By Yasas Mudalige
The term “slowbalisation” has gained prominence in recent years as a descriptor for the evolving landscape of globalisation. It signifies a shift away from the rapid, borderless exchange of goods, services, and information that characterised the late 20th century. While it is hard to provide a definite answer to the question on whether the world is moving towards slowbalisation, this blog will offer an understanding of what exactly this term means and explain recent global events or trends that may make some people believe that we are moving to such a reality.
What is Slowbalisation?
To understand slowbalisation, it is essential to first recognise the historical context of globalisation. The beginning of globalisation is a matter of debate, with most scholars tracing it back to the European Age of Discovery. However, interconnections started to emerge in various aspects during the colonial period.
The late 20th century witnessed an unprecedented surge in global interconnectedness driven by factors like advances in technology, liberalisation of trade, and the fall of political barriers, notably the end of the Cold War. The fall of the Soviet Union and the resultant unipolar global order, along with global institutions such as the World Trade Organisation, gave rise to this unprecedented development. This era of hyper-globalisation seemed to promise boundless opportunities for countries to participate in the global economy. However, as the 21st century unfolded, a series of events and developments led to the slowdown of rapid globalisation that had taken place in the late 20th century.
How Has Globalisation Slowed Down?
Here are a few events, trends and developments that have impacted globalisation:
- The 2008 Financial Crisis
One of the most significant events that demonstrated the consequences of a globalised world that greatly depended on one another was the 2008 financial crisis. The 2008 financial crisis exposed the vulnerabilities of interconnected financial systems, prompting countries to reevaluate their economic policies and become more cautious about excessive exposure to global markets. However, this did not mean that it necessarily impacted the phase of globalisation.
- Geopolitical Fragmentation
A significant development in the world is geopolitical fragmentation. In a way, this is a result of globalisation itself. The liberalisation of markets and capital flows led to capital flowing from Western developed countries to developing nations. This influx of foreign direct investment (FDI) fuelled the growth of economies in countries like China and India, enabling them to rival Western nations and Euro-centric global institutions for political and economic power. This has made the global political landscape very competitive, giving rise to countries implementing protectionist trade policies and other measures that decrease global interconnectedness. Clear examples of this competitive landscape are the US-China trade war and the Australia-China trade tensions. In 2018, under the Trump administration, the United States imposed tariffs and other trade barriers on China, prompting China to retaliate with countermeasures. This slowed the growth of international trade. However, it is important to note that although these measures slowed down growth of international trade, it did not decrease the global levels of trade.
- The COVID-19 Pandemic
The COVID-19 pandemic resulted in an unprecedented dip in the levels of international trade in 2020. In value terms, global trade stood at about $25 trillion in 2019 but declined by about $2.5 trillion in 2020 due to the pandemic. This demonstrated the dangers of countries relying on interconnected supply chains, leading to nations shifting their focus on their national demand requirements and implementing protectionist measures. Even though this highlighted the importance of localised supply chains and the vulnerabilities of international trade, statistics show that international trade recovered rapidly in 2021. Overall, the value of global trade reached a record level of $28.5 trillion in 2021, representing a 25% increase from 2020 and a 13% rise compared to 2019, before the pandemic struck. The value of international trade was expected to reach around US$32 trillion by the end of 2022, an increase of roughly 26 percent relative to the pre-pandemic levels of 2019. Thus, despite the wider popularity of “slowbalisation,” these statistics does not seem to reflect the actual trends in international trade.
- Climate Change
Climate change has also impacted the phase of globalisation. El Nino disruptions have pushed countries to implement protectionist trade policies, especially regarding food items. Recently, India banned its rice exports due to fears of shortages caused by El Nino disruptions and rising inflation. India’s ban on rice exports has far-reaching consequences, particularly for nations heavily dependent on its rice supply. Many countries across Asia, Africa, and the Middle East rely on Indian rice imports to fulfil their food requirements. The brunt of this impact is borne by impoverished countries such as Nepal and Bangladesh, as well as African nations including Benin, Senegal, Togo, and Mali, all of which predominantly import broken rice. These instances also indicate signs of a slowdown in international trade and the vulnerabilities of relying on international trade for food. Due to issues like these, countries are trying to focus on localised food manufacturing to increase food security. However, most of these policies are yet to be implemented. Increased awareness of climate change has also influenced the perception of international trade. Concerns about the carbon footprint associated with long-distance shipping and sustainability have led companies to reconfigure their supply chains, favouring more eco-friendly and localised approaches.
- The Russian-Ukraine War
The Russian invasion of Ukraine underscored the risks associated with heavy dependence on international trade for food and energy resources. European countries have faced economic challenges due to disruptions in gas and oil supplies resulting from sanctions against Russia. Concurrently, the conflict has disrupted the supply chains for key staple food products like wheat and corn. Russia and Ukraine are significant exporters of these commodities, and the disruptions have had global ramifications, leading to rising food prices and shortages. As a result, nations are increasingly exploring localised solutions to enhance their food and energy security.
What Does All of This Mean?
While the concept of “slowbalisation” has gained popularity and exposed the vulnerabilities of international trade, the world remains highly interconnected, and in fact, it is more interconnected than ever before. However, it is evident that nations are actively seeking to reduce their dependence on the pitfalls of globalisation. Particularly, there is a growing emphasis on enhancing food and energy security and establishing localised supply chains, which may herald an era of “slowbalisation.” Nevertheless, the reality is that the global supply chains are immensely complex and require the collaborative efforts of multiple countries, raising doubts about the feasibility of complete localisation. Countries are poised to intensify their efforts to reduce their reliance on international trade for food and energy security. Simultaneously, prevailing geopolitical dynamics may push nations to adopt protectionist measures, given the current global landscape. In summary, while the signs of “slowbalisation” have emerged, its full realisation remains uncertain. The future will ultimately determine whether this trend becomes a reality.
The views and opinions expressed in articles submitted to the Comparative Advantage Blog are those of the author and do not necessarily reflect the views of The Moot Court Bench.