Reshoring, nearshoring, decoupling - keywords like these have become highly topical these days. A reaction to the ongoing international turmoil that has shaken up the previous political and economic world order, it seems. At the latest, since Russia's attack on Ukraine, blatantly violating international law, coupled with China's increasingly aggressive stance against Taiwan. Reason enough for the renowned Hamburg weekly, Die Zeit, in close cooperation with shipping line Hapag-Lloyd, to invite high-ranking experts to discuss the prospects of globalization from different angles.
A change in mindset is noticeable in many boardrooms of global companies. They already stopped putting their eggs in a single – Chinese – basket, when deciding about industrial expansion in the Far East. Car manufacturer Opel, for example, has just canceled plans to set up a production plant in China. Other well-known brands like Black & Decker, Intel, Adidas, Sony, Puma, Nike, or Apple have decided to relocate some of their production to other Asian countries, preferably to Vietnam, Thailand, Malaysia, and Indonesia. Or, as in the case of Hyundai, Kia, and Samsung, some companies have packed up their bags in China and returned home to South Korea or their countries of origin, respectively, thus safeguarding industrial activities.
This trend to exit China or to scale down industrial activities is result of a “mental shift” that is currently taking place at the headquarters of many global enterprises, states a survey
conducted by the European Chamber of Commerce in China, presented last Wednesday (21SEP22). The Chamber concludes that due to permanent lockdowns, human rights violations and because of an ever
more aggressive policy “China is becoming increasingly risky and unpopular as a business location.” For managers of Western companies, taking on a leadership role in a secondary branch
of their company in China used to be a huge step up their career ladder. Today, such an offer is tantamount to a punitive transfer.
Therefore, detaching from China is a clear trend, confirmed speakers at the recent forum in Hamburg. But does this prove that the era of globalization is fading out? After all, during the past decades, the international division of labor has enabled millions of people in less developed countries to escape poverty, providing consumers in wealthier nations an abundance of products at affordable prices.
No, globalization is not over, was the uniform view of the experts speaking at the Hamburg-held meeting. But globalization is facing a fundamental transition, according to Germany Chancellor, Olaf Scholz. “The future of globalization has a name: diversification,” was his core message to the 100+ attendees that had enrolled for the full-day event. His prediction was echoed in principle by all panelists, such as Tim Scharwath, Head of DHL Global Forwarding, Freight. “Protectionism has increased, new trade blocs have formed, and sanctions are affecting trade flows,” he summarized the mounting hurdles for universal trade and transportation. Marion Jansen, Director of the Trade and Agriculture Directorate at the OECD in Paris, said a “democratic group of like-minded countries has taken shape, consisting of 38 nations around the world, with which the OECD collaborates closely.”
Of winners and losers
Peter Kovacs, Head of the Industry, Goods, Energy, Customs and Origin unit, DG TRADE, EU Commission, added to this that deindustrialization fears in Europe are not unjustified, as seen by mounting export restrictions [set up by China] for rare minerals such as niobium, copper, iron, or apatite, hampering production of high-tech goods. Professor Gabriel Felbermayr, Director of the Austrian Institute of Economic Research (WIFO), reminded the audience that globalization moved sideways in the aftermath of the financial crisis in 2008, following a decade of hyper-globalization from 1998 to 2008. Among the losers will be those who close themselves off like North Korea, Venezuela, Myanmar, or through imperialist policies practiced more recently by Russia, was the general consensus among panelists and attendees.
Climate change becomes THE future globalization driver
So, where do we go from here and what are the economic perspectives mid- and long term in international trade, transportation, and market developments? The overarching and global theme will be the fight against global warming, i.e., sustainability. “The climate impact is the key driver of economic growth in the times ahead,” predicted Gabriel Felbermayr, forecasting a new and different form of globalization. He added that the division of labor is far from over. In contrast to the past, “production will increasingly take place where the sources are,” he said, hence areas backed by abundant water supply, solar or hydrogen powered electricity, and fuel cell systems. His outlook was supported by Danae Kyriakopoulou, Senior Policy Fellow, London School of Economics and Political Science (LSE). Globalization is on the brink of taking different forms. “We are amid a transitional phase to run economic processes much more sustainably in order to step out of the era of fossil fuel and embark on a net zero future.”
In a nutshell: Fighting global warming becomes the new driver of economic processes and will be a game changer in international trade, consumption, and production within the next two or three decades. This includes sustainable supply chains in ocean, air, or surface transportation, driven forward and backed by a universal scheme of carbon taxes as part of an international legal framework. Achieving net zero is a matter of do or die.
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