The coronavirus is a force for deglobalization
Illustration: Sarah Grillo/Axios
The COVID-19 pandemic is rolling back the tide of globalization, both economically and politically.
Why it matters: For all its flaws, increased global trade and international connections has on the whole been a force for prosperity and peace. COVID-19 is forcing a reshoring that, while necessary, could leave the world poorer and less able to counter global threats — including the pandemic itself.
What's happening: The World Health Organization held its 73rd annual assembly earlier this week — virtually — as it debated responses to a COVID-19 pandemic that has killed more than 300,000 people worldwide. But the meeting was overshadowed by growing animosity between the U.S. and China over the disease, leading to President Trump's threat to permanently cut off U.S. funding for the organization.
- The WHO assembly was the latest sign that the global pandemic, far from bringing the world together, has only driven it further apart.
- Before a successful vaccine has even been discovered, battle lines are already being drawn over which country will develop it and whose citizens will receive access first. That includes between allies — the U.S. shunned a Europe-led virtual meeting earlier this month to raise billions for a vaccine, while French officials expressed anger over the possibility that the U.S. might be first in line for a vaccine produced by Paris-based Sanofi.
Driving the news: While international governance crumbles — the five permanent members of the UN Security Council haven't even been able to agree on a resolution urging a global cease-fire during the pandemic — the virus has been even more devastating to economic globalization.
- The World Trade Organization believes COVID-19 could cause global trade to fall by as much as one-third, while the UN Conference on Trade and Development predicts the pandemic will reduce flows of foreign direct investment by as much as 40%.
- The International Civil Aviation Organization projected last month that international air passenger traffic could drop by as much as two-thirds by September, while on May 19 Canadian Prime Minister Justin Trudeau announced the U.S.-Canada border would remain closed to nonessential travel for at least another month.
- Exports of U.S. goods fell 6.7% in March, the biggest decline since the 2008 recession, and the drop will almost certainly steepen in April.
The companies that are traditionally good at being resilient will take a look at deglobalization in the areas that are the biggest risk for them.— Kevin Ingram, CFO at FM Global
While the most extreme changes are likely a temporary effect of COVID-19 lockdown policies, globalization was already facing major political headwinds boosted by long-term technological shifts.
- The U.S.- China trade war had significantly damaged the economic relationship between the world's two largest economies, and U.S. tariffs on imports were already at their highest rate since 1993 before the novel coronavirus.
- The development of automation and robotics — another existing trend accelerated by the pandemic — will permit some companies to bring outsourced work home, or even replace workers altogether.
- The advance of political populism in much of the West has sapped support for the institutions that undergird globalization. That includes the WTO, which Republican Senator Josh Hawley called to be abolished in a piece earlier this month.
"Globalization describes a world economy increasingly integrated under a common set of rules and principles. We’re now experiencing the beginnings of an unwind."— Ian Bremmer, president of the Eurasia Group
The catch: An infectious disease pandemic spreading around the world is a clear example of the dark side of global connection, and one that underscores the importance of considering resilience alongside efficiency when constructing supply chains. But true deglobalization would make the world poorer and less secure.
- Increased global trade in recent decades coincided with an unprecedented reduction in global poverty. Throw that into reverse, and both workers in developing nations and consumers in rich ones will suffer.
- As nations become economically more interdependent, they tend to be less likely to make war on each other — one reason why the post-World War II era has been a peaceful one, at least by the bloody standards of humanity.
- Large segments of the global population may want to turn their backs on each other, but nationalist impulses won't suddenly make international challenges disappear. Climate change, nuclear weapons and cyber crimes are "problems that can best, and maybe only, be solved via international cooperation," writes author Robert Wright.
The bottom line: Though globalization isn't dead, its trajectory will be altered by the pandemic. But we still need to figure out a way to share the same small globe.