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After the one-two punch of Covid and war, globalisation, which has its supporters and enemies, is being put to the test like never before.
The pandemic had already aroused concerns about the world’s reliance on an economic paradigm that has torn down trade barriers while also making countries increasingly reliant on one another as industry has been delocalized over the decades.
Companies have been having to deal with massive supply chain bottlenecks around the world.
Russia’s campaign in Ukraine has sparked fears of more interruptions, threatening everything from energy supply to auto components to wheat and raw materials exports.
In a statement to shareholders on Thursday, Fink wrote, “We had already seen connectedness between governments, corporations, and even people disrupted by two years of epidemic.”
However, Janet Yellen, the US Treasury Secretary, disagrees.
Surgical mask shortages during the start of the pandemic in 2020 became a symbol of the world’s reliance on Chinese companies for a wide range of products.
The conflict between Russia and Ukraine has sparked fears of global food shortages, as the two agricultural superpowers are among the world’s biggest breadbaskets.
It has also brought attention to Europe’s — and particularly Germany’s — strong reliance on Russian gas supplies, which are now subject to punishing sanctions.
“They’ve realised that what was previously inconceivable in terms of far-reaching sanctions has suddenly become a reality,” said de Ville, author of “The End of Globalization as We Know It.”
Instead of “off-shoring,” the goal today is to divert strategic dependence to allies, a process he calls “friend-shoring.”
The most recent example of friend-shoring is a Friday agreement between the US and the EU to form a task force to wean Europe off Russian fossil resources.
“There is no de-globalization,” according to Lamy.
He described globalisation as “an animal that evolves rapidly.”
China’s Decouplement
When former US President Donald Trump initiated a trade war with China in 2018, it triggered a tit-for-tat exchange of punitive tariffs, globalisation was already facing an existential crisis.
In his broad investment plan to “rebuild America,” his successor, Joe Biden, emphasised the need to “buy American.”
“Decoupling,” or the idea of untangling the US and Chinese economies, was a phrase that originated during the Trump years.
The US has warned that providing material backing to Russia in its war in Ukraine will result in “consequences” for the world’s second-largest economy.
China also has other thorny concerns with the West, such as Taiwan, a self-governing democracy that Beijing has promised to annex one day, if necessary by force.
However, the conflict in Ukraine provides China with an opportunity to minimise its reliance on the US dollar. According to the Wall Street Journal, Beijing is in talks with Saudi Arabia to buy oil in yuan rather than dollars.
“China will continue to establish foundations for the future,” Bao remarked. “Financial separation is becoming more pronounced.”
