Will COVID19 affect the course of globalisation? (The multiple ways the world is likely to change)

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 Will COVID19 affect the course of globalisation? (The multiple ways the world is likely to change)

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• FIRST PERSPECTIVE:

1. Redrawing of geographical boundaries: Global integration of trade will now suffer in short-run. Trade dipped by 10% in 2008, and world GDP by 3%. The ratio usually is that - 3 : 1.Trade grows much faster than GDP, during boom time. The WTO estimates global trade to dip by a high value of upto 32%. So countries will first try to save themselves. In India, 50% trade is linked with MSME sector firms, and disruption in production will hit them hard. So 2020s will be like 1900s and 1910s, and a whole new normal is expected.
2. China's experience now: There are indications that China is now opening up slowly, and Wuhan is back in action. Many other nations are in lockdown mode, for at least two more months. Flattening of the curve is still some way away, and normalcy is not round the corner. Can China consolidate their position in world economy due to this? The last two times - after both 9/11 and 2008 crisis - China consolidated itself quickly and became stronger. China's stimulus size is not known, but it must be large. So other countries, wary of China, will slowly disengage. Western world's stimulus packages will focus on MSMEs, the backbone of their post-war industrialisation strategy. Coupled with imports substitution, we are looking at a new world.
3. Labour movement across borders: Import substitution automatically means you focus more on domestic workforce. US may keep importing Indian skilled personnel, but countries will see significant employment dislocation to warrant a whole new approach to jobs.
4. What about WTO's role: When global economy booms, and there is no crisis, trade rules work best. Before 2008 was when real discussions happened at the WTO. Then it went downhill. Same trend will continue now. So when it comes to subsidising small industries, no one will listen to the WTO. Agri subsidies issue too will be junked now (the 10% limit). So WTO may fail. Then it back to the 1930s when brute force reigned. Even the G-20 statements talked nothing about global rules.
5. Exising multilateral pacts: Each such pact asks a government to cede a part of their sovereign power. Market forces were able to get it done through 1970s to 2000s. But now as governments are expected to take care of societies, they may not allow too much ceding of power. A new WTO will emerge, saddled with many bilateral / multi-lateral arrangements. EU was already struggling a lot. ASEAN is tightly-knit anyway. NAFTA was being reshaped by Trump. So now, if by July 2020, things don't come under control, a lot will change.

• SECOND PERSPECTIVE:

1. Economic impact on Asia: COVID-19 challenge is a never-before situation. The 2008 global financial crisis was just a demand shock, which this crisis is not. It's much more. The twin shocks of supply and demand will shrink many economies now. All those dependent on tourism and commodities will suffer, as prices too are moderating. For India, it's a great thing as we are net importers, and since govt. is not reducing prices at retail level, good for the fiscal also. MSMEs are backbone of mfg., trading and services. The shock to world economy is just too large.
2. Slowdown in trade flows everywhere: Already in 2019, the term "slowbalisation" was being used. In the 2000s, world trade growth was 10% on average per annum, which had reduced to just 1-2% later. The WTO came to a near halt, amid the trade war(s). The pandemic shows how interdependence creates troubles. Countries will now strive to build local supply chains, as dependence on China starts to hurt badly.
3. Impact on jobs: Every govt will now try to create jobs for their own people first. Hiring expatriates would be out of favour. Protectionism was already rising.
4. What about immigrants: Nations will need immigrants in high skill areas, and that will not change. But nations that have invested heavily in healthcare and social sector will bounce back quickly.

• Summary :  Two perspectives on the fate of globalisation, after the pandemic 2020

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