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Faced with the shocks of war and the pandemic on the cogs of the economy, the future of globalization seems to be in question.
Another face of globalization gives rise to the risk of an economic disconnection between Western countries on the one hand, and China and its allies on the other.
AFP
In a letter to its shareholders on Thursday, the boss of the global finance giant Blackrock, Larry Fink, said that “the Russian invasion of Ukraine has put an end to the globalization that we have known for the past three decades”. This period, marked by massive deregulation policies and the digital revolution, allowed an almost borderless circulation of goods and capital.
But the Covid-19 and the war in Ukraine have cast a chill over certain principles of this globalization: regional specialization, fragmented production chains and company supplies on very short deadlines. The war in Europe also undermines the argument that trade is a vector of peace, supported in the 18th century by Montesquieu.
Hyper-addiction
Already before the war, “connectivity between nations, companies, and even between people had been severely tested by two years of pandemic”, writes Larry Fink. The shortage of masks at the outbreak of Covid-19 had thus symbolized the hyper-dependence on China for basic products.
A month into the war, the chaos in the global economy is now putting pressure on prices and supplies of grain, oil, gas, and strategic materials like copper.
“A certain number of vulnerabilities” have appeared, showing the limits of the break-up of production chains on multiple locations, notes to AFP the former director general of the World Trade Organization (WTO) Pascal Lamy. The “strategic autonomy” demanded today in Europe for energy and critical materials, or the massive investments of the United States in semi-conductors reflect the priority of regional or even national withdrawal.
Former US President Donald Trump’s trade war once morest China in 2018 had already challenged the globalization model. His successor Joe Biden recalled in his State of the Union address in early March investing to “ensure that everything from the deck of an aircraft carrier to the steel of highway guardrails is made in America, from beginning to end”.
Massive economic sanctions
“The pandemic has not led to radical relocation decisions, but the war has an impact on the way companies think regarding their production chains and their investments”, notes Ferdi de Ville, professor at the Institute of International Studies. and European from Ghent in Belgium. “They realized that what was unimaginable before last month has become realistic in terms of massive economic sanctions,” explains the professor, author of an article on “The end of globalization as we know it”.
It is now a question of redirecting strategic dependencies towards allies, according to him, or doing “friend-shoring” instead of “off-shoring”, like the announcement on Friday of a group of work between the United States and Europe to reduce dependence on Russian fossil fuels. In this regard, “there is no de-globalization”, says Pascal Lamy, affirming that this one “is an extremely evolutionary animal”.
“China will continue to build foundations for the future”
This other face of globalization, on the other hand, gives rise to the risk of an economic disconnection between Western countries on the one hand, and China and its allies on the other. The world’s second largest economy, which has so far not condemned Russia’s attack, risks one day finding itself in more direct confrontation with the United States or Europe, particularly on the Taiwan issue.
“China’s interest for the moment is not to compete with the West”, thinks Xiaodong Bao, portfolio manager at the investment company Edmond de Rothschild AM, because Beijing “has been for twenty years the main beneficiary of globalisation”.
But the war in Ukraine is an opportunity to develop its financial autonomy, with less dependence on the superpower of the dollar. The “Wall Street Journal” thus recently evoked discussions between Beijing and Saudi Arabia to buy oil in yuan and no longer in dollars. “China will continue to build foundations for the future,” continued Xiaodong Bao. “Financial decoupling is accelerating.”
(AFP)