Globalisation v. COVID-19, who will win?

– Agrani Goyal

Merriam Webster’s dictionary defines globalisation as, “the process of development of an increasingly integrated global economy marked especially by free trade, free flow of capital, and the tapping of cheaper foreign labour markets.” There are many benefits of globalisation, such as the swift spread of novel technology, lower cost of outputs, tapping of new markets etc. But as there is no rose without a thorn, globalisation has some negative aspects as well. It has led to huge disparities among nations, high rates of unemployment, spread of consumerism and a death blow to the domestic manufacturers. These patterns clear route for an anti-globalization emotion, which may intensify because of the COVID-19 pandemic.

However, it seems like the world had caused globalization to jolt to a stop even before the COVID-19 pandemic. Trade, as part of the global GDP had risen from 39% in 1991 to 61% in 2008 but has plateaued since then. Similarly, FDI, as part of the global GDP plummeted from 3.5% in 2007 to 1.3% in 2018. It started becoming clear that globalization was not benefitting everyone in the same way and this started to echo in the national and foreign policies of the countries too.  Brexit, USA’s withdrawal from the Trans-Pacific Partnership (TPP), the US-China trade war and the failure of talks at the WTO disclosed that the world had hit a pause on the process of globalization.

The process of globalization of data became a little incongruous too. Data today is more accessible and shareable than any moment in recent history, but it also is subjected to greater surveillance than ever before. During the SARS pandemic of 2003, there was mass monitoring of individual data in the interest of public health and similar actions are expected in the post-COVID-19 world too.

All these reasons have acted as a catalyst in the transition of globalisation into ‘slowbalisation.’

The effect of COVID-19 on the process of globalisation will be like discovering that the light at the end of the tunnel is actually the headlight of an oncoming train. According to the United Nations Conference on Trade and Development (UNCTAD), the further slowdown in the global economy caused by the novel coronavirus will cost roughly around $1 trillion. The emerging economies and those of the developing countries would also be severely affected as they rely heavily on exports, but now countries all over the world would want to become self-reliant. Import substitution, which was out of the lexicon, may be back in vogue. The global supply chains have been severely disrupted too, which has affected various corporations, as approximately 51,000 companies had direct suppliers in Wuhan while around five million companies had tier-two suppliers in the region. Apart from the economic effects, it will affect the diplomatic relations worldwide and the people to people movement too. With the United States and Germany slapping a bill worth $20 trillion and $165 billion respectively on China, and several other countries like France blaming it for the pandemic, COVID-19 has worsened the already brewing diplomatic tensions. The tourism industry will remain bad even after the crisis is over as governments all over the world will weigh in between the hazards of an infectious disease and the rewards of ease of travel.

Even then, globalization will not and cannot be discarded. The negative aspects of globalisation have always been there and it has withstood protests from citizens of different countries at different times, so the current backlash against it is not unprecedented. The process of globalisation has persevered not only two world wars, a Cold War and a war on terror, but also pandemics like the 1918 flu, 2003 SARS and the 2009/2010 H1N1 influenza. Additionally, the spread of the COVID-19 should be blamed on the hassle-free international travel and not globalization and even then, it does not warrant imposing of barriers on such travel but of health screenings at points of entry, just like the 9/11 attacks called for the rechecking of the airport security system. Finally, the chief reason why globalisation will not become superfluous is that the fundamental reason of the process still persists, that is nations still require goods and services from each other, as they have required for most parts of their existence.

Once the crisis begins to fade away, countries should focus on granting of economic packages which lay emphasis on post-crisis reconstruction, like the US announced one worth $2 trillion. Such economic packages should include measures like interest rate cuts, long-term tax reliefs to businesses and industries such as the infrastructure industry, providing financial help to the unemployed etc. The aim should be to fill the economic vacuum caused by the pandemic, for which the stronger economies should help the struggling ones. But as all nations would first want to protect themselves before bailing the other economies out, some scholars suggest that the full use of IMF’s Special Drawing Rights (SDR) must be made. SDR is “a reserve of foreign exchange assets comprising of leading currencies” and the idea is that countries like the USA should lend their SDRs to the stressed economies at easy terms. This would kill two birds with one stone: it will help the needy economies without taking a toll on the national budget of the helping country. Additionally, the global community should concentrate their efforts on setting up of apparatuses, such as a global fund or a centre for collaboration of research efforts, which would help us to respond more efficiently and effectively to such global problems. Finally, as a perpetual solution, the social disparities caused by globalisation have to be remedied. What the current process of globalisation is lacking is political globalisation, that is the global agencies are doing their best but the member countries are not helping and empowering them.

Globalisation has provided people with a better standard of living, better prospects and better healthcare, among other things. It has done more good than harm and so the answer to the current catastrophe is not deglobalisation, but modified globalisation, because a bad penny always turns up. If we are unsuccessful in doing this, the virus will win.

The article has been written by Agrani Goyal, a third year student at National Law University, Delhi.