1、PLACEHOLDER ONLY!Use Secondary image with Color adjustment treatment,following guidelines.Fanatic Studio/Getty ImagesJanuary 2023Global flowsThe complication of concentration in globaltradeConcentration in the origins of traded products is widespread,prompting questions about whether to diversify or

2、 decouple.By Olivia White,Jonathan Woetzel,Sven Smit,Jeongmin Seong,and Tiago Devesa No region is close to being self-sufficient.Every region relies on trade with others for more than 25 percent of at least one important type of good.About 40 percent of global trade is“concentrated.”Importing econom

3、ies rely on three or fewer nations for this share of global trade(Exhibit).Three-quarters of this concentration comes from economy-specific choices.In these cases(30 percent of global trade),individual countries source a product from only a few nations,even when global supply options are diversified

4、.Over the past five years,the largest economies have not systematically diversified the origins of imports.All have vulnerabilities,some more than others.Informed reimagination of global trade requires a granular approach,both in mapping concentrated trade relationships and in deciding on actionwhet

5、her to double down,decouple,or diversify.At a glanceMaize(corn)DiamondsAirplanesVaccinesMemory chipsNatural gas(pipeline)SoybeansLaptopsIron oreExamplesEconomy-specifc concentrationMany supplying economies exist,but each importer relies on only a few of them Global concentrationFew supplying econo-m

6、ies,on which most importers rely40106030Concentrated tradeImporters depend on three or fewer nations1Diversifed tradeTotal goods tradeProportion by type of concentration,%Web Exhibit Global trade value by type of concentration,20211Concentration refers to the product-level concentration for the impo

7、rting economy.In the underlying analysis,“concentrated trade”is defned as all imports with a Herfndahl-Hirschman Index(HHI)over 3,000;this approximately represents cases where a product is supplied to an importer by three or fewer econo-mies.The 10%of trade corresponding to“few supplying economies”i

8、s defned as all products with a global export market HHI over 3,000.2Non-exhaustive.Examples given are the largest,ordered by total value of concentrated trade,across a range of sectors.Source:UN Comtrade,2021;McKinsey Global Institute analysisAbout 40 percent of global trade is concentrated,mainly

9、due to economy-specifc factorsMcKinsey Global Institute|The complication of concentration in globaltrade1We live in a highly interconnected world.Every region relies on imports for more than 25 percent of at least one important type of good,according to recent McKinsey Global Institute(MGI)research.

10、1 Interconnections have created broad benefits over time,improving efficiency,increasing global product availability,and fostering economic growth.But recent supply chain disruptions,Russias invasion of Ukraine,and rising tensions between China and the United States have highlighted the importance o

11、f resilience.Firms and policy makers alike are examining where inputs come from,and,in some cases,contemplating reconfiguring or even breaking certain long-standing trade ties.Concentrated global trade creates complications.On the one hand,concentrated trade relationships can reflect and drive effic

12、iency gains.On the other,interruption of concentrated trade flows can be particularly disruptive if products are harder to replace on short notice due to a lack of visibility and alternatives.Where do concentrated trading relationships exist across products and between countries?In the face of new d

13、isruptions,how should companies and countries adjust these relationships,if at all?To examine these questions,this article builds on the findings of MGIs recent research on global flows,analyzing concentration across more than 120 countries,roughly 6,000 products,and eight million individual trade c

14、orridors.2About 40 percent of global trade is concentrated,mainly due to economy-specific factorsFor many products,countries rely on a diversified pool of trade partners.This is particularly true for larger economies.For example,China imports crude oil from more than 40 economies,and the United Stat

15、es imports cars from more than 25 nations.However,a significant portion of global trade is concentrated in the sense that an economy relies on only a handful of nations to source almost all of its imports of a specific product.Indeed,40 percent of the value of global goods trade corresponds to cases

16、 where the importing economy relies on three or fewer nations for the supply of a given manufactured good or resource(Exhibit 1).Narrowing the focus further,about 15 percent of global goods trade corresponds to cases where the importing economy relies on only two or fewer nations.In some instances,c

17、oncentration arises because only relatively few economies export a given product,defined here as“global concentration.”Soybeans are an example(see Box 1,“A tale of two commodities:Global versus economy-specific concentration in soybeans and wheat”).However,such cases account for a relatively small s

18、hare of total concentrated trade.Most concentration is due not to a lack of supplier economies.Instead,concentration arises because of specific choices to source products from only a few countries despite the fact that other potential supplying countries are available.In this research,this type of c

19、oncentration is described as“economy-specific concentration.”Of the 40 percent of global trade value that relies on three or fewer supplier economies,about three-quarters corresponds to economy-specific concentration.1 Global flows:The ties that bind in an interconnected world,McKinsey Global Instit

20、ute,November 2022.2 Unless otherwise noted,all findings in this article are based on MGI analysis of UN Comtrade,2021 data,accessed in November 2022,using six-digit Harmonized System(HS)codes to categorize all traded goods,including both manufactured goods and resources.In 40 percent of globaltrade

21、in products(by value),the importing economy relies on three or fewer nations for the supply of a given product.2McKinsey Global Institute|The complication of concentration in globaltradeExhibit 112A significant share of global trade is concentrated,largely due to economy-specific factors.Global good

22、s trade by product-level concentration for the importing economy,2021Trade value,$trillionConcentration(HHI)2Least concentratedMost concentratedEconomy-specific factors drive concentration in trade40%of total trade valueAlmost all traded supply from three or fewer economies1Global concentrationEcono

23、my-specific concentrationGlobalconcentration3Economy-specificconcentrationMcKinsey&CompanyConceptual overview of import concentrationJapans wheat imports are mostly supplied by the United States and Canadathis is for economy-specific reasons,as other major suppliers are availableChinas soybean impor

24、ts are mostly supplied by the United States and Brazilglobally there are no other major suppliers availableEconomy-specific concentrationWheat exampleGlobal concentrationSoybean example1This is an approximate interpretation of a Herfindahl-Hirschman Index(HHI)greater than 3,000.2Measuring concentrat

25、ion using the HHI of each international trade flow using the 6-digit Harmonized System(HS6)to define product categories.3Defined here as products for which all globally traded supply is provided by 3 or fewer economies,with an HHI of about 3,000.Note:Arrows on bottom panel display cumulatively over

26、90 percent of supply for a given importer.Source:UN Comtrade,2021;McKinsey Global Institute analysis10,00009,0008,0007,0006,0005,0004,0003,0002,0001,000Other economiesUnited StatesBrazilChinaThailandJapanSupplier economiesImporting economiesSupplier economiesImporting economiesOther economiesCanadaU

27、nited StatesAustraliaRussiaUkraineJapanPhilippinesTrkiyeOther economies3McKinsey Global Institute|The complication of concentration in globaltradeConcentration exists in all sectors but is particularly pronounced in mining and the food value chainConcentration exists in all sectors and stages of the

28、 production process,from raw commodities to intermediates and final products.All countries rely on some inputs whose origins are concentrated,with such inputs often spanning a value chain across different sectors.Agriculture is an example.Soaring global food prices in 2022 largely reflected not just

29、 disruption to the growing and shipping of grains like wheat,but also to disruptions to crucial upstream chemical inputs such as fertilizer,most notably potash.3 The following key findings emerged from an examination of the most traded products by value in each sector(Exhibit 2):Agriculture and food

30、 are among the most concentrated sectors,mainly reflecting economy-specific concentration.The agriculture sector shows the highest average level of concentration.While staple cereal crops such as wheat,rice,and maize are exported by a relatively 3 Olivia White,Kevin Buehler,Sven Smit,Ezra Greenberg,

31、Mihir Mysore,Ritesh Jain,Martin Hirt,Arvind Govindarajan,and Eric Chewning,“War in Ukraine:Twelve disruptions changing the world,”McKinsey&Company,May 9,2020.wide range of countries,many economies source the bulk of their supply from three or fewer partners.The Philippines,the worlds second-largest

32、importer of rice,obtains almost 90 percent of its supply from Vietnam,while Saudi Arabia,the third-largest importer,receives about 75 percent of its supply from India.While a couple of the most traded products in this sector are globally concentratedfor instance,almost all soybean exports are from B

33、razil and the United Statesthe global form of concentration is the exception rather than the rule.Similarly,in the food and beverage sector,everyday goods ranging from fresh beef to beer often show economy-specific concentration.More than 100 economies export beer,but the United States,which is the

34、worlds largest beer importer,sources about three-quarters of its supply from Mexico.Global concentration is most prevalent in the mining sector,especially in the case of iron ore.In the mining sector,global concentration plays a greater role.In this sector,about 50 percent of Box 1A tale of two comm

35、odities:Global versus economy-specific concentration in soybeans and wheatFeeding the global population relies on flows of agricultural commodities across the world.Often,countries source imports of key agricultural goods,from cereal staples to fruits and vegetables,from only a few partner economies

36、.Take the example of soybeans and wheat.The typical country receives almost all of its supply of both commodities from two or three other economies.However,beneath this similarity,the underlying dynamics driving concentration for these two commodities are very different.Soybean trade is globally con

37、centrated.Two economies,Brazil and the United States,account for about 90percent of globally traded supply.The top 15 importers globally,including China,Japan,and Thailand,together account for about 95 percent of global soybeans imports,with each one receiving on average 90percent of its supply from

38、 these two economies.Wheat trade often shows economy-specific concentration.Global supply of wheat is more diversified,with about 15economies providing 90 percent of globally traded supply.However,most countries source their wheat from only a few of these 15 economies,with main trading partners vary

39、ing by country.For example,in 2021,more than 90 percent of Trkiyes wheat imports were from Russia and Ukraine,while over 80 percent of imports to the Philippines came from the United States and Australia.4McKinsey Global Institute|The complication of concentration in globaltradeExhibit 2More concent

40、ra-ted sectorsAgricultureMiningFood and beveragesElectronics and electrical equipmentChemicalsTranspor-tationequipmentContract manufacturing and otherBasic metalsTextiles and apparelLess concentra-ted sectorsEnergy resourcesMachineryAverage concentration,6HHIPotassic fertilizersCopperMicroprocessors

41、Hybrid carsCell phonesBeerLaptopsFresh beefSpecialty compounds(lactams)CosmeticsCoffeeSoybeansGasoline LGVsLi-ion batteriesPalm oilEngine partsFlavoringsJewelryLNG4Iron oreElectrical energyMaizeMetal seatsWheatNonmonetary goldCopper scrapDiesel LGVs3NickelCopper wireTVsCotton jerseysChromiumShoesBau

42、xiteCrude oilNatural gas(pipeline)Other food preparationsBituminous coalSalmonLignite coal5Midsize carsTapsSwitchboardsPower toolsFace masksMilled rice7,0001,0002,0003,0008,0005,0004,0006,0009,000|Average concentration for largest products in selected sectors,12021 Key products across sectors are of

43、ten sourced from relatively few nations.1Five sectors have been excluded from the visualization.Medical supplies;glass,cement,and ceramics;rubber and plastics;and wood and paper products have been excluded as the lowest-value sectors by total 2021 import value.Pharmaceuticals have been excluded due

44、to low granularity of available data.Descriptors are indicative of HS6 categorization.2Value-weighted average of all products in sector.3Light goods vehicles.4Liquefied natural gas.5While lignite coal is relatively widely produced for domestic consumption,it is exported in significant quantities by

45、only a few countries.6Value-weighted average of all economies import concentration,as measured by the Herfindahl-Hirschman Index for the given product.Source:UN Comtrade;McKinsey Global Institute analysisAlmost all supply from 2 or fewer nationsAlmost all supply from 3 or fewer nationsMcKinsey&Compa

46、ny$100 billionProducts with concentratedglobally traded supplyCircle size=total trade valueSector average2|5McKinsey Global Institute|The complication of concentration in globaltradeall trade by value is in products that are supplied by three or fewer economies.Iron ore,the most traded mineral commo

47、dity,is the most prominent case,although many other commodities are also exported from only a few countries,including bauxite(principal ore for aluminum),chromium,natural graphite,nickel,niobium,and rare earths.Some economies develop particularly concentrated relationships.A striking example is Sout

48、h Korea,which sources more than 95 percent of its nickel from New Caledonia.Most energy resources are not particularly concentrated for individual economies,but pipeline natural gas is.Because of the infrastructure needed for its transportation,pipeline natural gas is a concentrated import for many

49、individual economies,which obtain this resource through pipelines from relatively geographically proximate partners.For instance,in 2021 China received about 85 percent of its pipeline supply from Turkmenistan,Russia,and Kazakhstan,in descending order.And Chinas supply base is broad relative to most

50、 others.For example,in the same year,Argentina obtained virtually all of its pipeline gas from Bolivia,and many European countries sourced it almost exclusively from Russia.4Trade in liquefied natural gas(LNG)by maritime transportation is an alternative channel for economies to achieve some diversif

51、ication,and it is on average about 60 percent less concentrated than pipeline natural gas.In 2021,European economies tended to source the majority of their natural gas from pipelines,whereas the largest Asian importers(including China,Japan,and 4 Statistical review of world energy,BP,2022.South Kore

52、a)tended to source the majority of their supply as LNG.All manufacturing sectors have some concentrated products,with global concentration being most prominent in electronics.Electronics has the highest proportion of globally concentrated trade of any manufactured goods sector.About 20 percent of th

53、e value of electronics trade is in globally concentrated goods,from game consoles to vacuum cleaners.Mobile phones and laptops are the most traded highly concentrated productstheir supply originates mostly from China.However,an equal portion of electronics tradeabout 20 percent by valuecorresponds t

54、o cases where goods are more widely produced but an individual economys supply is sourced from three or fewer economies:economy-specific concentration.Televisions are an example.Although there is a relatively wide set of exporters,the United States sources more than 70 percent of its televisions fro

55、m Mexico,and Japan receives a similar share of its supply from China.A skew toward economy-specific concentration is particularly prominent in the transportation equipment sector.In transportation,economy-specific concentration is ten times more common than global concentration,by value.Hybrid cars

56、and goods vehicles provide examples.While both are widely produced,Australia imports more than 80 percent of its hybrid cars from Japan,Brazil imports almost 90 percent of its diesel light goods vehicles from Argentina,and almost all US imports of light goods vehicles are from Mexico.In minerals,50

57、percent of all trade by value is in products that are supplied by three or fewer economies.6McKinsey Global Institute|The complication of concentration in globaltradeWhy have these concentration patterns developed?The reasons differ by type of concentration and by product.Global concentration is lar

58、gely found in resources where natural endowments play a role and in some manufactured goods where a few countries have achieved a significant comparative advantage.MGIs previous research highlighted electronics,textiles,mining,agriculture,and food and beverages,which together accounted for more than

59、 half of the value of products that are globally concentrated.5 Global concentration in resources is seen in iron ore.Australia and Brazil have the worlds largest iron ore reserves,which are relatively high-grade and economical to extract,complemented by large-scale,efficient extraction processes th

60、at deliver low unit costs.6In manufactured goods,two drivers of comparative advantage may historically have led to global concentration:reinforcing scale advantages that are difficult to replicate,and proprietary technology advantages.China established a significant comparative advantage in laptop p

61、roduction in part through lower factor costs and an enabling human capital,infrastructure,and policy environment.Over time,a local ecosystem of suppliers developed that may have enabled China to reinforce competitive advantages.Based on proprietary technology,Japan and South Korea established compar

62、ative advantages in many types of advanced machinery.They are the main global suppliers of the machinery used to manufacture flat panel displays,for example,representing almost 80 percent of globally traded supply.In the case of economy-specific concentration,what leads individual economies to form

63、concentrated relationships when a broader pool of supplier economies is available?Four factors particularly contribute.The way the following factors play out varies by economy and product,and often several of them play a role for any given product:Geography and transportation costs.When transportati

64、on costs are substantial relative to the cost of the good itself,nearby partners are likely 5 Global flows:The ties that bind in an interconnected world,McKinsey Global Institute,November 2022.6 Iron ore,Mineral Commodity Summaries,United States Geological Survey,2022.7 Iron ore:Where quality meets

65、opportunity,Minerals Council of Australia,2021.8 Oil and petroleum products explained,US Energy Information Administration,November 2022;Mapping the U.S.Canada energy relationship,CSIS Briefs,Center for Strategic&International Studies,May 7,2018.to be preferred,all else being equal.For example,Egypt

66、 and Trkiye historically sourced more than 80 percent of their wheat from relatively proximate Ukraine and Russia,while almost 90 percent of Mexicos wheat imports come from the United States.Landlocked countries that rely on(relatively more expensive)ground transportation may lean toward establishin

67、g a narrower set of trading relationships with neighbors.In other cases,the physical requirements of transporting a product require closer partners:pipeline natural gas and electrical energy are examples.Consumer and business preferences.A product may be exported by a wide range of economies,but con

68、sumers or businesses in individual economies may have country-or region-specific preferences that dispose them to source from a narrower partner set.Beer provides an example.While the beer export market is global,France and the Netherlands each source more than 50 percent of their beer imports from

69、Belgium.Austria receives a similar share of imports from Germany.Business production processes may also take in preferential inputs from a particular supplying economy.Certain steel mills in Japan and South Korea import a specific low-alumina iron ore that is produced in a single region of Australia

70、 in order to reduce impurities.7 Many US oil refineries are tooled to process relatively heavier crude oil such as that sourced from Canada.The United States is the worlds largest oil producer but still imported more than eight million barrels a day in 2021,of which more than 50 percent came from Ca

71、nada.8 Market structure.In some cases,the structure of buyers and sellers in given markets may lead to concentrated relationships at the economy level.This can be seen in airplane tradea single airline will often be the largest buyer for a given country,and it may source the majority of its passenge

72、r jets from a single supplier.For example,the flag carrier of Portugal currently operates a fleet manufactured primarily in France and Germany,while the largest carrier based in Ireland sources 7McKinsey Global Institute|The complication of concentration in globaltradeits fleet almost exclusively fr

73、om the United States.An importer may also opt to source mostly from a single geography in order to derive benefits,including simplifying the legal,operational,and cultural framework within which an importer operates.In this way,large buyers and sellers may shape the market structure for some product

74、s in their economies.Preferential trading arrangements and barriers.These can evolve for many reasons.In some cases,tariffs or nontariff barriers may steer buyers toward using suppliers from a certain set of countries.Examples of this appear in the automotive sector.In the 1960s,the United States im

75、posed what was popularly known as a“chicken tax”on light trucks in response to the decision by some European economies to impose tariffs on US chicken exports.The tax is still in place today and has meant that the United States mostly imports these vehicles from partners in the United StatesMexicoCa

76、nada Agreement,which are exempted from such tariffs.9All economies have developed concentrated relationshipsAll economies participate in concentrated trade relationships.Analysis of all 128 economies for which 2021 data were available reveals that every economy sources at least 20 percent of imports

77、(by value)from three or fewer partner economies,and at least 5 percent from two or fewer economies.Examples of economy-specific concentration,many of which have been noted,span all countries.However,there is significant country-by-country variation in the extent of concentration on average and for i

78、ndividual imported products(Exhibits 3 and 4).The following three findings are worth noting:Economies in Europe and AsiaPacific tend to have the most diversified trade relationships.Economies in these two regions tend to trade with a relatively larger number of manufacturing-9 Daniel Griswold,Why ar

79、e pickups so expensive?Blame the chicken tax,The Cato Institute,March 2022.10 Economies with a total import value below the global median have a value-weighted average import HHI that is 50 percent higher than that of economies with a total import value above the global median.11“Nghi Son refinery s

80、upplies 20 million tonnes of petroleum to domestic market,”Vietnam News Agency,July 28,2022.heavy intraregional partners.This can reflect preferential trading agreements and shorter transportation distance as well as some degree of regional preference.Larger economies are less concentrated on averag

81、e but develop concentrated relationships for selected products,often with nations in the same region.Notably,in most regions,the country with the lowest import concentration also tends to be the largest importer:Germany in Europe,China in AsiaPacific,the United States in North America,Brazil in Lati

82、n America,and South Africa in sub-Saharan Africa.Nonetheless,even these large economies often develop concentrated relationships with other nations in the region for specific products.For example,the United States and Mexico have high import concentration in trade with each other for specific goods.

83、The United States imports nearly all of its semitrailer trucks and light goods vehicles from Mexico.Mexico imports nearly all of its maize,propane,and refined petroleum products from the United States(see the next section for more detail on the concentration“fingerprints”of six large economies).Smal

84、ler economies are,on average,50 percent more concentrated than larger economies.10 Smaller trade volumes make it less feasible for these economies to source goods from a range of partners.At the same time,relative lack of domestic infrastructure may inhibit partner diversification.For example,Vietna

85、m,a net importer of crude oil,receives more than 80 percent of its supply from Kuwait;this oil is then processed in a new refinery,which was built in 2018 by a Kuwaiti-led consortium.11 The economies of landlocked developing countries are often the most concentrated.Laos,for example,receives about 8

86、0 percent of its total import trade from just three land neighbors:China,Thailand,and Vietnam.8McKinsey Global Institute|The complication of concentration in globaltradeExhibit 3Regions with lower average concen-tration1Europe 302AsiaPacificEECA3MENA4North AmericaRegions with higher average concen-t

87、rationSub-Saharan AfricaLatin AmericaAverage concentration,HHIEthiopiaUnited StatesJapanIndiaGuyanaSouth AfricaNigeriaChinaPakistanJordanBrazilRussiaEswatiniUnited Arab EmiratesNepalIrelandEgyptTajikistanArgentinaTrkiyeCanadaBelarusUnited KingdomLaosKenyaGermanyChileMexicoFranceCambodiaLuxembourg1,0

88、006,0002,0007,0008,0005,0003,0004,000|Average concentration for importing economy,2021Larger economies tend to have lower levels of concentration,but there are marked differences between and within regions.1The import value weighted average import concentration across all economies in the region.2Eu

89、rope 30 comprises the 27 European Union member states plus Norway,Switzerland,and the United Kingdom.3Eastern Europe and Central Asia(EECA)includes Commonwealth of Independent States countries,Russia,Trkiye,and other European countries not included in Europe 30.4Middle East and North Africa.Source:U

90、N Comtrade,2021;McKinsey Global Institute analysisCircle size=total import value$100 billionRegion average1|9McKinsey Global Institute|The complication of concentration in globaltradeExhibit 4ProductConcentrationMost concentrated economyTop economy share,%Corridor value,$billionRefined petroleum(hea

91、vier)MexicoUnited States,95 Liquefied natural gas BrazilUnited States,90 Light goods vehicles(diesel)United StatesMexico,95Photovoltaic cellsBrazilChina,95Liquefied propane gasMexicoUnited States,95 Semitrailer trucksUnited StatesMexico,95Maize(corn)MexicoUnited States,95 Brown coal2PhilippinesIndon

92、esia,95Li-ion batteriesSouth KoreaChina,90 Copper cathodesBrazilChile,80HHIOverview of largest concentration skews,12021 Large economies have above-average levels of concentration for certain products.1Largest 10 skews as measured by difference in HHI between the economy with the highest level of co

93、ncentration and the average concentration across economies for the product,excluding all trade where the product import value for an economy is less than$1.5 billion;this represents the top 50 percent of trade by value.Excludes trade flows where the concentrated economy is a significant net exporter

94、 of the product,and excludes product codes for unspecified goods or for which data quality is low.Product descriptions are indicative only and differ from exact HS6 specifications.2Includes sub-bituminous and lignite coal.Source:UN Comtrade,2021;McKinsey Global Institute analysisGlobal average acros

95、s economiesMost concentrated economyMcKinsey&Company10,0002,0004,0006,0008,0003.38.22.47.02.22.56.93.93.02.010McKinsey Global Institute|The complication of concentration in globaltradeOver the past five years,the largest economies have not systematically diversified the origins of importsCountries r

96、ely most on imports when no domestic supply exists,particularly for critical goods.In this case,concentrationwhether global or economy-specifichas the potential to create particularly pronounced vulnerabilities.When concentrated imports are of a discretionary good that is already produced at volume

97、in the domestic market,import concentration may matter less.Looking at a range of large economies across regionsBrazil,China,Germany,India,South Africa,and the United Stateseach has a distinctive“concentration fingerprint.”For example,there is no sector for which all six economies rely on imports fr

98、om concentrated trade relationships.Overall,China and Germany have the fewest sectors in which they are net importers of concentrated goods.The other four major economies analyzed have a broader set of concentrated dependencies.For each of these four,electronics are the largest area of concentrated

99、net imports,while Germany and China are net exporters.Energy resources are a relatively concentrated and import-reliant sector for Germany;China and India are particularly diversified in their energy resources imports(Exhibit 5).Brazil relies on concentrated inputs for many sectors where it is a net

100、 importer,notably chemicals and electronics.Brazils largest import sector by value is chemicals,which includes critical agrichemicals,such as fertilizers,insecticides,and herbicides.As one of the largest agricultural producers in the world,Brazil is one of the largest importers for all of these prod

101、ucts and has established concentrated relationships with just a handful of partners for its supply despite a relatively wider set of available exporting economies.For example,in 2021,Brazil sourced more than 90 percent of ammonium nitrate fertilizer from Russia and about 80 percent of phosphate fert

102、ilizer from China and Morocco.12 In this analysis,electronics includes the computers,consumer electronics,and electrical equipment sectors.13 Livia Neves,“Brazil imported 5.2 GW of solar modules in Q1,”PV Times,June 1,2022.14 Genevieve Donnellon-May and Zhang Hongzhou,“Chinas main food security chal

103、lenge:Feeding its pigs,”The Diplomat,July 6,2022.The sector whose concentration has increased the most is electronics,largely due to a sharp rise in imports of photovoltaic cells,which come almost exclusively from China.12 Between 2016 and 2021,Brazils imports of photovoltaic cells grew eightfold,ma

104、king the cells its largest electronics import.Brazils photovoltaic cell imports were on course to more than double from 2021 levels in 2022.13 Chinas concentration profile is shaped by a skew toward globally concentrated mining and agricultural commodities.China is the largest importer of some globa

105、lly concentrated commodities,leading to higher levels of concentration.China is the largest global importer of iron ore,importing ten times more than Japan,the second-largest importer.Iron ore accounts for almost two-thirds of Chinas mining imports.For comparison,in the United States,this figure is

106、15 percent,and in India about 1 percent.This skew toward iron ore drives concentration in the mining sector.Beyond iron ore,China is also the largest global importer of many other globally concentrated commodities,including cobalt,lithium,and nickel.A similar picture is seen in agriculture,Chinas mo

107、st concentrated sector.These imports are dominated by soybeans,which represent almost half of Chinas overall agricultural imports and are largely used for pigfeed to sustain rising consumption of pork.Soybeans are globally concentrated,and China is the largest global importer of soybeans,importing a

108、lmost 20 times more than second-place Argentina.Between 2016 and 2021,soybean imports became more concentrated,with about 95 percent coming from Brazil and the United States in 2021,up from about 75 percent in 2016.The rising concentration prompted concerns in China about security of supply and acti

109、on to reduce domestic consumption.1411McKinsey Global Institute|The complication of concentration in globaltradeExhibit 55,00010007,0006,000-100401,000203,0002,000-604,000-80-4080-20600ElectronicsMachineryEnergy resourcesFood and beveragesBasic metalsAgricultureRubber and plasticsTextilesTransportat

110、ion equipmentChemicalsGlass,cement,and ceramicsWood and paper productsPharmaceuticals3,0004,0000100-100-607,0006,000-8040-405,000-200202,000601,00080Food and beveragesAgriculture3MachineryRubber and plasticsMiningBasic metalsGlass,cement,and ceramicsChemicalsElectronicsTransportation equipmentWood a

111、nd paper productsPharmaceuticalsTextilesEnergy resources8040-40200-1005,000-80-604,000-20606,00010007,0001,0002,0003,000Basic metalsTextilesWood and paper productsElectronicsTransportation equipmentRubber and plasticsChemicalsEnergy resourcesPharmaceuticalsMiningFood and beveragesAgricultureGlass,ce

112、ment,and ceramicsThe largest global economies have distinctive concentration fingerprints.1Share of domestic consumption met by net flows(ie,imports minus exports divided by total domestic consumption)in value added terms.2Share of domestic consumption met by net imports is below 100%and not display

113、ed to conserve scale.Concentration level as displayed.3China has a nuanced net position in agriculture trade.It is a net exporter of agriculture products in value-added terms.However,it is net importer of key crops in gross terms.In 2021,China was the largest global importer of agriculture products

114、in gross terms.Source:UN Comtrade,2021;OECD TiVA,2020;BP Statistical Review of World Energy,2021;McKinsey Global Institute analysisMcKinsey&Company10%reduction10%change1025%increase25%increaseChange in concentration,201621Average import concentration by sector,2021 or latest availableCircle size=sec

115、tor imports as a proportion of total imports for the economy20%Area of greatest import dependency and concentrationAverage import con-centration,HHIShare of domestic consumption met by net imports,1%BrazilA range of more concentrated sectors,with concentration increasing in electronicsChinaAgricultu

116、re and mining are the largest concentrated sectorsGermanyAgriculture and energy resources sectors are relatively large,concentrated,and dependent on importsExhibit 5Mining2Machinery212McKinsey Global Institute|The complication of concentration in globaltradeExhibit 5(continued)-100-204,000-40-60400-

117、805,00020806,000607,0001,00010002,0003,000TextilesElectronicsChemicalsMiningWood and paper productsPharmaceuticalsBasic metalsMachineryRubber and plasticsTransportation equipmentGlass,cement,and ceramicsAgricultureEnergy resourcesFood and beverages0-6060201,000-1003,000-402,000-807,000-206,000408010

118、005,0004,000Wood and paper productsTextilesElectronicsMachineryPharmaceuticalsMiningTransportation equipmentFood and beveragesEnergy resourcesBasic metalsRubber and plasticsGlass,cement,and ceramicsAgricultureChemicals-10040204,0000-80-40-60-207,0001,000606,0008010002,0005,0003,000PharmaceuticalsEne

119、rgy resourcesElectronicsChemicalsFood and beveragesTextilesAgricultureGlass,cement,and ceramicsWood and paper productsTransportation equipmentRubber and plasticsMachineryBasic metalsThe largest global economies have distinctive concentration fingerprints.1Share of domestic consumption met by net flo

120、ws(ie,imports minus exports divided by total domestic consumption)in value added terms.2Share of domestic consumption met by net imports is below 100%and not displayed to conserve scale.Concentration level as displayed.Source:UN Comtrade,2021;OECD TiVA,2020;BP Statistical Review of World Energy,2021

121、;McKinsey Global Institute analysisMcKinsey&Company10%reduction10%change1025%increase25%increaseChange in concentration,201621Average import concentration by sector,2021 or latest availableIndiaReducing concentration in large,import-dependent sectors,such as food and electronicsSouth AfricaThe elect

122、ronics sector relies the most on imports and has seen rising concentration United StatesThe electronics sector is relatively large,concentrated,and dependent on importsCircle size=sector imports as a proportion of total imports for the economy20%Exhibit 5(continued)Mining2Area of greatest import dep

123、endency and concentrationAverage import con-centration,HHIShare of domestic consumption met by net imports,1%13McKinsey Global Institute|The complication of concentration in globaltrade Germany is the economy with the most diversified import relationships,but pockets of concentration are found acros

124、s sectors.On average,Germany has the most diversified import patterns of the 128 economies in our analysis.However,in agriculture and energy resources,as of 2021 it had concentrated relationships and met domestic demand through net imports.Germanys concentration in agriculture is low relative to oth

125、er economies;indeed,the sector is less concentrated than in 90 percent of other economies in the analysis.Concentration in Germanys energy resources sector in 2021 owed largely to its dependency on pipeline natural gas,which accounted for 40 percent of energy resources imports,the highest share out

126、of any large economy.In the pharmaceuticals sector,concentration has increased noticeably.This largely reflects sourcing of vaccines during the pandemic.About 75 percent of vaccine imports in 2021 came from Belgium,one of Europes largest producers of the Pfizer BioNTech vaccine,on which Germany reli

127、ed most heavily(and which was originally codeveloped by a German company).Indias fingerprint is more concentrated than most in the food sector,and increasingly concentrated in mining.Indias most concentrated sector is food and beverages,largely due to vegetable oils,which account for about 80 percen

128、t of its imports in this sector.India depends on imports to meet domestic demand and is the worlds largest importer of vegetable oils,with significant imports of palm oil,90 percent of which is supplied by Indonesia and Malaysia,and sunflower oil,75 percent of which came from Ukraine.This concentrat

129、ion fingerprint proved problematic after Indonesia banned palm oil exports and the war impeded Ukrainian sunflower oil exports.Indias increasing concentration in its mining sector is due to changing patterns in diamond sourcing.The country is the worlds largest importer and exporter of diamonds,and

130、diamonds account for two-thirds of its mining imports by value.Between 2016 and 2021,the import concentration of unworked diamonds increased significantly.This was driven by increasingly close trading ties with Belgium and the United Arab Emiratesin 2021,India received about 80 percent of its supply

131、 of unworked diamonds from these two economies.This has driven an increase in concentration of Indias mining imports.South Africas electronics sector is both concentrated and the sector most reliant on imports.Concentration in this sector increased significantly between 2016 and 2021.The change larg

132、ely reflects an increased share of laptops and mobile phones in South Africas electronics import mix:both are globally concentrated,largely supplied by China.In the two other manufacturing goods sectors with the highest levels of concentrationtextiles and basic metalsSouth Africas main partner is al

133、so China.Many imports of textiles products,from shoes to jerseys,come largely from China.In basic metals,the majority of South Africas flat-rolled iron and steel imports are from China.These are all examples of economy-specific concentration.In other concentrated sectors,such as agriculture and food

134、,there are cases of economy-specific concentration,but with a different set of partners.For instance,three-quarters of frozen chicken imports come from Brazil and the United States,and more than 90 percent of rice comes from India and Thailand.The United States concentration fingerprint has remained

135、 stable in recent years;electronics,the largest import sector,remains relatively concentrated.US electronics imports are particularly concentrated in comparison with other large economies such as China and Germany.This mainly reflects strong trading ties with China for laptops(more than 90 percent o

136、f imports)and mobile phones(about 80 percent of imports).Moreover,the United States has built economy-specific concentrated ties with Mexico in some electronics products,including televisions.Close ties with its North American neighbors also drive relatively high levels of concentration in agricultu

137、re and in wood and paper products.Neighbors account for about half of US imports in these two sectors.For example,Mexico supplies 85 percent of two of the largest US agricultural imports,avocados and tomatoes,while Canada supplies more than 95 percent of US sawn wood,one of its 14McKinsey Global Ins

138、titute|The complication of concentration in globaltradelargest exports to the United States by value.In minerals,the United States relies on net imports for a broad set of critical commodities.Overall,it imports more than 70 percent of its consumption needs for more than 30 mineral commodities.15Two

139、 sectors stand out among the ways the US concentration profile has changed in recent years.First,imports of energy resources have become more concentrated.As the United States became a net exporter of petroleum,it reduced imports from most of its partners except for Canada,leading to higher levels o

140、f concentration.Second,textiles imports have become less concentrated.Indeed,this is the only sector that diversified by more than 10 percent in recent years,due to increased sourcing from Southeast Asia and a reduced share from China.However,diversification could be less pronounced than it may seem

141、;Southeast Asian economies often rely on China upstream in their own textile value chains.Indeed,when measured from a value-added perspective,China has maintained a constant share of the total flows of textiles into the United States,at about 45 percent.16These fingerprints are not immutable,but the

142、y change only slowly.From 2016 to 2021,concentration patterns were largely stable across sectors.In the six large economies analyzed,most sectors did not register more than a 10 percent change in concentration as measured by the HHI in that period.The four largest economies reviewedChina,Germany,Ind

143、ia,and the United Statesexperienced stable concentration levels in at least ten of 14 sectors analyzed(Exhibit 6).15 Mineral commodity summaries 2022,United States Geological Survey,2022.16 Based on OECD Trade in value added data between 2016 and 2020.17 Knut Alicke,Edward Barriball,Tracy Foster,Jul

144、ien Mauhourat,and Vera Trautwein,“Taking the pulse of shifting supply chains,”McKinsey&Company,August 26,2022.Almost every sector has become more concentrated in at least one economy,but no sector has become more concentrated across all economies.This suggests that where concentration increased,it w

145、as due to idiosyncratic drivers specific to a particular economyas in the case of soybean imports to China or US crude oil imports.The only case of a systemic increase of concentration appears to have been in pharmaceuticals,where increased concentration was more widespread due largely to a rise in

146、the concentration of vaccine imports likely associated withCOVID-19.All six large economies experienced a rise in concentration of more than 25 percent in at least one sector,often in areas where the economy is relatively reliant on imports for domestic supply;examples include Indias mining sector a

147、nd the electronics sector in Brazil and South Africa.In summary,the drivers of increased concentration are often idiosyncratic.Overall,large economies are not generally moving toward greater overall diversification.However,there are some early indications that political and economic disruption may h

148、ave started to trigger shifts in this direction.In a recent McKinsey survey of global supply chain leaders,the proportion of those reporting a dual sourcing strategy for raw materials increased 26 percentage points between April 2021 and April 2022.17 Multinational corporations,which account for abo

149、ut two-thirds of global exports,are an integral part of each nations concentration fingerprint through their sourcing and sales networks,and will therefore be decisive in shaping how these fingerprints evolve.Concentration fingerprints are not immutable,but they change only slowly.From 2016 to 2021,

150、concentration patterns were largely stable across sectors.15McKinsey Global Institute|The complication of concentration in globaltradeExhibit 6BrazilChinaGermanyIndiaSouth AfricaUnited StatesAgricultureMiningFood and beveragesGlass,cement,and ceramicsWood and paper productsElectronicsChemicalsTransp

151、ortation equipmentBasic metalsTextiles and apparelEnergy resourcesRubber and plasticsPharmaceuticalsMachineryChange in import concentrations by sector for selected large economies,201621Concentration has broadly remained stable,but each large economy has seen shifts driven by its individual needs.Mc

152、Kinsey&Company1The change in value-weighted average of concentration,as measured by the Herfindahl-Hirschman Index,for all products in the given sector for the importing economy.Source:UN Comtrade,2021;McKinsey Global Institute analysis10%reduction10%change1025%increase25%increaseChange in concentra

153、tion,120162116McKinsey Global Institute|The complication of concentration in globaltradeInformed reimagination of global trade requires a granular approachRecent events have demonstrated the potential fragility of supply chains.MGIs previous research highlighted the importance for companies of mappi

154、ng supply chains to understand their supplier ecosystems to bolster resilience.A single large multinational corporation can have tens of thousands of suppliers,with direct suppliers sometimes making up less than 10 percent of the total number of indirect suppliers for some of the largest multination

155、als.18 To manage this complexity,it is important to get the basics right.McKinseys latest survey of supply chain leaders revealed that inventory management strategies,digitization and visibility of supply chains,and talent management continue to be areas of focus for most firms when bolstering their

156、 overall resilience.19The current research highlights a complementary angleunderstanding the countries on which value chains rely.National interdependencies are increasingly at the forefront of many decision makers minds.Not every concentrated relationship is a source of vulnerability.Nor can every

157、product be substituted.But understanding country-level concentration will help business leaders and policy makers to better gauge their exposure to country-level risks,such as those that may arise from geography-specific shocks(for example,natural disasters and disease outbreaks)or policy-related sh

158、ocks.As these considerations become increasingly relevant,where inputs come from is of particularly acute interest.How can decision makers approach the changing landscape and derisk their growth?Making the right trade-offs in their trading relationships requires understanding both the potential for

159、disruption and where concentration might exacerbate such disruptions.Some of MGIs previous research has focused on the former.20 To further develop understanding of where exposure to concentration lies,decision makers might consider the following:18 Risk,resilience,and rebalancing in global value ch

160、ains,McKinsey Global Institute,August 2020.19 Knut Alicke,Edward Barriball,Tracy Foster,Julien Mauhourat,and Vera Trautwein,“Taking the pulse of shifting supply chains,”McKinsey&Company,August 26,2022.20 Risk,resilience,and rebalancing in global value chains,McKinsey Global Institute,August 2020.21

161、Ibid.Decision makers can map their concentrated trade relationships to identify risks and opportunities.Business and public-sector leaders need to understand the(different)nature of their many interdependencies.This requires evaluating each of the products they source through multiple complementary

162、lenses,including the level of concentration and dependency,the criticality of their use case,the perceived reliability of the economies that supply them,potential alternative sources,and additional upstream dependencies,among others.This“map”can be a useful starting point to judge options for managi

163、ng trade relationships.In some cases,a watchful waiting posture may be sufficient.For example,some concentrated flows may have a reliable backup that can act as insurance against any potential disruptions,or the specialization and cost benefits of concentration outweigh potential resiliency benefits

164、.However,other flows may have no plausible alternative source of supply,and some partnerships may be less robust in the context of a shifting geopolitical landscape.A scenario-based approach enables stress testing and prioritization of action.To make informed choices,decision makers need to understa

165、nd interdependencies in their value chains.For example,the war in Ukraine simultaneously led to disruption to agriculture(including wheat),agrichemicals(mainly potash),and energy(natural gas and oil).Scenario analysis can help identify correlated risks that might unfold in parallel.Indeed,McKinsey r

166、esearch has indicated that,while scenario planning is not universally used,it can enable greater resilience in the face of disruption.About one-third of companies reported having implemented scenario planning in their supply chain planning,with those that did reporting lower levels of disruptions.21

167、 A scenario-based approach can be used to stress-test and refine initial findings from the concentration mapping,and help identify and prioritize areas for action.17McKinsey Global Institute|The complication of concentration in globaltrade Decision makers can develop a portfolio of actions to derisk

168、 growth.For each prioritized area for action,decision makers can adopt one of the following three broad options:Double down.Some concentrated trade relationships are,in themselves,sources of competitive advantage,such as when they provide access to technologically advanced inputs.In such cases,busin

169、esses may opt to reinforce the relationships to make them more resilient,seeing concentration as an opportunity rather than a risk.For example,the most advanced semiconductor players in the world rely on imports of advanced lithography equipment,almost exclusively manufactured in the Netherlands,for

170、 leading-edge chips.In turn,these lithography machines rely on lenses manufactured by a single supplier based in Germany.The players involved in these sectors have historically had long-standing cooperation agreements,and sometimes even equity-participation deals,to reinforce what are some of the mo

171、st concentrated trade relationships in advanced technologies.22 Decouple.In some cases,for instance if policies restrict flows between countries,concentrated trade relationships may create levels of risk beyond the appetite of the business.Parts of the business exposed to such flows may be spun off

172、or divested,or new domestic sources of production may be pursued.Diversify.Diversification may be an option especially for the substantial portion of concentrated trade that is largely driven by economy-specific factors.For example,over the past decade,Singapore identified that its 22 ZEISS and ASML

173、 strengthen partnership for next generation of EUV lithography due in early 2020s,ASML,November 3,2016;Baek Byung-yeul,“Samsung deepens chip cooperation with Dutch equipment firm ASML,”Korea Times,June 6,2022.23 Kelvin Wong,Tan Wee Meng,and Yeo Boon Kiat,Oil and gas regulation in Singapore:Overview,

174、Thomson Reuters Practical Law,October 1,2020.24 Singapore mining consortium inks a US$15bn deal to develop Guinea iron ore mine,Nanyang Technical University Singapore,April 21,2022.25 Reducing reliance on cobalt for lithium-ion batteries,US Department of Energy,April 6,2021.natural gas imports were

175、highly dependent on a few pipelines.It therefore proactively diversified its natural gas supply,building a liquefied natural gas terminal to gain access to the seaborne market.23 When alternative supply is not an option,such as when trade is globally concentrated,businesses and policy makers may loo

176、k to partner to create alternative solutions.In some cases,these may involve the creation of wholly new supply bases.For example,a joint venture by a Singaporean conglomerate,a China-headquartered aluminum producer,and a leading mine operator is trying to expand the global supply of high-grade iron

177、ore in a new mine in Guinea.24 Businesses and policy makers may also find opportunities to partner to pool their sourcing risk.In other cases,the solution may be in the form of product innovation to reduce dependency on a selected input.For example,the US Department of Energy has supported specialty

178、 chemical and battery manufacturers in their efforts to develop low cobalt cathode formulations for lithium-ion batteries.25Recent global events have encouraged decision makers to reexamine their global interdependencies.By having a clear-eyed view of concentration,decision makers can decide when an

179、d where to double down,decouple,or diversify,and how to reimagine rather than retreat from their global footprints.The benefits of doing so do not solely relate to managing risk.Many economies may find new opportunities from the diversification of global trade,enabling more participation across the

180、globe.Organizations that demonstrate thoughtful management of concentrated exposures are likely to be more resilient in a changing world.18McKinsey Global Institute|The complication of concentration in globaltradeOlivia Whiteis an MGI director and a senior partner in the San Francisco office;Jonatha

181、n Woetzelis an MGI director and a senior partner in the Shanghai office;Sven Smitis chair of MGI and a senior partner in the Amsterdam office;Jeongmin Seong is an MGI partner in the Shanghai office;and Tiago Devesa is an MGI fellow in the Sydney office.The authors would like to acknowledge the extra

182、ordinary leadership and contribution of Camillo Lamanna,a consultant in the Sydneyoffice.This article was edited by Janet Bush,an MGI executive editor in London.19McKinsey Global Institute|The complication of concentration in globaltradeScan Download PersonalizeFind more content like this on the McKinsey Insights AppMcKinsey Global Institute January 2023 Copyright McKinsey&Company.All rights reserved.Designed by the McKinsey Global I McKinsey_MGI McKinseyGlobalInstitute McKinseyGlobalInstituteSubscribe to MGIs podcast,Forward Thinking:mck.co/forwardthinking