Less Globalization, More Multilateralism
While some degree of deglobalization may be desirable today, this process also carries grave risks, from skyrocketing production costs to geopolitical conflict. The only way to mitigate those risks is through enhanced multilateral cooperation.
WASHINGTON, DC – With the COVID-19 catastrophe having laid bare the vulnerabilities inherent in a hyper-connected, just-in-time global economy, a retreat from globalization increasingly seems inevitable. To some extent, this may be desirable. But achieving positive outcomes will depend on deep, inclusive, and effective multilateralism.
One of the most powerful drivers of support for deglobalization is the vulnerability of production models that rely on long and complex global supply chains, which have sacrificed robustness and resilience at the altar of short-term efficiency and cost reduction. With many companies and industries dependent on faraway suppliers – and lacking any alternatives – no part of such value chains can function unless all parts do. And as the COVID-19 crisis has shown, one never knows when parts will stop functioning.
This is especially true with regard to China, a global supply-chain hub. The country is central to the manufacture of a wide range of common consumer products, including mobile phones, computers, and household goods. Moreover, it is the world’s largest supplier of active pharmaceutical ingredients, so a crisis affecting production there can disrupt medical supplies worldwide.