Does the Pandemic Mean the End of Globalization?

In a word, no. Globalization is not coming to an end. Certainly we have seen some challenges to globalization efforts over the last several years. The trade war with China, immigration barriers being raised, Brexit, and what appears to be a general retreat of the US in global affairs, the current pandemic can seem the last nail in the coffin for globalization. However, the evidence seems more likely to point to increase global cooperation in the years ahead.

Existing Global Supply Chain Investments

Trillions of dollars have been invested over the last 30 years in developing complicated global supply chains. Those investments will not be abandoned overnight. The pandemic may be stressing supply chains, and some companies will certainly look to diversify across multiple countries. Nonetheless, integration across the globe is simply too deeply integrated to most companies to significantly change.

Too many companies rely on cheap labor and cheap inputs from Asia to significantly alter their supply chains. If supply chains are moved at all, they will likely go to other countries in Southeast Asia, such as Vietnam and Thailand. Globalization has been underway since World World II. The currently pandemic is unlikely to undo a trend that has survived other similar shocks, such as wars, 9/11 and the Great Recession. Companies will not abandon their investments now.

Expanding Economic Investments

While there have been several high profile instances of countries backing away from international commitments and treaties, the flow of money tell as a different story. Brexit has actually resulted in increased European investments as the remaining European nations seem shocked into sticking more closely together. Even Britain has increased investments across Europe after the Brexit vote. Mexico is now America’s largest trading partner, surpassing Canada and China, despite the Trump Administration’s wails over NAFTA. The USMCA is likely to positive influence on trade amount the three countries. Instead of withdrawing, China continues to invest across Latin America and Africa, and is assisting Europe and the US during the pandemic.

Several international agreements continue to move forward, often without the US. That is not necessarily great for the US though those agreements streamline trade and relations among member countries. The pandemic may even raise awareness for the need to address additional global challenges, such as climate change, that can unleash significant international cooperation and investment.

Pent Up Demand & Cooperation

The pandemic has severely restricted travel across the globe as borders close and nation hunker down. Travel and tourism may face a renewed surge when the pandemic ends, unleashing significant pent up demand for global travel. Of course, nations will need to coordinate monitoring in a post-pandemic world, similarly to the coordination that occurred after the September 11, 2001 terrorist attacks. Such international cooperation seems far more likely than closed borders.

The end of globalization seems highly unlikely. Global cooperation among nations and continued business investment are the more likely result. Strengthened and more robust supply chains that diversified across multiple countries will only increase international investments. Post-pandemic pent up demand for travel and tourism will result in greater coordination to prevent future pandemics and may even kickstart international’s talks into solving other global challenges. The pandemic will deliver a sever blow, but it does not mean the end of globalization.