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The coronavirus is killing globalization and empowering nationalists and protectionists

Political

The coronavirus is killing globalization and empowering nationalists and protectionists

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Until recently, most policy makers and investors remained complacent about the potential economic impact of the coronavirus crisis. As recently as the end of February, it was wrongly assumed that it would only have short, limited, China-specific effects. Now they realize that this creates a global shock that, while severe, is still expected by most to be brief. But what if the economic disruption has lasting effects? Could the coronavirus pandemic even be the nail in the coffin for the current age of globalization?

The coronavirus crisis has revealed the dark side of comprehensive international integration, at the same time fueling fear of foreigners and legitimizing national restrictions on world trade and the flow of people.

Until recently, most policy makers and investors remained complacent about the potential economic impact of the coronavirus crisis. As recently as the end of February, it was wrongly assumed that it would only have short, limited, China-specific effects. Now they realize that this creates a global shock that, while severe, is still expected by most to be brief. But what if the economic disruption has lasting effects? Could the coronavirus pandemic even be the nail in the coffin for the current age of globalization?

The coronavirus crisis has revealed the dark side of comprehensive international integration, at the same time fueling fear of foreigners and legitimizing national restrictions on world trade and the flow of people.

All sorts of companies have suddenly realized the risks of relying on complex global supply chains that are specific not just to China – but to specific locations like Wuhan, the epicenter of the pandemic. Chinese – and now Italians, Iranians, Koreans, and others – are widely viewed as carriers of disease; Senior Republican politicians in the United States have even referred to the disease as “Chinese coronavirus”.

In the meantime, governments of all stripes have imposed travel bans, additional visa requirements and export restrictions. The travel ban announced by US President Donald Trump on March 11th for most travelers from Europe is particularly far-reaching, but by no means unique. All of this makes the economy more national and politics more nationalistic.

[Mapping the Coronavirus Outbreak: Get daily updates on the pandemic and learn how it’s affecting countries around the world.]

Many of these disorders can be temporary. However, the coronavirus crisis is likely to have lasting effects, especially if it reinforces other trends that are already undermining globalization. It can deal a blow to fragmented international supply chains, reduce the hypermobility of global business travelers, and provide political fodder for nationalists who advocate more protectionism and immigration controls.

Particularly at risk are the complex, China-centric global supply chains that so many Western companies rely on. The cost advantage of manufacturing in China has waned in recent years as the country got richer and wages skyrocketed. The associated risks were made clear by President Trump’s imposition of punitive tariffs on imports from China in 2018 and 2019, prompting companies to look for alternatives.

While the January deal marked a fragile truce in the US-China trade war, the dangers of manufacturing in China remain; Both Democrats and Republicans are increasingly viewing China as a long-term strategic rival that needs to be contained. And no sooner had the trade war subsided than the coronavirus intervened. The prolonged shutdown of many Chinese factories depressed exports by 17 percent year-on-year in the first two months of the year and halted production of European cars, iPhones and other consumer goods.

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Indolence is a powerful thing. And there are still many advantages to producing in China, such as size and efficient logistics. However, the coronavirus crisis could mark a turning point, driving many companies to reshape their supply chains and invest in more resilient and often more local production patterns.

One possibility is to relocate and diversify activities to other Asian economies such as Vietnam or Indonesia. Another is the shortening of supply chains, with US companies relocating their production to Mexico and European ones to Eastern Europe or Turkey. A third is investing in robots and 3D printing in advanced economies to produce closer to the consumer locally.

A second lasting consequence of the coronavirus crisis could be reduced business travel. Technology gurus have long argued that video conferencing and chat apps would eliminate the need for most business travel and allow many people to work more from home. But until the Corona crisis, business travel had apparently grown inexorably.

Whether due to government bans, business decisions, or individual caution, all but major international trips have been canceled, and those who can work from home are increasingly staying in place.

With this forced grounding, organizations can find that while face-to-face meetings are sometimes required, technology alternatives are often good – and much less costly, tootime consuming and harmful to family life. And at a time of growing concern about the impact of aircraft emissions on the climate and at a time when many companies are keen to emphasize their commitment to environmental awareness and sustainability, there is both an environmental and an economic reason why business travel could be on the decline.

Perhaps most importantly, the coronavirus crisis plays into the hands of nationalists who advocate stronger immigration controls and protectionism.

The speed and extent of the virus’ spread around the world have highlighted the vulnerability of people to seemingly distant foreign threats. The coronavirus has not only spread to global hubs like London and New York. It has also jumped straight to provincial cities like Daegu, the fourth largest city in South Korea; Nursing homes in the suburbs of Seattle; and even small towns like Castiglione d’Adda (population 4,600) – one of the 10 towns in Lombardy that were first quarantined by the Italian government in February.

While internationally minded heads of state and government have made fine words about the need for cross-border cooperation in the face of an unprecedented common threat, their actions have often refuted it. Many allegedly liberal governments have imposed travel and trade restrictions more draconian than even Trump dared to impose at the height of his conflict with China last year.

Jacinda Ardern, the leftist Prime Minister of New Zealand, has quickly banned travelers from China who are not New Zealand citizens. While such blanket bans may or may not be justified on public health grounds, they offer greater legitimacy to those who view the closing of the border as the solution to all diseases.

Even within the supposedly barrier-free internal market of the European Union, France and Germany have banned the export of face masks; So much for liberal internationalism and the commitment to the EU of President Emmanuel Macron and Chancellor Angela Merkel. What’s even more shocking is that none of the other 26 EU governments responded to Italy’s urgent appeal for medical aid – while China did.

Granted, the coronavirus crisis has also exposed the hollowness of nativist claims that their anti-immigrant and protectionist policies make people safer. Although the nationalist coalition that governs the provincial government of Lombardy is led by Matteo Salvini’s far-right League party, it has failed to protect the region from the coronavirus. Despite his desire to decouple from China, Trump was also unable to prevent the coronavirus from reaching the United States.

Trump himself could still pay a price in the November presidential election for his recklessness and clumsy mismanagement of a public health crisis. But in general, the coronavirus crisis is a political gift for nativist nationalists and protectionists.

It has increased the perception that foreigners pose a threat. It underlines that crisis countries cannot always count on the help of their neighbors and close allies. And as India limits the export of life-saving medicines from its huge pharmaceutical sector, it provides ammunition for those who want to localize the production of all kinds of products for national security reasons. In a broader sense, it can empower those who believe in a strong government and prioritize social needs over individual freedom and national action over international cooperation.

As a result, the coronavirus crisis threatens to usher in a less globalized world. Once the pandemic and panic subsides, those who believe that being open to people and products from around the world is good in general must make a fresh and compelling case for it.

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