Deglobalisation within trade volumes means a slump in international businesses,cross-border transactions and money remittances, foreign direct investments(FDIs), subdued value chains, and logistics.
Concerns about deglobalisation became consequential even before COVID-19,and the pandemic only escalated its intensity with the closing of borders and security measures mandated by governments.
The world experienced the most damaging deterioration of global trade during the financial crisis of 2008-2009. The Harvard Business Review asserts that the pandemic is unlikely to cause similar outcomes.
The director of The Economist Intelligence Unit, Alfredo Montufar-Helu, perceives a worst-case scenario, where deglobalisation can stagger the world economy sooner or later. In his view, it can provoke developed countries to strengthen self reliance in essential goods (reducing global imports), continuous trade separations (China-US) and disruptions to supply chains (increasing cost of trade among countries).
Despite the different opinions of experts worldwide, businesses in global trade need to adapt and restructure their business models to face any adverse consequences of deglobalisation. Dambisa Moyo, an international economist,published an article in Bloomberg this year about how businesses can be flexible and meet deglobalisation.
- Developing local talents and skills by investing in education will prepare a country to adjust to skills shortages when recruitment across borders becomes too costly or complicated.
- Encouraging global businesses to raise capital in the same markets where they invest rather than borrowing from developed countries (e.g. US & UK).
- Making supply chains stronger to avoid uproar in the global geopolitical environment and obtain factors of production domestically or from neutral countries.
These modifications will be time-consuming and incur substantial costs, which will be fixed at the prices of goods. But they can also help lessen the impact on a country’s economic development.
For now, it is safer to conclude that deglobalisation is the least likely threat to proceed at speed, based mainly on the overall demand of the global manufacturing, reproduction, research and development, and distribution of COVID-19 vaccines.