The Diminishing Drivers of Economic Deglobalization -Essay Analysis

With the rising tensions between the global economies of US and China, there is a fragmentation of the global supply chain, leading to significant changes in the technological sector. The US blacklisted Huawei couple of years ago, a Chinese tech giant and restricted the semiconductor export to China. This affected many other economies and disrupted the global trade[1]. Then Brexit is an example of a political factor that can lead to the fragmentation of economies that were integrated once, as the United Kingdom's departure from the EU led to trade barriers that changed the dynamics of the European Market [2]. Many countries are adopting regionalism approach, the global supply chain has been compromised in many regions which has resulted in increased costs for businesses and consumers. This is evident when the production is done in exactly the amount needed by the customer and these just-in-time production methods, are easily disrupted by tariffs and such trade policies[3]. According to the World Bank, such disruptions could lead to a reduction in the growth of global trade, which can lead to an increase in the economic inequalities among countries[4]. However, many researchers suggest that this is leading towards a regional form of economic integration, where multipolar world at various regions establish distinct model of economic integration[5].

Then there was an issue of pandemic of COVID-19, which has been a critical turning point in the global economy, where many global economies had to reevaluate their supply chains as there were immediate disruptions in the manufacturing and logistics approaches of the year 2019-2020[6]. The vulnerabilities of just in time supply chain, caused the economies to practice self-sufficiency, particularly in the field of medicine. Afterwards, the countries began to practice reshoring, also the pandemic led the economies towards digitalization, where remote work, e-commerce and other digital services expanded significantly suggesting that where traditional trade flow was disrupted the digitalization of economies led to the globalization, of services, data and technology their flow across borders at accelerated rates[7].The economic globalization is massively dependent upon the technological advancements that have played a crucial role in enhancing economic globalisation. With innovations happening in the communication systems and transportation, there can be better international trade, investment and commerce[8]. Yet recent studies have highlighted the fact that this advancement has caused fragmentation while simultaneously improving globalized connections. The COVID-19 pandemic has heightened the digital transformation of economies, by promoting remote work and localised production. It was the necessity of the time and the adaptation to such methods helped to reanalyze the traditional models of globalization that are based upon physical presence and cross-border trade[9]. This shift highlights the need to understand the complexities of the technology that both drives and inhibits global economic integration. Similarly, as many digital platforms for e-commerce have influenced customer behaviour and business practices, it has provided the customer with direct delivery without engaging in traditional trade ways. With the rapid growth of digital economies and e-commerce that has the potential to either enhance or undermine globalisation, the trend is going towards deglobalisation[10].

With e-commerce, there is a rise in localized economic activity, which provides businesses leverage technology to reach as many customers as possible without relying on traditional global supply chains. This decentralization has also highlighted the need for digital protectionism, where countries and nations apply policies and frameworks to protect their data and digital sovereignty[11]. Where countries implementing regulatory policies that have restricted the data flow across borders, affect the free flow of data related to commerce. Implementation of protectionists policies creates obstacles for international companies to enter the markets but also reinforce local monopolies, that minimizes the competitive advantages that globalisation provides [12]. The global supply chain has been facing various pressures and has gone through significant changes. The institutions have adopted strategies such as "China Plus One", to diversify the manufacturing process and investment in other promising economies beyond China also due to increasing labour costs and geopolitical risks[13]. Where the term "resilience" is used as a fundamental requirement in corporate decision-making, within businesses that aim to develop regional yet diverse and flexible supply chains. It is observed that where supply chains are evolving, the global trade flow is significant in the fields of electronics, automobiles and pharma. Hence the factors are not retreating but are going through a selective approach that balances efficiency and risk management [14].

[1] Zhang, Y. (2021) '‘Barbarising’ China in American trade war discourse: the assault on Huawei,' Third World Quarterly, 42(7), pp. 1436–1454. https://doi.org/10.1080/01436597.2021.1894120.

[2] Higgott, R. (2021) 'The USA-East Asia and the struggle to reform world order: What role for Europe and the UK after Brexit?,' in Springer eBooks, pp. 17–44. https://doi.org/10.1007/978-981-15-9841-8_2.

[3] Brakman, S. and Van Marrewijk, C. (2022) 'Tasks, occupations and slowbalisation: on the limits of fragmentation,' Cambridge Journal of Regions Economy and Society, 15(2), pp. 407–436. https://doi.org/10.1093/cjres/rsac014.

[4] Van Niekerk, A. (2020) 'Inclusive Economic Sustainability: SDGs and global inequality,' Sustainability, 12(13), p. 5427. https://doi.org/10.3390/su12135427.

[5] Peters, M.A. (2022) 'The emerging multipolar world order: A preliminary analysis,' Educational Philosophy and Theory, 55(14), pp. 1653–1663. https://doi.org/10.1080/00131857.2022.2151896.

[6] Liu, G. (2020) 'Analysis of the Trend of Global Economy after the Epidemic,' The Frontiers of Society, Science and Technology, 2(9). https://doi.org/10.25236/fsst.2020.020904.

[7] Bergman, M.M. (2020) 'The World after COVID,' World, 1(1), pp. 45–48. https://doi.org/10.3390/world1010005.

[8] Archvadze, J. (2020) 'THE IMPACT OF THE CORONAVIRUS PANDEMIC ON THE FORMS AND STRUCTURE OF EMPLOYMENT,' Globalization and Business, pp. 117–120. https://doi.org/10.35945/gb.2020.10.014.

[9] Sułkowski, Ł. (2020) COVID-19 pandemic; recession, virtual revolution leading to de-globalization? https://www.ceeol.com/search/article-detail?id=846210.

[10] Kihombo, S. et al. (2021) 'Is there a tradeoff between financial globalization, economic growth, and environmental sustainability? An advanced panel analysis,' Environmental Science and Pollution Research, 29(3), pp. 3983–3993. https://doi.org/10.1007/s11356-021-15878-z.

[11] Dicken, P. (2015). Global Shift: Mapping the Changing Contours of the World Economy. Guilford Press.

[12] Mitchell, A.D. and Mishra, N. (2020) Digital trade integration in preferential trade agreements. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3603741.

[13] Cevik, S. and Correa-Caro, C. (2019) 'Growing (un)equal: fiscal policy and income inequality in China and BRIC+,' Journal of the Asia Pacific Economy, 25(4), pp. 634–653. https://doi.org/10.1080/13547860.2019.1699985.

[14] Fan, Z. (2024) 'The Status Quo, Opportunities and Challenges of International Direct Investment in New Energy under the ‘China Plus One’ Strategy,' Airiti Library 華藝線上圖書館 [Preprint]. https://doi.org/10.6981/FEM.202408_5(8).0016.