Globalisation Under COVID-19: Slowbalisation
Slowbalisation is a term coined by Adjiedj Bakas, a Dutch writer, and is widely used to describe the falling share of global GDP made up by trade. As a result of the COVID-19 pandemic and its side effects, slowbalisation has increasingly become more relevant. This article will discuss globalisation pre-COVID-19, how it has changed so far (up to the time of writing) and how it may be like post-COVID-19.
Globalisation has been altering the dynamics of global power, trade, and wealth for decades. Increasing interconnectivity between countries through trade has resulted in almost one billion people being lifted out of poverty, mostly in China and India, since 1990. As China implemented free-market reforms in 1979, China has averaged a real annual 9.5% GDP growth which is described by the World Bank as “the fastest sustained expansion by a major economy in history” (EveryCRSReport, 2019). Referencing Figure 1, we can see a positive correlation between GDP per capita growth and exportation of merchandise. However, between 2001 and 2018, an estimated 3.7 million American jobs were moved to China (Scott, R.E. and Mokhiber, Z., 2020). Moreover, Chinese investment into the US dropped by 78% in 2018 due to the US-China trade war, compounding the loss in jobs and contributing to slowing growth both within the US and China. This spurred a change in viewpoint of globalisation by world leaders and their respective Populus, as evident in Figure 2 which shows that there was about a 20% plunge in positive connotations in just a 3-year span.
Figure 1: Annual change in GDP per capita vs average annual change in merchandise exports as % of GDP, 1945 to 2014 (CEPII, 2016)
Figure 2: Perceptions of globalisation, 2003 and 2006 (Eurofound, 2008)
Despite slowing growth, countries as a whole were still working hard to create stronger trade bonds between each other to create greater global prosperity, at least until early 2020 when COVID-19 started spreading. Governments scrambled to close boarders and implemented national lockdowns to slow the spread. Global shortages in essentials such as personal protective equipment (PPE) led to mass panic buying and shortages in shops. The UK government began buying production lines to produce “millions of face masks each week” with the materials needed also being sourced from the UK (Bell, J., 2020). It was evident that in times of national crisis, countries resort to self-preservation to ensure their own well-being. However, the EU tried to counter this with programmes such as the “PPE procurement scheme” and the “COVID-19 recovery Package” where the EU mobilised all member states to do their part to help in the effort. By doing this, the EU is helping preserve itself as an organisation, trying to increase integration. By promoting co-operation between countries, the EU has attempted to reduce nationalist sentiments that will try to pursue self-preservation. Additionally, by investing hugely into Europe, the EU might manage to fix some of the economic cracks beginning to form in countries such as Italy and Greece, threatening the future of the EU. As a result, the EU has managed to continue fostering co-operation and growth in trade, progressing globalisation. Despite this, the impact of other factors such as 3D printing, automation, the demand for customisation, and protectionism was already being felt; COVID-19 can only accelerate this, further fragmenting supply chains (Bloom, J., 2020).
These factors, Professor Javorcik believes, will lead to a process called “reshoring”. Reshoring involves a business returning production or operations to the host country that had previously been moved to a different international location (Riley, J., n.d.). Reshoring has many advantages – improved quality, flexibility and delivery times are a few examples. As seen in Figure 3, UK firms are seriously considering reshoring, and with this, a growing relevance of slowbalisation. This will result in a restructuring of logistic networks in order to capitalise on domestic production. This, combined with the increasing wages in countries such as China, makes Western manufacturing seem more appealing. This reversal of globalisation will likely hit an equilibrium point where costs are low while high quality is maintained. With reduced trade, it will be much more difficult for less-developed countries to close the wealth gap. By reshoring, it is likely that the global wealth gap will stay the same or even grow over time as developed countries retain the jobs and means of production.
Figure 3: Survey of corporations on reshoring, and reasons why (Scott Barton et al, 2019)
In a post-COVID-19 world, there is likely to be a pullback of globalisation while governments and companies re-evaluate their global supply chains and reliance on other countries for essential supplies. It is unlikely that there will be a global increase in trade, however, I believe there will be an increase in trade within regional trade blocs like the EU, NAFTA and ASEAN. Globalisation, in my opinion, has gone too far, and the negative implications are coming through. Large companies are understanding this, explaining the data shown in Figure 3, meaning that slowbalisation, or even reverse globalisation, could occur. This could help reduce pollution due to supply chains being more clustered and allow for greater consideration the local needs and wants when negotiating trade agreements.
In conclusion, globalisation has been slowing down and falling out of public favour for almost two decades. COVID-19 is likely to accelerate this process, and further increase nationalism within regional trading blocs. This may lead to greater stability because there is less reliance on other countries for domestic goods. For this reason, slowbalisation may actually be beneficial to world prosperity and sustainability in the long run.
Barton, S. et al. (2019) A survey of key sector opinions, trends and insights, Lloyds Bank [Online]. Available at: https://resources.lloydsbank.com/insight/business-in-britain-2019/ (Accessed: 4 October 2020)
Bell, J. (2020) UK government ramps up face mask production with 10 new manufacturing sites, NS Medical Devices [Online]. Available at: https://www.nsmedicaldevices.com/news/uk-face-masks-production/ (Accessed: 4 October 2020)
Bloom, J. (2020) Will coronavirus reverse globalisation?, BBC News [Online]. Available at: https://www.bbc.co.uk/news/business-52104978 (Accessed: 3 October 2020)
Eurofound (2008) Perceptions of globalisation: attitudes and responses in the EU, Eurofound [Online]. Available at: https://www.eurofound.europa.eu/sites/default/files/ef_files/docs/erm/tn0708016s/tn0708016s.pdf (Accessed: 3 October 2020)
EveryCRSReport (2019) China’s Economic Rise: History, Trends, Challenges, and Implications for the United States, EveryCRSReport [Online]. Available at: https://www.everycrsreport.com/reports/RL33534.html (Accessed: 3 October 2020)
Luca D’Urbino (2020) Has covid-19 killed globalisation?, The Economist [Online]. Available at: https://www.economist.com/leaders/2020/05/14/has-covid-19-killed-globalisation (Accessed: 3 October 2020)
Riley, J. (n.d.) Reshoring, Tutor2u [Online]. Available at: https://www.tutor2u.net/business/reference/reshoring (Accessed: 4 October 2020)
Scott, R.E. and Mokhiber, Z. (2020) Growing China trade deficit cost 3.7 million American jobs between 2001 and 2018, Economic Policy Institute [Online]. Available at: https://www.epi.org/publication/growing-china-trade-deficits-costs-us-jobs/ (Accessed: 3 October 2020)
Esteban Ortiz-Ospina and Diana Beltekian (2018), Trade and Globalization, ourworldindata [Online]. Available at https://ourworldindata.org/trade-and-globalization (Accessed: 3 October 2020)