This is at least the fourth time in just a few years that the death of globalization has been announced.
Many thought that was it when, in its embarrassing collapse of 2008, Wall Street dragged down international finance and a good part of the world economy.
Then there were those four years during which Donald Trump shot everything that moved in trade matters, that is to say not only the great Chinese rival, but also the closest and most faithful economic partners of the United States. , as well as the international rules of which his own country had been the principal architect.
Then came the COVID-19 pandemic, during which several countries initially scrambled to keep their vaccines and medical equipment to themselves, and then the big global supply chains began to derail .
And now, it is the invasion of Ukraine by Russia which is disrupting these chains even more, in addition to posing the problem of security and economic independence.
We obviously think of Europe, which would like to punish Vladimir Putin’s regime more harshly if it were not a prisoner of its dependence on Russian fossil fuels. But there are other regional powers — China, India, Brazil, Saudi Arabia, Nigeria — who see the Western countries’ treatment of Russia and think they might be worth -be better off depending less economically on them in order to avoid suffering the same fate one day, noted several observers in recent weeks.
These powers must not have been reassured when they heard on Wednesday the US Secretary of the Treasury issue a warning to countries that continue to do business with Russia. Reinforcing this image of an economic world where it will increasingly be necessary to choose sides, Janet Yellen notably informed China that its “integration into the world economy” was going to depend on factors such as its participation in the campaign against Vladimir Putin’s regime, Agence France-Presse reported. “Going forward, it will be increasingly difficult to separate economic issues from broader considerations of national interest, including national security,” she told several other countries, including India, without however naming them.
stay with friends
While calling for a “modernization” of the major international economic institutions, such as the International Monetary Fund (IMF) and the World Bank, which will hold their spring meetings next week, Janet Yellen called for Russia to be excluded from the G20 and wished more “amilocalization” (friendshoringin English).
We have known for a long time about “relocation” (offshoring, in English), i.e. the movement of manufacturing jobs from developed countries to emerging economies, where wages are lower. Governments in affected countries have also often called for these jobs to be brought home — “reshoring” (reshoring) — or, at the very least, as close a return as possible (nearshoring).
Often predicted, these relocations have rarely materialized. However, there would be several advantages to keeping our supply chains close, argued Thursday Investissement Québec during the launch of a new certification for products designed and manufactured in Quebec (“Product of Quebec”). This would, among other things, reduce transportation costs, business risks and pollution, in addition to promoting local production and innovation.
With friendlocation, or withally shoring, it is a question of at least bringing supply chains back to partner countries (friends or allies) that are more reliable, more stable and with closer values, argued last summer two experts from the Brookings Institute, located in Washington. Replace autocratic regimes like China and Russia with liberal democracies like Canada, Mexico or Europe, for example.
It all sounds awfully like trade as it existed in the days of the Cold War, remarked last month. The Economist. The difference is that at the time, the USSR and China were cut off from the rest of the world economy, whereas today autocracies account for 31% of the world’s gross domestic product and the two worlds 15 billion worth of goods and services are bought and sold each day.
Necessary cooperation
The best way to strengthen supply chains is not to shorten them or keep them at home, the IMF wrote in a study published this week. On the contrary, it is a question of injecting as much diversity as possible into the sources of supply and of providing for more flexible manufacturing methods.
“The fragmentation of the global economy into geopolitical blocs […] would entail terrible adjustment costs,” IMF Managing Director Kristalina Georgieva said on Thursday. “In a world where war in Europe leads to hunger in Africa, where a pandemic can circle the globe in days and have repercussions for years, where pollution, wherever it comes from, contributes to the hen sea levels rise anywhere on the planet, the threat of a breakdown in global cooperation cannot be overstated: our collective prosperity depends on it. »
Going forward, it will be increasingly difficult to separate economic issues from broader considerations of national interest, including national security.