Is the trade industry ‘reglobalizing’?
“The world isn’t deglobalizing: trade is as essential as ever to the world economy. The supply chains that bottlenecked during the first years of the pandemic aren’t being dismantled, they’re being reengineered for resiliency.”
Well, that’s according to Bloomberg.
The current environment in trade is characterized by a mixture of both globalization and deglobalization trends. While there are elements of deglobalization being carried out on the global stage, such as rising protectionism and geopolitical tensions, there are also efforts to revive and reengineer global trade.
- Trade protectionism: Over the past few years, there has been a rise in trade protectionist measures, including tariffs and trade barriers. Governments around the world have increasingly focused on protecting domestic industries and jobs, leading to a slowdown in global trade. As an example: The $430 billion US green subsidies scheme aimed at attracting investment to the US has been called “anti-competitive” by the EU as the bloc believes such tax breaks may lure away EU businesses and disadvantage European companies.
- Geopolitical tensions: Geopolitical tensions, such as conflicts and trade disputes, have contributed to a more fragmented and hostile global trade environment. Disputes over intellectual property, commodities, and market access have strained trade relations between countries, leading to a more cautious approach to international trade.
- Regionalization and ‘reshoring’: There has been growing emphasis on regional trade agreements and blocs, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, with a recent member in the UK following its departure from the European Union, and the Regional Comprehensive Economic Partnership. These agreements promote trade among member countries but can also divert trade away from global markets. In addition, a shift to move supply chains closer to home is affecting the trade system.
- Calls for Reglobalization: Earlier this year at the annual World Economic Forum meeting in Davos, there were calls for “reglobalization”, to address some of the challenges currently being faced by a sluggish global economy. Leaders and policymakers recounted the importance of trade and investment in jump-starting economic growth and recovering from the lingering effects of the pandemic.
- Need for resilient supply chains: Recent disruptions to trade flows and supply chains have highlighted the vulnerabilities of global supply chains, leading to a renewed focus on building resilient, technology-enabled business flows. This has prompted discussions about diversifying and decentralizing supply chains, creating opportunities for countries and regions that were previously on the margins of global value chains.
- Multilateral cooperation: There is an increasing recognition of the need for multilateral cooperation to address global challenges. Organizations, such as the World Trade Organization, are advocating for stronger global governance and coordination to overcome trade barriers and facilitate smoother trade flows. Though, some experts argue that modernizing the trade system to meet current and future challenges requires moving beyond the WTO’s consensus system.
- Lingering impact of Covid-19: The pandemic has had a profound impact on globalization and trade. It disrupted global supply chains, caused a decline in international trade volumes, and led to a reevaluation of the reliance on certain countries for critical goods. The pandemic also highlighted the importance of collaboration and cooperation among nations to address challenges, such as the procurement of medical supplies, emphasizing the need for a balanced approach between self-interest and global cooperation.
Overall, the current global trading environment reflects a mix of deglobalization and efforts to revive and reengineer global trade. While trade protectionism, geopolitical tensions and regionalization have contributed to deglobalization trends, there are calls for reglobalization, resilience in supply chains, and multilateral cooperation to overcome these challenges. Moreover, leaders must recognize the importance of taking a balanced and collaborative approach to trade.