Globalization — Does the Pandemic Kill it or Revamp it?
Ever since the COVID-19 Pandemic has started, there have been changes to the globe as a whole, from aspects as small as lifestyles, transportation, and employment to aspects as large as economic activity, education, and social attitudes. With the increasing bankruptcy of business, both the supply and demand side has received severe shocks, thanks to the uncertainty brought by COVID-19. Citizens, businesses, and governments are forced to pause and rethink the fundamental structure of globalization, specifically if the Pandemic will change the nature of our relationship with the world and the long-lasting trend towards increasing globalization. Some people say that the Pandemic has brought an end to globalization because the virus has limited physical forms of integration like the exchange of commodities and international geographic travels. I argue that faced with the deadly virus, there is a revolutionary change in the form in which globalization takes place because almost every population has tasted the “sweet-spot” of the already established world interconnectedness that letting go of the benefits of globalization — minimized cost, maximized profit, and wider product choices — is easier said than done. With the added uncertainty of an unprecedented pandemic, a change in the structure of internationalization from tangible forms to diversification is inevitable.
Opponents are correct when they say that countries do realize the risk of relying on the international supply chain and there is an increasing tendency towards the agenda of becoming more national. What if the pandemic continues to escalate or there is an even worse world crisis leaving the countries to be independent from week to week? For instance, the United States is currently facing the threat of over dependence on imports in the field of chips and semiconductors. Harry Moser, the founder and president of Reshoring Initiative, claims in his article “The U.S. is Overly Dependent on Imports” that “despite the fact that the United States is a world leader in semiconductor design and R&D, chip manufacturing occurs mostly in Asia.” The percentage of American produced semiconductors has decreased from 37 percent in 1990 to 12 percent in 2021. Trade wars and difficulty in world transportation caused by the pandemic has led to the disruptions in the supply of security-sensitive and important equipment like computer chips and medical products. Chips are found in devices like “computers, tablets, and phones but also in medical equipment, military equipment, wireless networks, cars, and manufacturing equipment” (Moser 2021) and the current situation has left the United States at the risk of national security dangers. Countries are already aware of the dangers of depending too much on imports but with the resources and benefits of countries specializing in specific industries that they have advantages in, they do not have the ability and resources to become entirely independent.
The current pandemic has highlighted the flaws in global supply chains as well as the lack of manufacturing self-sufficiency across many countries. The Global Value Chains, also known as the GVCs, is a sophisticated structure that links the producers and suppliers from all around the world. Even though the pandemic has severely disrupted this system of operations, there is no change in the fact that countries cannot supply and fulfill every demand on their own given the limited domestic resources that individual countries own. For example, China’s imports of meat skyrocketed in 2020, according to research conducted by Aston University. This exemplifies China’s inability to provide sufficient protein to meet the demand due to the “weakened domestic supply of food” during the lockdown. As Professor Jun Du discusses in the article “Coronavirus won’t kill globalization — but a shakeup is inevitable,” the pattern of international trade is “the result of businesses sourcing the best possible inputs to meet their production needs at the lowest cost — wherever those inputs come from.” Although many countries are making an effort to supply their citizens without the dependence on imports from other countries, it is nearly impossible having enjoyed the comparative and absolute advantage that each country has. With efficiency and profit maximization always being the top agenda for worldwide businesses, producers will continue to trade globally because it is almost impossible for a world without globalization.
With worsened international relationships and changing global regulation policies, it may seem like countries are continuously shutting themselves down to others and bringing key industries back to the domestic homeland from overseas, a process known as “reshoring.” To specify, a survey conducted by the American Chamber of Commerce in China shows that approximately 16% of the manufacturing firms responded that they “intended to shift production out of China” (Moss2020). It appears as if manufacturers are returning the production process back to their home country, but international trade will, in fact, diversify away from China into more countries rather than disappear. “At the end of the day, I think there’s going to be a diversification where these supply chains get moved into places like Vietnam, Bangladesh, Turkey, even Brazil,” says Mark Mobius, an emerging market asset manager from Mobius Capital Partners. Sourcing diversification will allow suppliers to become more competitive and self resilient in cases of market disorder in the future. There will also be more flexibility in the supply side as the entire production process will no longer be reliant on a single geography like China. There is now the involvement of a larger number of countries, expanding on a larger scale the scope of globalization.
The fast recovery of the global economy from the profound depression has been faster than ever compared to the recession in the previous last two decades, thanks to international trade. WTO Director-General Ngozi Okonjo‑Iweala suggests that “keeping international markets open will be essential for economies to recover from this crisis.” Trade in goods during 2021 was even higher than the quantity before the pandemic with China and the United States being the main leading countries. World merchandise is expected to increase even further by “8.0% in 2021 after having fallen 5.3% in 2020,” according to estimated statistics from the WTO. The quick recovery was only possible because, unlike previous recessions, the global economy is more interconnected and countries are supporting each other in the form of supply and demand to improve the economic conditions. There will continue to be a positive outlook on the recovery of world depression through global trade by supportive macroeconomic environments like loosening pandemic restrictions, weaking trade protectionism policies, and maintaining the positive trend in commodity prices.
To conclude, Globalization — or the growing interdependence of the world’s economies, cultures, and populations — is a result of people maximizing the output from limited input, regardless of the geographic location. The COVID-19 virus has put an end to tangible forms of cultural exchange and international integration, but with the convenience and development of communications technology that we have nowadays, globalization is almost impossible to cease. Air travel may lessen, but it is not made impossible. The way countries now connect may alter, but they will never stop. So has the Pandemic killed globalization by interfering with human relationships with the world and with each other? The answer is no. The world is reliant on globalization, and with the changing factor of the Pandemic, a reconfiguration of the international structure is inevitable to manage and govern the current state of affairs.
Citations
https://www.sme.org/technologies/articles/2021/december/the-u.s.-is-overly-dependent-on-imports/
https://unctad.org/news/global-trades-recovery-covid-19-crisis-hits-record-high
https://theconversation.com/coronavirus-wont-kill-globalisation-but-a-shakeup-is-inevitable-137847
