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Globalization – What’s Subsequent? – Worldwide proper

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Globalization – What’s Subsequent? – Worldwide proper

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Preparing for a changing world

2020 was a year of disruption and change as COVID-19 swept the globe, forcing world economies to pause, significantly affecting international trade and capital flows. In mid-2021, as many countries emerge from lockdown, global business activity recovers and the landscape has changed. But how has it changed? And what should happen next?

Peter Zeihan, geopolitical strategist, speaker and author of the bestsellers The Accidental Superpower, The Absent Superpower and Disunited Nations, joined the BLG leadership team and event organizers John Murphy, Prema Thiele and Alan Ross QC for a webinar presentation in which he his perspective on the future of globalization. This engaging discussion provided a vivid account of how geographic, demographic, and industry trends are affecting the Canadian economy and the broader global system. He also examined critical questions about the future of globalization and major trade movements, capital flows, immigration, food shortages and their ongoing effects on Canada’s agribusiness, energy, manufacturing, infrastructure and technology, among others.

Here are some of the key takeaways from the discussion.

American-led international trade: the glue that holds the world together

Zeihan began with a discussion of how global free trade depends on the viability of the international alliance that was inaugurated at the end of World War II. Despite having been successful for decades, Allianz’s failures are becoming more and more apparent. Zeihan pointed to the formal violation of international trade rules under the Trump administration, signaling that Biden appeared in no hurry to re-enforce those rules. Zeihan posits: “Without the United States to maintain the global network, trade will not work. The countries either have to be part of the American network or have to go it alone. Canada, Mexico, Korea, Japan and the UK secure their positions in the US’s new trade portfolio as the country made domestic trade policy a priority.

He also argued that this could well end globalization. COVID-19 has accelerated this process. The new normal for the world will include a rise in economic nationalism in countries with healthy demographics and a collapse in global consumption.

Why geopolitics and demographics are converging to end the era of globalization and what millennials have to do with it

Unprecedented global depopulation is leading to shrinking consumer demographics that Zeihan believes will not recover in our lives on a global scale. The population structure that supported the international trading system is declining. Global consumption has already peaked, while global production and global investment capital are currently at their peak.

Looking at the US demographic structure, the same trends can be seen, with the exception of the millennial population, which is among the most resilient in the world. The density of this segment of the population ensures that the American consumer-oriented economic model will weather the storm.

At the same time, Mexico has a solid consumer-centric demographic that is saturated with a young population that enables the country to shine in manufacturing and assembly, leaving value-adding processes and design to the US. Additionally, Mexico’s consumer base requires high levels of American exports. In 2019 it became America’s number one trading partner, a position it won’t give up in our lifetime.

In contrast, Canada’s demographics are mostly high-quality, older workers between the ages of 40 and 65. Since Canada does not have a large enough population in the 20-30 age group needed to increase consumption, the country must count on exporting its goods, making Canada an economic competitor to the United States

What are some of the global trends and how will they affect Canadian industry?

Agriculture

Modern agricultural patterns result from three different factors: low risk world trade, limitless demand in Asia and unlimited cheap credit. When international trade collapses, demand plummets, which ushers in a new challenge to supply.

Unlike many other countries in the world, Canada has the upper hand as the country’s harvest season doesn’t follow global consumption patterns. Accordingly, agribusiness producers are in a unique position to sell everywhere at top prices. This enables Canada’s agribusiness to become a leading global food producer.

energy

The United States cut the break-even cost of shale oil production below $ 45 a barrel, which effectively pushed down the price of natural gas, a by-product of those oil projects. Natural gas, because of its abundance and low cost, has displaced oil and coal as the largest source of electricity in the US and has driven the US into a new phase of industrialization that is profiting from natural gas.

This is both the best and worst scenario for Canada. On the one hand, American natural gas is being sold to Québec at Québec hydropower prices, giving Canada access to another cheap source of energy.

On the flip side, of course, energy sales are Canada’s largest export unit, and energy taxes fund a large chunk of the federal budget. In addition, Alberta is subject to new pricing, with the US energy floor lower than $ 45. All of these factors make for a particularly challenging competitive environment.

Manufacturing

In order to stand out in the changing world order, Canada must do more for American companies and pool efforts in various sectors, particularly in the aerospace industry. This will most likely require some tough policy decisions as Canada faces increasing US competition in this sector. Québec’s leading aerospace company, Bombardier, is the focus of this edition as it is subject to high tariffs due to its links with the British aerospace company Airbus.

Additionally, Canada has to produce fundamentally different product streams, and Zeihan advises borrowing now while interest rates are low: “We have no more roads here. If you want to borrow to upgrade your industrial facilities, now is the time” – 2023 can already be too late.?

Infrastructure

Zeihan noted that capital flight to Canada will be a significant source of funding. The Chinese pulled more than $ 2.5 trillion from China last year. In his view, there is no reason Canada couldn’t catch more of this runoff without it falling entirely into residential real estate. Canada must consider developing financial products that take advantage of this inflow of capital into the country and feed it into much-needed infrastructure development.

technology

Canada must consider applying technology solutions to address the challenges posed by the disproportionate ratio of young (consumers) to old (retirees) in its population structure. Canada is the fourth fastest aging society in the world, and the elderly care system will be a huge drain on resources. The key for Canada is figuring out how to automate what isn’t automated. Zeihan suggested that Canada should borrow heavily to implement and advance existing technologies, such as those explored in Japan over the past 30 years, to free Canada’s future workforce for higher-level work.

Peter Zeihan concluded the webinar by refocusing the conversation on how companies can realign themselves to thrive in the post-pandemic and post-globalization world.

His most important conclusion: “Borrow big and borrow now.” In his view, the credit conditions that exist today will not repeat themselves in the foreseeable future and companies should do everything in their power to invest in processes and production, the most important limiting factor for the western world Hemisphere for the next 30 years.

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