The world will not reject globalisation after COVID 19, but redefine it.
By: Vihang Jumle
Tags: Trade, Change, Globalization, Economics, Coronavirus

A frontline idea often used by advocates of globalisation is that it enables states to ‘specialise’ in producing specific goods or services with minimal resources hence giving them a ‘comparative advantage’ in global markets. This efficient, focused production of specific goods or services promotes economic growth and drives prices lower, making it affordable for all income levels globally. However, globalisation requires specialising states to excessively rely on other states — that specialise in producing other commodities — to meet their diverse domestic demands. By virtue, specialising states need to trust each other and ensure production, access and consumption of each other’s goods, in good and especially bad times — which is problematic. No sooner did the COVID 19 break out, than the ever-globalised world’s trade machinery came down like a fragile card castle, raising questions over states’ overreliance on each other for basic medical gear and their adherence to a foundational assumption — mutual trust. As soon as the virus engulfed the world, China — that manufactured 50 per cent of the world’s medical masks — hoarded its supply and banned exports. The European Union shut its medical gear exports to Africa and the United States followed suit. Over three dozen governments — that control the most of the world’s medical gear supply — shut or limited their medical gear exports in March 2020 alone. It merely took a couple months for states to turn inwards, self-interested and overturn years of outwards, globalisation efforts — here that concerns life-saving health gear — which should make us think if globalisation need a rejection or a redefinition.

If we were to assume that the growing inwardness were to continue — states were to continue stringent trade and travel restrictions — and the world were to eventually become fragmented, we would be in the centre of another long term global economic crisis with different countries dealing with different version of it domestically. That would kill far more people and lead us all to come to a standstill. The distribution of resources on earth, diverse human needs and other circumstances inherently requires states to interact and cooperate in some manner and that would eventually push states to reinitiate the exchange of goods, services and human capital — which has been the normal course of inter-state relations since the dawn of bordered states. Though it is impossible for the world to be completely fragmented, the scale of globalisation may be re-calibrated to suit the current capacity of international cooperation, especially with domestic issues — such as zoonotic diseases outbreaks — quickly turning global due to globalisation. States may re-initiate domestic production of goods to reduce their reliance on other states, increase scrutiny on tourism, and tighten their borders for international commerce. Further, a significant reduction in globalisation when viewed with the current power distribution within states may lead powerful states to increasingly constrict transfer of domestic information beyond their borders and deprive the world of intelligence that may at times be critical for its survival. For instance, compare the evolution of Ebola outbreak in 2014 versus the ongoing pandemic. The World Health Organisation declared an Ebola outbreak in March 2014, the US Centres for Diseases Control and Prevention sent teams to West Africa in July 2014 and by September 2015, the outbreak was almost eradicated. The comparison is not about Ebola and COVID 19, but about the originating countries. It was impossible for Guinea, Liberia and Sierra Leone (where Ebola broke out) to hide its situation from the world as China did simply because these countries are economically backwards and thrive off international aid. On the contrary, COVID 19 was rampant by end December 2019 in China, it agreed to allow international teams to enter its territory in January 2020 and it is only in February 2020 that international medical teams set foot in the country. Despite having the virus mapped by early January, China delayed sharing this critical information with the international community for a week. China is powerful enough to defy the US’ commands, but not powerful enough to not abide by the international community. Had a multilateral approach been adopted in December 2019, threating to cut supplies to China, things may have been in favour of the world. But such mediums may become inaccessible should the world clamp down on globalisation. It was China’s reliance on other countries that was the international communities’ bargain chip, but such chips will likely turn redundant once powerful countries reduce outwardness and international pressure becomes bearable.

Though states have incentives to reduce globalisation, there are enough incentives for states to increase it as well. Globalisation is being viewed as a solution to accelerate economic growth and make up for lost economic opportunities after the pandemic ends. Many countries are heavy invested in international projects that may disallow them from parting ways with globalisation. China’s Belt and Road Initiative — with over USD 1 trillion investments in Latin America, Africa, Middle East, Southeast Asia and ahead — is the corner stone of its 21-century international economic, military and political strategy. The outbreak has led manufacturing and online services countries alike to discover new markets that were earlier distant. China has managed to deliver medical supplies, equipment and practitioners to the European Union, which remained meagre before the crises. Similarly, companies affected by the outbreak in China and around, such as Apple Inc, intend to shift their manufacturing to other countries in South Asia and not back to the US keeping the globalisation sentiment alive. Though much of international hospitality and tourism has come to a halt, it is unlikely that countries will reduce their tourism. With billions of tourists, that drove trillion-dollar worth business between 2006 and 2019, the incentive is too big for countries to miss out on. Likely, this pandemic driven contraction is a reversible change and will not dismantle global supply chains. Countries are only better prepared now to pump capital in industries that have dried up in the last few months. Strategically, globalisation allows the international community to legally tame powerful states — through the UN, WTO, etc. — and maintain appropriate checks and balances — through collective sanctions and penalties — and disable any state from exploiting other states and deviating towards an anarchy. This will keep most of the world intact.

India’s economic activity is significantly influenced by globalisation. Not just India, countries that are less economic integrated within the global supply chain and are developing stand to gain more from globalisation than their counterparts. India’s integration within the global supply chain after the 1991 economic reforms transformed its foreign trade, domestic production, and helped reduce poverty. India’s service industry that caters to foreign clients and receives substantial foreign investments is the country’s economic front burner. India falls behind in manufacturing, imports most of its fuel, is only further integrating with the global banking and financial system, derives huge revenues off tourism and is a major human capital, minerals, coal, and other raw goods supplier. India also intended to join the RCEP to better integrate with the global supply chain (though it fell apart!) and perhaps also realises that it has more to gain from globalisation and similarly more to lose should the world become fragmented.

The benefits of globalisation in the long run will take over its intermittent downfalls. The world is economically better off being connected than being disconnected. However, the associated risks will remain and that does call for a redefinition of globalisation, with built-in measures to make up for trust deficits and ensure cooperation in times of distress. Though some countries may have the option to step out of the boat when it starts to sink, other countries may not be able to do so. A truly globalised world should ensure all participating countries built the boat and collectively figure out means to keep it afloat when it starts to sink. On the contrary, a non-globalised world will eliminate the sinking problem, for the boat will never exist.