Gone are the days when Europe had just a handful of ‘traditional’ trading partners. Over the past several years, European trade corridors and patterns have shifted significantly, with greater emphasis on emerging markets and local currency transactions. As this pivot continues, corporate treasurers are encountering new challenges from an FX risk management standpoint – and companies must adapt their hedging strategies, international payments processes, trade finance arrangements, and technology stacks in order to thrive.
Playing cards, porcelain, gunpowder, paper money, and printing-press technology. All these items were introduced to Europe from China via the Silk Road [1] – a vast network of trade routes that connected the East to the West from the second century BCE to the mid-15th century.
While the logistics of trade may be very different today, China is once again one of Europe’s top trading partners – together with a growing stable of emerging market economies. According to Gibran Maqsood, Head of Transactional FX Sales, Europe, Barclays Corporate Banking, “Several interesting changes have taken place in the European cross-border trade landscape in recent years, especially around trading partners and currencies.”
Although the majority (59.9%)[2] of EU trade – imports and exports combined – still occurs within the single market, extra-EU trading relationships are shifting, he says. “There has been a notable transition in the focus of bilateral trade towards emerging economies, especially China, whereas trade interactions with long-standing partners have generally progressed at a slower rate.” (See box on next page for detailed country-level statistics on trade shifts).
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