Economics of Deglobalisation

In this revision video we look at the issue of de-globalisation.

After decades of increasing globalisation, there now seems to be a slowing of globalisation, or even a turn to de-globalisation, meaning decelerating trade and investment and reduced global value chains.

Will the covid pandemic accelerate a process away from hyper-globalisation or will most aspects of our inter-connected world demonstrate more resilience in the face of severe shocks?

De-globalisation is the process of contracting interdependence and integration between businesses and countries . For example, growth of trade in goods and services and investment flows between countries declines.

Some drivers that might be causing de-globalisation

1. Rise of populist politics and return to protectionism (including many non-tariff barriers) - a response to trade imbalances
2. Shift towards bi-lateral and regional trade deals + decline in the influence of the World Trade Organization (WTO)
3. Some return to capital controls and managed floating exchange rates especially after the global financial crisis
4. Economic nationalism – such as disputes over vaccine exports, controlled mergers and acquisitions, technology rivalries
5. Businesses shifting away from reliance on extended global supply chains (some reshoring of manufacturing)
6. Movement away from free movement of labour across borders – greater use of migration controls
7. Immediate impact of the 2020-21 covid pandemic - threats to supply chains and reductions in labour movement

Is de-globalisation inevitable?

• Our desire for overseas travel & study is strong – will rebound after the pandemic
• Global parcel and data flows have risen sharply over the past decade - expected to continue expanding post pandemic
• Fall in global trade during pandemic has not been as severe as many feared
• Technology has erased virtual borders – the physical movement of labour not as important as it once was
• Signs emerging global collaboration for example over corporation taxes and pharmaceutical research
• Trade liberalisation is not dead – there has been raft of new trade agreements signed between major regional blocs such as Mercosur, EU and the Pacific Alliance