For the last four decades or so, globalization has powered the world economy.
After the end of the Cold War,
what really accelerated was the economic integration
of big nations.
As I sign the North American Free Trade Agreement
into law, we are ready to compete.
What made sense for businesses
from a profit motive standpoint,
from a cost and efficiency standpoint
was generally also supported
by governments when it came
to developing really complicated supply chains
around the world.
The more countries work together,
the more their economies are linked,
the more likely they are to be at peace with each other,
and that that therefore is good for the world.
We're clearly not on that path anymore.
There's a lot of uncertainty about what is ahead.
So right now, the world economy is said to be at something
of an inflection point.
It's a rethinking of globalization
and to some extent, a regionalization,
and it changes everything.
We're in the midst of a serious financial crisis.
So in the years after the financial crisis,
the conventional Western economic capitalist-led model
came under a lot of scrutiny, given the impact
that that crisis had on ordinary people.
And in 2016, we saw a vote for Brexit,
an exit from the European Union in the UK,
and the election of Donald Trump in the US.
That, in extension, triggered a big trade war
between China and the US.
We've seen a global pandemic
that has tested those global supply chains
and that has led a lot of countries
to rethink offshoring production.
We're seeing war in the Middle East.
We are seeing coups in Africa,
and those conflicts are leading people
to question even more the benefits of globalization.
It was unprovoked,
but this is what Russian president, Vladimir Putin,
unleashed on Ukraine.
Explosions rocking several cities,
including the capital of Kyiv.
Russia's invasion of Ukraine was a sort
of crystallizing moment for people on both sides
of this emerging divide in the global economy.
In 2022 at the United Nations, we had a series of votes
over condemning Russia's invasion of Ukraine.
This is illegal invasion,
it is illegal occupation,
it is illegal annexation, all at gunpoint.
Roughly two thirds of the global economy,
led by the United States, voted to condemn Russia.
The remaining third we saw countries either abstain
or vote to reject any condemnation.
We're seeing billions of dollars
in investment in new factories
that is now being guided by geopolitics,
rather than simply economics.
And that is really seen when you dig down
into the United Nations vote.
In 2022, we saw $1.2 trillion in foreign direct investment
in the world.
We also saw $180 billion of that shift from the bloc
that refused to condemn Russia's invasion of Ukraine
to the US-led bloc condemning Russia's invasion.
The International Monetary Fund found
that if you had a full fracturing of the global economy,
you would eliminate 7% of global GDP.
That doesn't sound like much,
but it is equivalent to wiping out the French
and German economies together.
China remains, of course, the world's factory floor.
It offers scale that no one else does.
Sentiment towards investing there has turned quite negative
in recent years,
But there's a whole network of global trade
that is resting on the interrelationships
that have developed between the US and China
over the last 20 or 30 years.
Many people refer to it as, you know, I'm making the omelet.
If you're an American company,
you're still gonna be very reliant on many things made
in China for many years to come.
There is a group of economies
who are navigating the middle of this geopolitical divide.
You can call them the connector economies.
They're not in the game of choosing sides.
They're attracting factories from the US,
factories from China, often located close by
or in the same industrial park.
They're importing from China,
they're selling to the West or vice versa.
They can take advantage of their neutrality
to get benefits from both sides in this emerging rivalry.
In northern Vietnam,
you can drive an hour from the Chinese border
and into what was once a farm field with water buffaloes
and banana trees.
You're seeing big factories go up.
Before this was all rice fields.
People were farmers.
People's lives have much improved and life is
better than when we were farming.
Over the last five years, we've seen exports from Vietnam
to the United States double,
but at the same time, we've seen imports from China
into Vietnam double as well.
Places like Poland are now getting huge investment
from China and South Korea,
and even US chip makers as they set themselves up as a link
between Europe and the rest of the world.
We're also seeing places like Indonesia,
which has vast natural resources, bring together Ford,
the US automaker, and Chinese companies,
and Brazilian miners to exploit nickel mines
to sell into China or to sell into the United States.
If you're a country like Morocco
that has a free trade agreement with America,
and you already have also quite good relations with China,
well, then obviously,
you're in a position to play both sides.
Mexico is perfectly placed to cash in
on this so-called fragmentation.
Sitting right on the US border,
it's a textbook example of nearshoring,
but Mexico is also attracting a lot of Chinese investment
and that's why it's able
to straddle both sides of this divide.
Plenty of people talking about what says made in China
can say, in the future, made in Mexico.
And right now, we got the potential,
if we get our act together to get all those consumer goods,
electronic consumer goods that went into China
to be manufactured in Mexico.
To be clear, these connector economies, in some cases,
have a long way to go
before they have the necessary infrastructure in place.
Motorways, ports, electricity networks,
these are all key features
that global manufacturers want and need.
China, of course, has excelled at that for decades.
These other economies are now trying to catch up.
We're at the very beginning of this story.
The reality is we're not seeing the end of globalization,
but we are seeing a reshaping of the global economy.
It's an incredibly interlinked global economy
that we live in.
Business will continue to be done, money will continue
to flow around the world,
and even though there will be tensions
at a government-to-government level,
companies will look for a way
around those political divides.
But how this happens
and the direction we go in the years to come
is really gonna shape all of our lives.