Notes on a speech delivered at Diplosphere's panel discussion on Has Coronavirus Killed Globalisation? on 25th June.
COVID-19 hasn’t killed globalisation - but it has put it into quarantine.
We need to remember the many benefits the world has received from globalisation:
higher living standards
information vastly more available than ever before
Globalisation is not dead
The world remains highly connected.
Major ‘connecting strategies’ like the Belt & Road Initiative continue apace.
The big US tech firms (Google, Facebook, Microsoft) continue to sell their products internationally.
Businesses and individuals continue to shop globally.
Climate change & emissions trading cooperation is still happening.
International cooperation among health institutions and professionals has greatly increased (because of the coronavirus).
Global food exports are continuing strongly (this has been good for New Zealand, latest stats (for 7-20 May) show New Zealand’s exports are actually 1% higher than the same period last year, mostly food exports to Asian destinations).
And the pandemic has made more of us internet-savvy – we now communicate more online, have more zoom meetings, shop more and do business more, globally, online.
The coronavirus affected e-platforms that facilitated person-to-person activities (e.g. Uber) but did not affect those that facilitated individual activities (e.g. gaming).
Globalisation was already transforming
( transformations - both good & bad - started before COVID-19 hit )
Trade restrictions are increasing – the most obvious example has been the shadowboxing between the US and China over the last 2 years, but there has been a move towards protectionism in other countries too.
Multinationals are declining - multinational companies (that earn at least a quarter of their revenue abroad) are less numerous and less profitable than 5 years ago (McKinsey Research).
Globalisation is becoming less about cheap labour – The “low-cost labour model” (western states’ reliance on cheap labour in developing countries) is becoming less prominent.
Some supply chains are becoming more local, more regionalised - because China and other emerging economies have growing demand from their growing middle classes, so they are now consuming more of what they produce. In many places, “shorter supply chains” is the result
Supply chains are becoming more knowledge-intensive - Companies supplying machinery and equipment spend 36% of revenue on R&D and intangibles, while those in pharmaceuticals and medical devices average 80%.
Trade in services is growing faster than trade in goods - Overall, trade in services has grown over 60% faster than goods trade over the past decade. Some services (telecom, IT, business services, IP) are growing two to three times faster.
We need changes to achieve a better form of globalisation
(among other things, we need to strengthen our rules-based systems)
Balanced interests – We need a form of globalisation that is not dominated by a single country or a few countries. Where all countries’ interests can be advanced in a balanced way. We need to avoid a bi-polar world, where e.g. the US and China were the dominant forces, and where other countries were forced to choose between supporting one or the other.
Multi-lateral trade - The institutions supporting multi-lateral trade have been disrupted by the effects of the COVID pandemic – important that these institutions retain international support and retain their primacy
WTO - Even before COVID, the WTO was facing challenges to its funding and its disputes resolution processes, by large nations – need a refreshed mandate for world trade
Foreign investment flows – overseas investment rules are an important part of countries’ engagement strategies with others. They are being tightened in response to the Covid outbreak in some places, including New Zealand. OI rules need to be very carefully calibrated.
Kirk Hope is the CEO of BusinessNZ
The views expressed in this article are the author's own and do not necessarily reflect Diplosphere's stance.