The reality is that globalisation won’t come to an end. It has been called out many times but since 1970 it has continued on its path.
It has to be said though that it appears to be in a period of stagnation while the “world is temporarily closed,” mentality exists in many countries.
There are many geopolitical issues that are popping up which started before Covid with the USA/China trade war as an obvious example. Since Covid, the position has worsened with a lot of finger pointing. Let’s look at some of the cross-border issues:
- Indian troops killed on the border with China leading to the ban of apps and business closures by India.
- China placing tariffs on Australian barley and beef causing major issues.
- USA looking at tariffs on France for daring to look at their tech industry.
- UK allowing Hong Kong residents to apply for citizenship in the UK from Jan, 2021 with a threatened backlash from China since they introduced the new security laws on Hong Kong.
- Vietnam/Philippines struggling to maintain offshore land and seas claimed by China.
- The USA just ordered closed the Chinese embassy in Texas with an immediate retaliation from China to close the USA consulate in Chengdu.
- Japan offering funding to move supply chains out of China with Vietnam/India set to win a lot of business off the back of that.
- And let’s not forget Taiwan or Tibet.
These are just some of the problems during a period of global stress and a bit of a theme running with China central to a lot of these issues but it isn’t only one country causing issues. Although pretty close as China does seem to be in the headlines almost daily fighting out a scrap with some country around the world and as the world’s second biggest economy currently, not something that should be overlooked. China is set to leapfrog the USA into the number one spot by 2025 but that could be under some threat right now.
For over half a century the world has been changed through trade and investment expansion globally. The way that manufacturing and investment has been conducted has been transformed forever. Think about where your trainers or mobile phone comes from these days. You call your bank in the UK and you’ll speak to someone in Mumbai. Industry that existed in Europe and North America have disappeared in a puff of smoke only to reappear on the other side of the planet. And it has all happened in a relatively short period of time.
By the same author:
Covid has created a shock and raised the concerns of globalisation to a new height. In recent reports the WTO suggested that trade may fall by as much as 32%. This probably doesn’t come as a surprise given the disruption caused by the closure of businesses and lockdowns around the world. We are in some form of an economic crises although the markets do not reflect this. 2020 is something of a perfect disruptive storm. And yet there is growth in the markets that can be taken advantage of if you are smart about it and conduct your due diligence on the target assets correctly.
Europe is probably not willing to choose between the USA and China. Well at least not yet anyway. Germany for example, is looking to expand ties and relationships with China for now. Whereas the UK has shown its cards in the opposite direction. Don’t forget the UK ban on Huawei and the access to its 5G network for at least 3 years and when combined with the open invitation to HK citizens to “come on over”. I would say that is a very clear shot across the bow from the UK and with it will almost certainly come retaliation.
The institution that most clearly embodied that “end of history” vision, the WTO, was launched in January 1995. Today, the WTO is in tatters. Its dispute-processing procedures have been paralysed by deliberate American obstruction and its head, Brazilian Roberto Azevêdo, has announced that he is resigning a year ahead of time, which leaves the WTO leaderless in the face of the greatest shock to world trade since 1945.
Comparisons with the 1930s should not be taken too far. We don’t live under the shadow of total war, and there are good reasons to welcome the end of 1990s-style hyper-globalisation. But we should not underestimate the break with the recent past or kid ourselves that there is any obvious alternative on offer.
There does feel like there is a general consensus to walk away from globalisation. Although the reality is that it is so sewn into the fabric of global trade today, that it is virtually impossible to make everything homegrown. And while politics and the urge to buy cheap both get in the way, it will never truly slow down or go away. But there are going to be winners and losers. I think it is very obvious who the players are to watch and who is set to be on which side of the fence when the dust starts to settle in years to come.
Domestic policies and trade will and are being pushed up higher on the agenda and with very good reason. Covid has shown flaws in supply chains but it doesn’t account for everything. Tensions especially between the USA and China I expect will continue but only on a recurring but erratic basis.
I naturally will be continuing to keep a close eye on any further escalations and the possible effects on my client’s portfolio’s making sure we are on the correct side of the fence. I have my views on who the winners and losers will be and since last year it does seem to be continuing along the path I expected.
So is globalisation dead? Not yet, but is suffering from a bad case of Covid.
If you need assistance with wealth management solutions or a portfolio review. Please get in touch with Vietnam’s leading wealth manager at Lawrence.young@holbornassets.com
Lawrence Young, The Author
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Source: Vietnam Insider