are saying there is something missing, if we only look at the one indicator we get the wrong information”. This new study indicates that these countries are not including the use of raw materials that never leave their country of origin.

The researchers used a new model that looked at metal ores, biomass, fossil fuels and construction materials to produce what they say is a more comprehensive picture of the “material footprint” of 186 countries over a 20 year period.

“The trade figure just looks at the physical amounts of material traded, but it doesn’t take into account the materials that are used to produce these goods that are traded – so for something like fertiliser, you need to mine phosphate rocks, you need machinery, so you need extra materials.”

In this analysis, the Chinese economy had the largest material footprint, twice as large as the US and four times that of Japan and India. The majority comes from construction minerals, reflecting the rapid industrialisation and urbanisation in China over the past 20 years.

The US is by far the largest importer of these primary resources when they are included in trade. Per capita, the picture is different, with the largest exporters of embodied raw materials being Australia and Chile.

According to the model, South Africa was the only country which had increased growth and decreased consumption of materials.

The researchers believe their analysis shows that the pressure on raw materials doesn’t necessarily decline as affluence grows. They argue that humanity is using natural materials at a level never seen before, with far-reaching environmental consequences.

They hope the new material footprint model will inform the sustainable management of resources such as water. The authors believe it could lead to fairer and more effective climate agreements.

“Countries could think about agreements where they help reduce the emissions at that point of material use,” said Dr Wiedmann. “That’s where it is cheapest to do, where it is most efficient, where it makes more sense.” Source: BBC News