Emergence of pandemic poised to define an era

Editor’s note: Nations are collaborating in the fight against the novel coronavirus pneumonia outbreak to limit the damage to people’s health and the impact on the global economy. Here, in the fourth part of a series titled “One World, One Fight”, we look at how countries can work together.

What now for globalization? With much of the world in partial or complete lockdown, the COVID-19 pandemic is set to be an era-defining event－like the global financial crisis of more than a decade ago.

One of the big questions concerns the consequences for the interconnected global economic system that has emerged since the 1990s.

Globalization has improved the living standards of many in the world, lifting millions of people in China out of poverty, in particular.

But in recent years there has been a populist backlash in some quarters in the West, particularly among those in former industrial heartlands who feel they have missed out.

Even before the pandemic unfolded, worldwide trade had been slowing significantly. In the 30 years leading up to the financial crisis, it had consistently grown at a rate twice that of global GDP expansion, but since 2012, it has barely kept up.

Leaders such as French President Emmanuel Macron have acknowledged that globalization is facing a major crisis.

However, one of its staunchest defenders has been President Xi Jinping. He made this clear in his speech to the World Economic Forum in Davos, Switzerland, in January 2017.

While acknowledging that globalization had created new economic problems, he said mankind could only advance by cooperating.

Xi’s vision of globalization goes beyond merely trade, and is embodied in his concept of “a community of a shared future for mankind “where countries work together to advance human civilization.

Singaporean academic and former diplomat Kishore Mahbubani believes one of the lasting consequences of the pandemic could be a move away from a form of globalization centered on the United States to a more China-centric version.

He said globalization has underlined how interdependent the world has become and that is why the concept of a shared destiny is so relevant to our times.

“I use the analogy of planet Earth becoming like a cruise ship. So, essentially we are all in the same boat, and it’s better for us to realize this. This applies not just to this crisis but to issues like global warming,” he said.

“You have to take care of the boat as a whole. There is no point in keeping just your own cabin clean. This is actually what a common destiny is all about.”

Wang Huiyao, president and founder of the Center for China and Globalization(CCG), an independent think tank based in Beijing, said the pandemic proves above all else that globalization is not just about trade, but is a much bigger concept.

“If people didn’t realize it before, they know now that we can’t live without one another. We are intertwined and affect each other so much that we need a globalized approach to combat disasters or crises such as this. The pandemic is a wake-up call to remind us just how globalized we are.”

Wang, also a counselor to the State Council, China’s Cabinet, said one of the outcomes of the pandemic will demonstrate what he believes is the folly shown in recent years by some countries pursuing protectionism, unilateralism, and embarking on trade wars.

“Unilateralist, anti-globalization is no use to us now. What we need to do is to help each other until this crisis is over,” he said.

Wang believes this approach has been ably demonstrated by China in recent weeks.

“Despite facing a major crisis of its own, it has given every support to the global community－from releasing the genetic sequence of the virus at the earliest opportunity, to sending medical teams to Italy. I really do hope that when this is over, it will remove some of the misconceptions and bias against China that exist in the West.”

Philippe Legrain, founder of international think tank the Open Political Economy Network and a former economic adviser to the president of the European Commission, is not confident the current crisis will lead to any renewed commitment to globalization.

He believes the international response has been much less coordinated compared with that to the global financial crisis, when the G20 came up with an unprecedented rescue package.

“There has been very little international cooperation during this crisis. Most governments have acted unilaterally. Even within the European Union, countries have failed to respond to Italy’s urgent request for medical supplies, although China did,” he said.

“The closure of borders, the restrictions on trade－such as India’s with pharmaceutical exports－and the perception of foreigners as vectors of disease are all creating more national economies and more nationalistic politics.”

Before the pandemic emerged, the debate about globalization centered on trade, and the fact that it was slowing in relation to global GDP represented some sort of push back against the concept.

Parag Khanna, managing partner of FutureMap, a strategic advisory company based in Singapore, and author of The Future is Asian, said it has always been wrong to look at globalization through the prism of trade alone.

“Services trade is often discounted in trade statistics, yet is perhaps more representative of globalization than goods trade. One should always expect trade as a share of GDP to fall when large economies (such as China and India) are growing in terms of domestic (consumption) demand.

“Trade is not the most important indicator of globalization, it is just one. Foreign investment, capital flows, migration, and so forth are equally important.”

Mahbubani, the academic and author of a new book, Has China Won?, which focuses on the Sino-US relationship, said it has always been an exaggeration to claim that slowing global trade spelled the end of globalization.

“When you talk of slowing, you’re talking about the slowing of the rate of growth. You are not talking about reversal. OK, it was growing much faster in the ’80s, ’90s and the noughties, but it is still actually growing, and I think it will continue to grow.”

However, the pandemic has raised the question of globalization relying on worldwide supply chains and just-in-time manufacturing, which requires an uninterrupted flow of components and other supplies.

Sectors migrate

Some observers have argued that the outbreak could hasten the departure of manufacturing from China to other countries.

Douglas McWilliams, deputy chairman and founder of the Centre for Economics and Business Research, an economics consultancy in London, said this is happening anyway.

“Much of China’s low labor cost sectors have already migrated to other countries,” he said.

McWilliams believes the pandemic could accelerate a transition in globalization, from which China will benefit.

“The new model will be based on specialization, particularly in technology. China is a world leader in a wide range of technologies, with companies like Huawei, Alibaba, Tencent and Geely all being seen as global leaders in their fields. All this should work in China’s favor,” he said.

Globalization could also become less about global supply chains but more about connectivity.

Some commentators believe this is best exemplified by China’s Belt and Road Initiative, first proposed in 2013 and which aims to forge links between countries, particularly through infrastructure but also in less-physical forms.

Legrain, from the Open Political Economy Network, argues that the initiative could sum up the meaning of globalization in the 21st century.

“Globalization exists in a political context. In the 19th century, it largely took place within European empires. In the 20th century, it took place through US-backed international institutions, and in the 21st century, it may exist within China-centered institutions such as the BRI,” he said.

Khanna, from FutureMap, who has described the initiative as the equivalent of the United Nations, the World Bank and the Marshall Plan all rolled into one, said it will become an important arm of globalization.

“It embodies infrastructure investment, trade facilitation, migration flows and new institutional dynamics spanning the whole world. It is unquestionably an additional layer of globalization,” he said.

Mahbubani believes the pandemic could be a turning point for globalization, as it comes at a time when the US and China are diverging in their thinking about how they want the world to operate.

“Americans have lost faith in globalization and international trade. They see free trade agreements as increasingly toxic. China is all too aware of the cost of being cut off from the world… It can see that its economic resurgence of the past few decades is a result of global engagement,” he said.