Now in its fifth edition, the GCI explores global 'connectedness' – the extent to which any given country is connected to others globally, measured based on actual interactions that take place between its citizens and other countries. It does this by considering depth (how much of their activity is domestic versus international) but also breadth (how many countries the international activity is shared among).
It's about more than just international trade; it's also about communication and migration. The GCI creates a score based on 12 global flows, including products and services, capital, information and people. By drawing on 3 million data points, the report provides a factual overview of how globalized the world and its individual countries actually are – and it's less than you think.
For example, the vast majority of flows still remain domestic, and almost half of those that are international take place between a country and their top three origins or destinations. The tendency to trade with one’s closest neighbors has still not been overcome then, even after the rise of e-commerce and logistical capabilities for extending further.
“There is still tremendous untapped potential around the world,” highlights John Pearson, CEO of DHL Express. “Increasing international cooperation continues to contribute to stability so companies and countries that embrace globalization benefit tremendously.”
The most globally connected country in the GCI was the Netherlands, while seven other European countries also made it into the top ten, solidifying Europe's status as the most connected region once again – and one to explore for new trade opportunities. However, generally less than half of countries moved up or down more than four places and fewer than a quarter saw a significant change of over seven spots. Those with greater depth advances saw a correlation with economic prosperity, while a decline indicated potential problems. For breadth conversely, a higher rank is not necessarily better than a lower one.
The index also notes countries that are outperforming expectations with their international flows, including Cambodia, Malaysia, Vietnam and Singapore. These Southeast Asian countries have a lower proximity to foreign markets due to language or geographical barriers combined with economic development levels, and yet here they appear committed to boosting their global standing. These could be worth considering for your business's next export venture.
Germany is also exceeding expectations but in a different respect, ranking as the largest country to make the top 10. Larger countries typically register lower depth levels as they already have booming economic markets to serve at home, and yet Germany placed 30th in this respect – its closest neighbor France came in 67th, while the UK took 80th place. These impressive depth flows have helped cement the country’s reputation as Europe’s largest economy, while also promoting intra-regional trade.
One nation that is comparatively underperforming is the US, down one place from 2015 to rank 30th overall. This was partly due to their depth position at 120th, though this falls in line with their low reliance on international trade. However, when they do engage in global flows, they do so across many countries, coming in 2nd for breadth levels. With many secure global connections made already, SMEs everywhere can benefit from this to explore their trading horizons.
Despite such potential, there has been much skepticism surrounding the future of globalization following the election of President Donald Trump and also the Brexit referendum. In spite of these nationalist moves, the GCI found that cross-border flows of trade, capital, information and people have all increased significantly for the first time since 2007.
New policies made in 2018 threaten to undermine these advances however, with tit-for-tat tariff increases and immigration restrictions already prompting the downgrade of global growth forecasts. The future of globalization, therefore, remains uncertain with the potential to progress, plateau, or even reverse the advances made.
Policies that target international flows through potentially lowering tariffs or relaxing border policies can improve a country’s connectedness – particularly its breadth by opening up to more distant countries. Meanwhile the UK, reported as the top performer for global distribution of flows, has an uncertain future ahead, with around 40% of those flows going to or from the EU.
As ambassadors of global integration and the promotion of free trade, DHL aims to enrich current debate surrounding global connectedness, with the GCI demonstrating the positive effects it can have. Connectedness and cross-border e-commerce can enable each other, providing opportunities for SMEs to participate in the global market as well.
The GCI has consistently found that more connected countries are more prosperous ones. Those companies that remain focused on cross-border trade opportunities, as opposed to shying away and staying within their national borders, will be the biggest winners going forward, embracing all the potential that the wider world holds for them.
To explore the GCI in full and see how your country stands up in relation to the rest of the world, click here.