Have the last few years put globalisation into reverse?

It is an indisputable fact global trade has faced unprecedented disruption in the wake of the COVID-19 pandemic. The debate about the impact of the pandemic on global value chains and the future of international trade is a heated one, with experts divided on the issue of de-globalisation. Is there sufficient hard evidence to suggest that significant de-globalisation is indeed underway?

The answer remains a complex one. According to World Bank data, the ratio of international trade to global GDP peaked at 61% in 2008 before dropping to 51.5% in 2020. This could be interpreted as signalling the end of the long-term process of globalisation. However, this could also be a temporary phenomenon, resulting from trade taking longer than expected to recover from the 2008 financial crisis.

Protectionist approaches have played a role in disrupting the global supply chain. In the “Make America Great Again” campaign, Donald Trump imposed tariffs on imports from China, and the impact of the UK’s decision to depart from the European Union has impacted international trade significantly. Governments have responded by using an array of public policy tools to protect strategic supply chains.

Despite the disruption caused by protectionist measures, there is still little hard evidence in global trade statistics and business survey data to suggest that significant de-globalisation is underway. The post-pandemic reconfiguration of value chains may take longer than some experts expected. But the pattern of global trade is an aggregation of the “value chains” and a myriad of individual businesses that run from conception and production to distribution.

Ultimately, the future course of global trade depends on how businesses and governments respond to the pressures of the pandemic. Has the pandemic caused permanent changes to global supply chains, or will these changes be temporary? Is there a shift towards de-globalisation, or is this just a temporary phenomenon? As a professional international trade consultant, these are the questions I am constantly asking.

This article has highlighted the complexities of global trade in the wake of the COVID-19 pandemic and the debate around de-globalisation. We have discussed the impact of protectionist measures and a lack of hard evidence suggesting significant de-globalisation is underway. To help better understand the pattern of global trade and how it is being restructured in response to economic, corporate, geopolitical, and environmental forces, readers can refer to the clever interactive Trade Flows and Value Chains diagram offered by the World Economic Forum.

If you are part of the supply chain, you may want to challenge this analysis, but let’s see what the future of global trade holds.