Recent trends are expecting the global economy to move away from interdependence between nations to weaker interconnectivity, localised policies, and enhanced border controls, a phenomenon also referred to as ‘de-globalisation’. With the catastrophic impact of the global financial crisis, the rise of protectionism, exemplified by the US and China engaging in a trade war, and the implementation of Brexit, there are widespread concerns amongst economists that de-globalisation is a force that is here to stay. COVID-19 has further exacerbated these concerns. The ongoing pandemic has uncovered the vulnerable roots of globalisation illustrated by a sharp fall in global GDP, plunging levels in international trade, the decline of foreign direct investment, the vast disruptions of global value chains and lastly, higher unemployment rates. These trajectories seem to prove that globalisation comes with severe risks – which have the tendency to spread like wildfire. This begs the question of whether globalisation might actually be a ‘bad’ thing.
Globalisation replicates the structures of neo-colonialism whereby imperialists benefit from the continued exploitation of developing countries through indirect means such as conditional aid and taking advantage of the cheap labour and resources available in those countries. This process of manipulation hinders growth in the Global South. De-globalisation enables developing countries to take back this power and invest in growing their domestic industries, thereby achieving growth within their country without the interference of competitive pressures from multinational corporations or relying on an export-growth model. Whilst globalisation has made great strides in advancing the global economy, it has simultaneously hastened the level of global and national inequality. Karl Polanyi, the great Hungarian philosopher, said that ‘de-globalisation is about re-embedding the economy in society, instead of having society driven by the economy’. This illustrates that by de-globalising their economy, states could move towards greater levels of equity as opposed to upholding unequal economic interactions.
Whilst there may be some incentives for pursuing a de-globalised world, it is impossible to ignore the achievements of globalisation in the past few decades. By specialising global value chains, increasing innovation through a greater capacity for research and development, and improving living standards, globalisation has had a tremendous impact on transforming the economy. Hence, instead of scrapping globalisation and transitioning into a de-globalised world, international trade could benefit from certain amendments which would make international production more resilient in the face of global challenges. These changes would incorporate the advantages of de-globalisation and combat the risks emerging from contemporary trends as outlined above.
International production could become more resilient and allow developing countries to increase their domestic industry capabilities through the mobilisation of science, technology, innovation, sustainable investment, and the strengthening of transport systems. Advancing the former enables manufactures from developing countries to successfully integrate into global supply chains. Additionally, local and international capacity should reinforce each other while developing countries could gain a comparative advantage in risk management systems by employing open innovation models, using patents as tradable goods, and opening firm boundaries for knowledge transfer. Secondly, sustainable investment involves attracting investors who are seeking to diversify various supply bases and hence, building resilient production capacities in different locations. Pursuing this will allow national capacities to grow whilst also strengthening international production networks. Lastly, strengthening transport systems is essential to ensuring a more resilient economy. The provisions of the Agreement on Trade Facilitation by the World Trade Organisation highlights how national governments can facilitate international trade flows by ‘expediting the movement, release and clearance of goods’ This agreement also contains special and differential treatment agreements for developing countries to determine when they will implement certain provisions, enabling them to build domestic capacity according to their circumstances.