The age of ‘Slobalisation’: What tectonic shifts in global trade means
Nothing demonstrates globalisation like McDonald’s. Its burgers and fries retain a trademark flavour no matter where they are sold. Yet, the company does not shy away from embracing local tastes.
January 1990 was momentous for globalisation as McDonald’s opened its first outlet in the Soviet Union, signalling the then communist superpower’s desire to move towards a more open market. In 2022, the fast-food company temporarily closed its 850 outlets in Russia and 108 in Ukraine as the two countries battled each other, keeping pace with the recent phenomenon of “slowbalisation”.
Experts across the world have declared that after decades of economic growth, the world is now set for a period of slower global integration or slowbalisation. Former WTO chief Pascal Lamy said recently that the world has realised it has to take a lot more factors into account while doing global trade.
Though experts claim slowbalisation started after the 2008 global financial crisis, they point out that it has gained pace because of the Covid outbreak, the Russia-Ukraine war, spiralling costs of procurement through global value chains and a general tendency by several nations to tilt towards protectionist policies. In fact, some argue globalisation — often feted for helping poorer countries create wealth and get access to new tools and technology — is today under threat to a degree never experienced before. Time-tested models of trade flows are no longer relevant suddenly and are being redrawn or reshaped. This is slowing down the global economy.
Take the example of Europe, home of the world’s largest trading block, the European Union. The EU accounts for 16.5% of the world’s trade in goods, imports about 40% of its natural gas from Russia. But Russia’s invasion of Ukraine threatens this bilateral mechanism. Germany, Europe’s biggest economy, is already moving towards halting gas supplies from Russian Gazprom. The state-owned gas giant was a dependable supplier of natural gas to Germany for over 40 years. According to Reuters, Germany has cut Russian gas imports to 40% from 55% and oil to 25% from 35% before the invasion. The two nations’ arrangement was not just a win-win, but a shining example of globalisation at work. But now, the arrangement’s future is subject to strict West-led sanctions.
The global economy is riddled with such examples where trade equations are being realigned, and the trend is putting a heavy burden on the pace of globalisation.
Engines losing power
Experts also point out that key players in global trade are slowly losing the motivation to stay globalised. Partly because they suddenly have huge domestic issues to address first. For example, China, a key participant in global trade, has lately been battling fresh rounds of supply chain crisis. The country with a global trade share of nearly 15% saw its factory activity slump at the fastest pace in two years in March 2022. Further, widespread Covid outbreaks have forced major Chinese cities to impose lockdowns. Shanghai, the world’s busiest and largest container port, is under a strict lockdown. These signs indicate the “world factory” has to deal with economic, and probably even social, hardships first before looking at being a global player.
Another trade engine that is sputtering is Russia. As a former G8 member, it has been a leading player in shaping global trade. However, its invasion of Ukraine has made all major countries punish Russia by imposing sanctions to make it a pariah in global trade. This has put more pressure on the supply chains of a globalised world. Some experts say Russia — a key supplier of oil, gas, wheat, metals and fertilisers — is too big an economic player to be alienated from global trade.
Trade experts say the world has gained so much because of globalisation and nations must not lose that trade momentum. As several countries have deeper economic dependence on each other, the advantages of such an arrangement will make them renew their faith in a globalised world, assert economic pundits.
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