The Tribune

ACTIVTRADES WEEKLY

By Ricardo Evangelista

www.activtrades.bs

The coronavirus has created much disruption, unbalancing the pillars that sustain our way of living. This is particularly noticeable in the effect the virus-containment measures are having on globalisation. As the disease progressed from east to west, factories started closing in China, leading to a shortage of certain components that caused the shutting down of assembly lines in Europe within only a few weeks. The wave of economic disruption had already reached Europe when the disease itself started claiming the first victims, such was the degree of interdependency generated by the global supply chain.

But what is globalisation and is the coronavirus solely responsible for its decline? The Oxford English dictionary defines globalisation as the process by which businesses or other organisations develop international influence or start operating on an international scale. Since West European nations set out to navigate the world and started establishing trade outposts in the 16th century, we’ve had epochs of growing and then diminished globalisation. The latest phase started in the 1990s, when geo-politics and technological advances allowed for the transfer of knowledge and supply chain integration that culminated with China becoming the world’s factory, while the free circulation of goods, people and capital reached unprecedented levels.

This open system of trade and free movement suffered its first serious blow with the financial crisis of 2008. The flow of capital and foreign investment slowed down and so did the growth of exports, that froze in comparison to GDP. As populations in the West struggled with unemployment and austerity, protectionist ideas gained more traction, sometimes intertwined with chauvinistic principles that, after the horrors of the Second World War, had been relegated to the fringes.

At the end of 2016 Donald Trump came into power in the US, elected on an America-first campaign designed to appeal to a vast electorate of blue-collar workers who had been left behind by the new world order. This protectionist stance eventually led to a trade conflict with China, which impaired the growth of the global economy through a decline in world trade.

In January 2020 the tariffs on US imports were already at the highest level since 1993, and then the coronavirus announced itself to the world. The pandemic exposed the shortfalls of a globalised world, with many countries finding themselves unable to procure much needed medicine, protective clothing and masks, at a time of great necessity.

As borders were closed in Europe, farmers saw vegetables rotting in the fields, as the seasonal migrants that normally picked them were unable to travel. China and the US started to decouple their supply chains, while countless countries around the world made plans to repatriate supply chains that had been outsourced elsewhere.

It is likely the post COVID-19 world will bring restrictions to the free circulation of goods, people and capital, which we had grown used to and even took for granted.

The question now is: What form of world order will replace globalisation?