Your Excellencies and distinguished guests: Good morning. It is an honor to be here today representing Citigroup.
In my position as CEO, I have the privilege of running one of the world’s most global banks. We move $4 trillion in volume — equivalent to the GDP of Germany — for 5,000 of the most important multinational companies, every single day. This represents a constantly innovating network that helps underpin the global financial system and international trade. So, it should come as no surprise that Citi is a strong advocate for a world that continues to collaborate across borders.
With clients operating in nearly 160 countries and jurisdictions, we’ve had a front-row seat to the evolution of globalization over the course of our bank’s more than 200-year history. Today, we are witnessing a monumental shift towards another new era — and trade and supply chains are at the heart of these changes.
For the last several decades, there has been a strong emphasis on sourcing and moving manufactured goods as efficiently as possible to cut costs. But the geopolitical and macroeconomic shocks of late have upended this approach, and we’re now reaching a critical tipping point.
Today, amidst the backdrop of transformative technological innovations, increasing resilience is the clear and resounding call. We see nearly every country and company focused on security — be it food, water, energy, cyber, financial, or operational security. And consequently, they’re reconfiguring supply chains to meet the demands of customers and other stakeholders. It took too long but we’ve all woken up to the fact that concentrating the sourcing or production of any good — let alone essential goods — in one part of the world can have dire consequences.
This heightened focus on resiliency has given birth to a new era of diversification, and as businesses and countries adapt to this era, we’re starting to see clear benefits in economic growth.
First, as demand for resiliency and diversity grows, so too does the opportunity for smaller players to engage in global trade. That includes last-mile suppliers in developing countries.
Indeed, in addition to the initiatives announced this morning under the Partnership for Global Infrastructure and Investment, I’ll shortly be announcing an innovative trade financing partnership with a bank in India. Together, we will provide capital to more than 300,000 female entrepreneurs in rural India to help them grow their small businesses and increase their participation in global commerce.
A second benefit of an increased focus on resiliency is how investments in supply chains are creating diversified economies. Malaysia, Thailand, and Vietnam are early examples of this in the Indo-Pacific. Elsewhere, in the Middle East, Saudi Arabia, the UAE, and others are undergoing their own transformations as they look to diversify from oil.
We’re also seeing countries and companies diversifying their supply chains in specific sectors. This is particularly evident in Mexico, as a result of the United States-Mexico-Canada Agreement. Citi has been supporting clients seeking to reduce risk and increase efficiencies through nearshoring in Mexico. In some cases, it’s North American-based automakers bringing supply chains closer to home. In other cases, it’s European and Asian companies moving closer to their end consumers in North America.
Just this fall, a Korean auto parts supplier opened a 500,000-square-foot plant that Citi helped to finance in Guanajuato, Mexico. Likewise, in Thailand, we’re working with some of the largest electric vehicle makers to open factories and flagship stores. The economic benefits can ripple through the global economy. These new factories and stores not only create jobs and economic value in the communities where they’re located. They also add value for the Asian, European, and American companies who’ve built them, not to mention each of their home markets.
The third benefit we’re seeing from diversification is the creation of new trade corridors. Brazil is trading more with India and China than it is with Argentina. The Middle East is now more connected to Asia than Europe. And those connections will be further strengthened by a proposed economic corridor connecting the Middle East to India.
As the old system continues to be disrupted, the new era of diversification will evolve to meet new demands. But we should be clear-eyed that these changes won’t happen overnight. Any significant movement, especially deeper in supply chains, is much easier said than done. Supply chains and trade relationships take years to build. In some cases, it will take a decade for new players to achieve the scale and manufacturing quality that traditional production hubs developed over the last half-century.
Still, the demand to make these new connections and foster new relationships is palpable. And we anticipate the movement will continue to gain more and more momentum in the years to come.
We are far from the end of globalization, but it is changing. And with those changes, we’re seeing tremendous opportunities for all our economies to work together to tackle the unique 21st-century challenges.
Resilience doesn’t mean retreating to our corners. In some sectors, national security requires us to increase our domestic production capabilities. But excessive self-reliance, in the name of national security, won’t make us more secure. True resilience comes from open markets and robust and diversified supply chains. A decoupling of the world’s dominant economies is neither possible nor prudent. De-risking — or diversification, as we prefer to call it — has become the name of the game.
We are best served to focus on fostering intra- and inter-regional collaboration. First, we need to finalize all four pillars of the Indo-Pacific Economic Framework. But IPEF is just a start, and I would encourage this room to think bigger still. We should all challenge one another to explore trade agreements that take on market access — a critical hurdle to more diverse supply chains and less-concentrated trading relationships. There is growing evidence that these relationships can produce significant benefits.
Regional free trade agreements, such as the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, are only a few years old but are already lowering tariffs, opening markets for services, and protecting investment and intellectual property between major economies in the region. They’re also paving a way for cross-border collaboration with rules-of-origin provisions. More regional trade agreements with market access provisions can go a long way to open these various paths.
The new era of diversification offers a new way forward for globalization, not a reverse of course. As business and government leaders, we mustn’t lose faith in the tools that have enabled growth and progress over these past decades. And we should be conscious to avoid policies that swing the pendulum too far towards resilience and away from affordability and economic growth. Security and resilience go hand-in-hand in most cases — and we ought to seek enhancements to both through more global cooperation, not less.
We look forward to working with all of you on building a more resilient and prosperous future.
Thank you.
