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Working Knowledge

Has the Pandemic Killed Globalization?

Jun 1, 2020 1:14:17 PM

The Economist reports that globalization as it has existed in past decades may be a casualty of the COVID-19 pandemic. Concerns regarding the Sino-American trade war had already destabilized the international business environment before Covid-19, and the pandemic added new layers of complexity as critical goods suddenly were in short supply.

  • To limit the spread of the coronavirus, a total of 217 countries and territories worldwide have imposed travel and border restrictions, according to a report by the United Nations’ World Tourism Organization.
  • In March and April, airlines were flying 90% fewer seatson international flights, as compared to 62% on domestic flights. 
  • 21% of transpacific container-sailings in May were cancelled
  • Harvard Business Review reports preliminary forecasts of a 13-32% declinein merchandise trade and a 44-80% drop in international airline passengers in 2020

 

The key globalization-related debate is redundancy versus reshoring. Will companies and countries seek greater safety in international diversification, or will they try fostering domestic self-sufficiency?

“Covid-19 will push more companies in other sectors to relocate parts of their supply chains,” the Economist report predicts. “The outcome of this will be an Asian supply chain network that is both less China-focused and more diverse.” Many companies have already begun to develop redundancy through regional-based production capabilities.

While technological advancements such as ecommerce, videoconferencing, and robotics facilitate globalization, government policies and public opinion will also heavily influence the design of the future global supply chain.

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