Publisher’s Note

How Will the Covid-19 Pandemic Change
the New International Order?
By Kazumasa Kusaka
With 7 million confirmed cases worldwide and 400,000 lives
lost, it has been up to each nation to cope with the common
challenge of Covid-19. The Schengen Agreement, a pillar of theEuropean Union’s integration plan, has de facto been suspended
in order for the member countries’ government to regain bordercontrols. The movement of people globally has been banned bymany nations, and by the same token even movement acrossprovinces within countries has been regarded with hostility underself-isolation policies.
Logically a pandemic will not spread if we can prevent those
infected from coming into contact with other susceptible people.
But with Covid-19, we have been forced to isolate people without
knowing who is infected. It was an operation to buy time in thehope that treatment drugs or vaccines would soon arrive, while
the general lockdown of cities would ease the pressure on
existing medical infrastructure.
Some countries have generally succeeded in containing thespread of the virus, including Japan with a death toll of under
1,000 and few new cases. But the game is not over. The SARSCov-2 virus which caused Covid-19 has a complicated structure
and is already mutating. We will have to live with this virus for aconsiderably long time, and what is needed now is not simply abetter way to fight this medical emergency, but a way to create a
new order of society, economy and national security. The coming
long battle against the Corona virus will require us to mobilize all
our resources. We will need a healthy economy, industries andenterprises to provide finance, technology and human resources.
More importantly, on the domestic front, trust amongcommunities and societies has to be reestablished.
But are the social changes we can observe caused by the Coronavirus? Or has it merely accelerated changes already taking place?
The problem of income and asset discrepancies, for example, hasbeen further emphasized due to the disproportionate suffering ofsome people from the pandemic, and it has also highlighted
tardiness in society’s response to digital transformation and thedigital divide in society. On the international front, freemovement of goods and services, money and people havesupported globalization. In particular, foreign direct investment(FDI), technology-transfer and movement of engineers are
essential for the workings of supply-value chains. But are these
global chains going to be destroyed by the Corona virus?
Let us reflect on several incidents of the past decades. During
the Oil Crisis of the 1970s, energy producing countries such as
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the United States had the option of self-sufficiency while manyother consumer countries needed energy trade, but even the US
would have suffered extremely high oil prices once the global
market price had skyrocketed. Henry Kissinger came up with theidea of creating the International Energy Agency (IEA) to create astrategic reserve system, to promote alternative energy sources
such as coal and natural gas, and also to geographically diversify
oil supply sources. He thought that national security and energy
security were two sides of the same coin, and therefore selfreliance should not be a solution.
This proved to be a boon following Hurricane Katrina in 2005,
when US domestic supplies of refinery products saw a shortage,and the IEA mechanism and imports help to calm the market.
Following the 2002-2004 SARS outbreak and then the antiJapanese demonstrations in China in 2012, Japanese enterprises
launched a “China+1” strategy to diversify their supply chains.
Similarly, after the Great East Japan Earthquake in 2011 aEuropean automaker that had been sourcing key equipment solely
from a Japanese component maker decided to go back to
traditional dual sourcing, as the sole supplier could not establish
factories outside of Japan and guarantee replacement supplies
without delay.
The lesson from these experiences is “Don’t put all your eggs
in one basket.” By diversification, a more resilient supply system
can be built and strengthened through international cooperation.
Movements towards self-reliance will not realize resilienceagainst external and internal risks. Some emerging economies are
more vulnerable to such movements because they are more
dependent on trade and FDI, and often have less efficient
healthcare systems, in addition to weak governance in general. It
is time for OECD countries to start extending help to developing
countries in their efforts to cope with this pandemic.
We hope this Corona virus challenge will not lead to divided
communities, either domestically or internationally, but will
accelerate the structural changes of each community. We shouldbe optimistic that people will regain a sense of trust andbelonging, and believe they are being listened to. We may thenemerge as a stronger and more inclusive society.
Kazumasa Kusaka is chairman and CEO of the Japan Economic Foundation(JEF), as well as being a professor of public policy at the University of Tokyo. He
previously served as special advisor to the prime minister on global warming
after having been vice minister for international affairs at the Ministry ofEconomy, Trade and Industry.
Japan SPOTLIGHT • July / August 20201