The EU’s small businesses have a golden chance to move in the booming Asia-Pacific market, writes Karen Reddington.
Karen Reddington is the president of FedEx Express Europe.
Asia-Pacific (APAC) could resume its standing as the world’s fastest-growing regional economy in 2022, strengthened by a post-pandemic rebound in domestic consumption and export demand. Europe’s economy is also bouncing back from the initial shock of the pandemic.
However, both regions continue to strike a cautious tone about the overall recovery outlook, citing risks such as supply chain disruptions and the spread of the Omicron and Delta variants.
Despite these challenges, an economic interdependence and mutual reliance on strong trading relationships between the two regions has endured. Throughout 2021 alone, bilateral exchanges in goods between the EU and Association of Southeast Asian Nations (ASEAN) amounted to approximately €200 billion, and the EU remains ASEAN’s largest investor.
Recent supply chain shocks – from the Suez Canal blockage to the drop in air cargo capacity as passenger planes were grounded – may push some businesses to reassess how they view trade risk. But they are unlikely to undo what the forces of globalisation have done to integrate the economies of markets across Europe and APAC.
In 2020, the APAC region accounted for 62.6% of global e-commerce revenues and is expected to continue leading the charge over the next decade. Here lies an opportunity for EU export businesses to look East, prioritise internationalisation into key APAC markets, and capitalise on this resilient and rapidly growing market.
Doing so will not only open the door to millions of new customers, but will also help to revive international trade and facilitate a post-COVID boom, both at home and globally.
Small and medium enterprises (SMEs) are the backbone of the EU’s economy – they are the engine that adds value across all sectors of the economy, employs millions, and accounts for more than half of Europe’s GDP.
Yet, we know these businesses are underrepresented in international trade, with only 600,000 SMEs exporting goods outside the EU. We want to see more small businesses growing and capable of expanding beyond local parameters to survive and thrive.
Common issues exist that prevent EU SMEs from exploring trading opportunities outside of the bloc, many of which are associated with tariffs, taxes, and laws, as well as identifying reliable and trustworthy networks. Some SMEs might also feel they lack the cultural understanding to deal in overseas markets.
These limitations, coupled with challenges of unfamiliar administrative processes, can make some SMEs reluctant to look beyond Europe’s borders and push for true internationalisation.
But in many APAC markets, the trade infrastructure already exists to support SME exporters as they access new customers and abundant opportunities.
For example, the EU and Japan recently implemented the EU-Japan Economic Partnership Agreement, which saw exports rise 6.6% following the agreement, all aided by the removal of the majority of duties paid on exports annually.
Japan also has a Business Plan Drafting Support Service, which helps European SMEs to understand how they can best impact the Japanese market.
Meanwhile, the EU has also managed to solidify free trade agreements with South Korea and Singapore and is negotiating new agreements with Indonesia, Australia and the Philippines.
With the right policy infrastructure in place, SMEs looking to export to APAC to tap into the enormous growth potential need flexible, fast, and reliable access to these markets. Availability of cargo capacity will also prove essential as the demand for good soars.
While the pandemic continues to highlight challenges for global supply chains, European SMEs should not be deterred from exploring opportunities in the APAC region.
With the region’s ecommerce sales expected to nearly double by 2025 – and globalisation, increased connectivity, and the rise in online shopping opening the doors to more opportunities – the region should sit firmly on the agendas of SMEs with ambitions of rapid international growth.