We are concerned with new forces affecting world trade: trade tensions between China and the Western world; supply chain movement from China to elsewhere; and America’s turn to protectionism, among others. We understand that these trends will affect the globalization era we have become accustomed to since the 1990s, but how?
After significantly increasing the cross-border flow of money, technology, ideas, and people for the last three decades, the pace of globalization has noticeably slowed in the last decade due to several factors. The cost of logistics has stopped falling so that we would expect more complex international logistics. Loss of technology control has created strong local rivals thus increasing competition; witness the emergence of Huawei as a leading 5G technology provider, for example. Emerging economies also favor services which diminishes trade across borders, as China promotes internal growth based on consumption and services.
To account for this slowing pattern of world commerce, a Dutch author, Adjiedj Bakas, has invented a new word for it; “slowbalization”. In the author’s perspective, slowbalization means that, under a slower economic growth regime, regional links will grow stronger, supply chains will be brought back closer to home, and America will make room for economic, financial, and social leadership for others. As an example, the EU leads in protecting user data from social networks and we already see other regions following suit.
Regional trade pacts may still bring new opportunities to partners; APEC will probably create increased trade among Asia Pacific nations thereby mitigating slower growth in other areas.
Two disadvantages are associated with slowbalization. One is that emerging nations may have difficulties in interfacing their economies to the global financial system where the Fed and Wall Street still have major influence. The other is that it will not completely mitigate the cost of automation resulting in job losses in developed economies, nor the fact that reduced global cooperation will only retard growth. With this understanding we can only hope that this coming period of slowbalization is a short one.
(This article is based on the editorial “Slowbalisation”, Economist Magazine, Jan25-Feb 1 issue, www.economist.com)
Dr. Walter Kruz
Chairman, MIS Department