Reverse Globalization and how it may take shape after ongoing Ukraine Crisis.

 

Abstract: "Reverse globalization" is a hot phenomenon in the current international community. It is marked by the outbreak of a series of incidents such as the Brexit referendum, Trump's election to the US president, trade protection, border crossing and immigration control and geopolitical tensions which have caused widespread concern. Besides, recent covid-19 pandemic and Ukraine crisis have added new dimension to the concern. The active advocates of globalization, represented by the United States and Britain have now become active actors and decision-makers of reverse globalization, trying to return to nationalism for their own interests. Through the performance of reverse globalization in the fields of economy and politics, we can find that the reverse globalization reflects the profound crisis induced by the neoliberal economic imbalance. The imbalance between neo-liberalism's efficiency and fairness is not only the economic root of reverse globalization. The hypocrisy of capitalism freedom, democracy and humanitarian liberalism, the roots of globalization reversal in the political and cultural fields of European and American countries. There are also opinions that express doubt regarding the prospect of reverse globalization. Hence there is a scope for us to judge whether reverse globalization is inevitable or globalization will take a new shape in the coming years, especially after the Ukraine crisis from objective point of view.

Globalization: Globalization, or globalization, is the process of interaction and integration among people, companies, and governments worldwide. Globalization has accelerated since the 18th century due to advances in transportation and communication technology. Globalization thus becomes the spread of products, technology, information, and jobs across national borders and cultures. In economic terms, it describes an interdependence of nations around the globe fostered through free trade. In a word, Globalization is a social, cultural, political, and legal phenomenon. 

Reverse Globalization:  The term reverse globalization is widely used to describe the periods of history when economic trade and investment between countries decline. It stands in contrast to Globalization.

Some expert opinion and prediction on Reverse Globalization: The renowned economists, analysts and asset managers put forward their observations on the issue through different journals and magazines. The Consumer News and Business Channel (CNBC) published a report on 13^th May, 2020 about the prediction of economists on Coronavirus and reverse globalization. In the report the Economist Intelligence Unit (EIU) said the pandemic will reverse globalization by accelerating a move toward regional supply chains. The report says that China’s dominance in international trade has grown ever since the country was accepted into the World Trade Organization (WTO) in 2001. This event was credited by the EIU as sparking the latest wave of globalization, as multinationals took advantage of production and demand opportunities in the country. “However, as a result of Covid-19, it is likely that this period of globalization will not only come to a halt, it will reverse,” the report’s authors said, noting that the Sino-U.S. trade war and rising wages in China had already incentivized some corporations to relocate supply chains to other parts of Asia.

“Covid-19 will push more companies in other sectors to relocate parts of their supply chains,” the report predicted. “The outcome of this will be an Asian supply chain network that is both less China-focused and more diverse.”

“By building quasi-independent regional supply chains in the Americas and Europe, a global company will provide a hedge against future shocks to their network,” the EIU said. “For those companies that have this luxury already, they have been able to shift production of key components from one region to another as lockdowns and factory closures resulting from coronavirus have unfolded.”

Mark Mobius, founder of Mobius Capital Partners, told CNBC in April 2020 that many companies were looking to move their supply chains closer to home after the shock of the pandemic. “I think there’s going to be a diversification where these supply chains get moved into places like Vietnam, Bangladesh, Turkey, even Brazil,” he said.

Speaking to CNBC on Wednesday, Suren Thiru, head of economics at the British Chamber of Commerce, said some U.K. businesses were already shortening their supply chains after coronavirus-related disruptions had affected operations.

On the other hand, independent analyst Fraser Howie said governments would look to reduce their dependency on China, although he noted that there was “no way China’s going to be ignored.” Bruce Pang of China Renaissance Securities agreed that China had a key position in the global supply chain in the near term, as alternative markets did not have the same scale to support major relocations.

The coronavirus pandemic was not the only issue that would encourage companies to rethink their supply chains, the EIU noted in the same report. “The trade war is likely to continue after the U.S. election in November 2020, regardless of the outcome, as issues of technological dominance drive tensions between the world’s two largest economies,” it said in the report.

Market watchers have been predicting an unravelling of globalization since before the outbreak of Covid-19. Eoin Murray, head of investment at Hermes Investment Management, told CNBC last year that international trade as we know it was unlikely to exist in the future, and would instead be replaced with a regional trading system. Meanwhile, Hans Redeker, global head of FX strategy at Morgan Stanley, warned last June that geopolitical tensions were reversing globalization.

THE SEISMIC shock of the coronavirus pandemic has revealed the fragility of an interconnected world. Anne McElvoy and economist Jeffrey Sachs debate whether globalization is still worth the risks—and whether liberal economists should bear some of the blame.

In recent time, many in media, academia and politics seem ready to hit the pause button on globalization. Globalization is headed to the ICU, a Foreign Policy column argued on March 9, 2020 while The Economist’s May 14, 2020 issue asked whether COVID-19 had killed globalization.

Meanwhile on the populist right, leaders like U.S. President Donald Trump and Brazilian President Jair Bolsonaro have used the widespread push to close national borders, and to keep foreigners, tourists and migrants out, to exploit pre-existing sentiments of xenophobia and racism among their supporters

Concepts for Globalization: Globalization seems to sustain might be in a new shape. It’s a horse that left the barn 30 years ago, when the Soviet Union fell, when free markets for labor and capital became the norm, and when financial markets became more important than the trade in goods and services. These trends cannot be reversed, any more than the industrial revolution or the emergence of computers.

It is obvious that no significant global player is changing its game plan. China is quietly continuing its enormous investments in the Belt and Road Initiative while the U.S. and Russia are in an ongoing tussle about major arms deals with India—intensified since the COVID-19 crisis became global—because neither power wants to shrink its global share of the arms market. French President Emmanuel Macron and President Donald Trump have just come to a broad agreement to slow down the E.U. effort to tax the big American tech firms (Google, Facebook, Microsoft) in the interests of avoiding a tariff war between the two countries. Germany remains keen to avoid lining up with either the United States or China in the most recent hostilities between the two. Though many nation-states are preoccupied with tightening their borders, maximizing their medical resources and prioritizing the health of their citizens above all else, no country has taken any serious action to undo or reverse their global alliances, interests and strategies.

The recent crisis has also shown how neither science nor technology can succeed without globalization. This was exemplified by the effort of President Trump to help the United States to buy a German company developing a coronavirus vaccine. The attempt, which failed, was a marker of the tensions that arise when science, which so often relies on international cooperation, collides with national ambitions and anxieties. The best virologists, epidemiologists and public health experts are constantly in touch with one another across national boundaries. Drug companies rely on globally conducted trials and scientific talent drawn from a global pool. Emergency equipment is sent from various countries to one another. Although there is still a competitive race to find the best tests, equipment, vaccines and cures, the globalized model of corporate collaboration in the big pharma corporate world is sure to continue. And nation states that treat the pandemic as a zero-sum game, to be won or lost, are sure to fail.

Concepts for Reverse Globalization: In terms of international trade and financial flows, globalization had already begun to reverse after the Great Recession. The outbreak of the coronavirus added momentum to the trend and fueled broader questions about how desirable an interdependent world really was. The Times’s Peter S. Goodman wrote in 2020.

Russia invaded Ukraine in 2014 and this year (2022) challenging NATO’s supposed encirclement of Russia and its military capabilities in Central Europe. The West has responded with threats of unprecedented sanctions. This crisis stems from the Soviet Union’s collapse and the West’s effort to create a ‘Europe whole and free’ and at peace. The West failed to convince Russia to play a positive role in Europe and to help it do so. NATO declared that Ukraine and Georgia, on Russia’s borders, would someday become Alliance members. Nevertheless, the US and NATO are conducting serious diplomacy with Russia that leads to a new polarization of the world. A new cold war will benefit no one, Russia least of all.

The current crisis over Ukraine has deep roots and, of course, is not limited to Ukraine. The view prevailing in the United States and most of Western and Central Europe is that Russian President Vladimir Putin has selected Ukraine, on account of its strategic location in Central Europe, to be the leading edge of an attempt to reconstitute the Soviet Union or at least to establish a new sphere of influence in Russia’s near abroad.

Russia and Ukraine supply more than a quarter of the world’s wheat, the Chinese government has become particularly concerned about reducing its dependence on foreign agricultural products, as James Palmer writes in Foreign Policy. President Xi Jinping of China said this month that the “the rice bowls of the Chinese people must be filled with Chinese grain.”

After a reckoning with the costs of its dependency on Russian fossil fuels, the European Union vowed this month to slash Russian natural gas imports by two-thirds by next winter, and to phase them out by 2027.

It is also seen that well before Russia’s invasion, the Biden and Trump administrations pursued policies to decrease the United States’ reliance on trade with China. As President Biden’s best-polling lines in his March 1 State of the Union address was his vow “to make sure everything from the deck of an aircraft carrier to the steel on highway guardrails is made in America from beginning to end.”

“You are removing this big chunk of the global economy and going back to the situation we had in the Cold War when the Soviet bloc was pretty much closed off,” Maury Obstfeld, an economics professor at the University of California, Berkeley, told The Washington Post. “But that doesn’t mean the rest of the world can’t be tightly integrated in terms of trade and finance.”

Conclusion: From the above discussion it can be said that the factors like trade protection, geopolitical tensions, border crossing and immigration control, covid-19 pandemic and Ukraine crisis contributed much to instigate the backward movement of globalization, the ultimate outcome of all the issues will be a new normal situation. As many agreed that Russia’s attack on Ukraine marks the end of all that and the beginning of a new normal or rather a shift back to old normality. Surely the covid-19 pandemic and Ukraine crisis will come to end and the globalization will also be there in a new shape i.e regional autarky and priority in case of trade and supply chain management.

 

 

References:

i)                    Wikipedia;

ii)                   Dr. Chaoying Zhang’s  Reverse Globalization-The Crisis of Neoliberalism INTERNATIONAL POLITICAL SCIENCE ASSOCIATION

iii)                The consumer News and Business Channel (CNBC) website.

iv)                The Economist, 14 may 2020;

v)                  Ukraine war: Ends the World as We know It by Liam Denning, march 18,2022;

vi)                The Ukraine Crisis: Why and What now? Robert Hunter, CNBC,4 February,2022