Will the war in Ukraine put an end to the continuous and unbridled growth of world trade, which has transformed the face of the planet since the fall of the Berlin Wall? In recent weeks, some have not hesitated to predict: «This is the end of globalization as we have known it for the past thirty years,”recently wrote Larry Fink to BlackRock shareholders.
A few weeks later, the IMF and the WTO warned of the risks of seeing the world fragment… On the eve of the Davos forum, which begins on May 22, deciphering of this change of era.
► When was globalization called into question?
Long before the war in Ukraine. From the financial crisis of 2008, which highlighted the excesses of finance, the view of globalization changed. «The crisis coincided with a period of slowing global growth, which made the cost-benefit analysis less favorable to globalization, especially in developed countries, where a number of criticisms emerged around deindustrialization and development. some inequalities “, recalls Sébastien Jean, from the Center for Prospective Studies and International Information (CEPII).
From there, the world entered a new era. In 2016, the election of Donald Trump and Brexit were real anti-globalization impulses. At the same time, China, which was nevertheless the great winner of the triumphant globalization of the 2000s, revised its economic ambitions. It adopted the “Made in China” plan, the objective of which was to move upmarket and strengthen strategic independence.
Between China, which no longer wanted to be the factory of the world, and the United States, which wanted to maintain its hegemonic position, the trade war was declared in 2018. For the first time since the fall of the Wall, international trade flu under the effect of an escalation of customs measures and sanctions. “This Sino-American decoupling will sign the return of the notions of sovereignty and self-sufficiency, which had disappeared from the international scene”, underlines Jeremy Ghez, professor at HEC Paris.
But it was in 2020 that the questioning became widespread, with the health crisis which demonstrates the fragility of supply chains. “Until then, the world could still harbor the illusion that the global market was deep and liquid enough to respond to any crisis. But the Covid has shown that the machine could seize up and that it was now necessary to insure against the advent of new crises”, observes Jean Pisani-Ferry, researcher at the Bruegel Institute.
Long blind to market imperfections, in 2020 Europe is adopting the concept of“open strategic autonomy”, a modest way of positioning oneself in the face of business partners who have become more aggressive. In February, the war in Ukraine definitively changed globalization from the status of a solution to that of a problem.
► Can we now speak of de-globalization?
No, because trade continues to grow. But slower than before: “Until the great financial crisis of 2008, world trade grew by 6% per year, faster than global growth. Since then, it has only increased by 3% per year on average, i.e. at the same rate as growth,” notes Samy Chaar, chief economist of the Swiss bank Lombard Odier. And for the next ten years, the economist expects an average increase of 1.5% per year.
We are therefore not witnessing a decline in trade, but a sort of leveling off. Sign of the times, the World Trade Organization is blocked. No more global free trade agreements are on the table. The latter are being replaced by regional agreements, like the pact between the United States, Canada and Mexico signed in 2020, or the recent treaty of Asian and Pacific countries around China. As for bilateral agreements, they are struggling to see the light of day: “After Brexit, Britain wanted to sign ambitious agreements. But it didn’t yield the expected results… She couldn’t materialize this new globalist momentum,” notes Fabrice Montagné, senior economist at Barclays.
However, companies continue to seek ways to optimize their production chain. “But now they have to take out insurance. We see, for example, Chinese companies setting up factories in Vietnam, in case they can no longer operate from Chinese territory… They take into account the risk of seeing the world fragment,” analyzes François Candelon, director of the Henderson Institute of the Boston Consulting Group.
→ MAINTENANCE. War in Ukraine: “The economic weapon will be decisive in the long term”
The big change, in fact, is this: in a context of heightened rivalry between China and the developed countries, it is becoming increasingly difficult for a company to be present in both markets. On the horizon is the risk of a fragmentation of the world economy, with the establishment of divergent technologies and commercial standards according to the different regions of the world. This is undoubtedly what the American Secretary of State for the Treasury, Janet Yellen, wanted to name when speaking of “globalization among friends”i.e. a reorganization of trade within major trading blocs: North America, Europe, China, etc.
“In this sense, the war in Ukraine has played the accelerators, the sanctions pressing certain States to free themselves from their dependence on the dollar. This is particularly the case of China, which seeks to develop an alternative monetary system based on its currency and the emergence of the digital yuan,” emphasizes Jeremy Ghez.
► Will this new age of globalization last?
The new balance that is taking hold is likely to last, because it is based on profound changes. First of all, there is an evolution of consciousness in the developed countries. “Fishing a salmon in Scotland, processing it in China to consume it in Spain, everyone feels that it is absurd”, illustrates Samy Chaar, by Lombard Odier.
A change in mentalities which, according to Pascal Lamy, has already found expression in the way of considering exchanges between developed countries. “Today, Western states are no longer just looking to protect businesses from customs tariffs, but also consumers from various health, technological, social and environmental risks. This new economic precautionism will be more difficult to overcome than protectionism, because it is more difficult to harmonize standards and quality norms than to agree on customs duties,” thus considers the former Director General of the WTO, today at the head of the Jacques-Delors Institute.
In a more prosaic way, globalization today also comes up against a physical limit linked to the increase in transport costs, due to the surge in the barrel of oil and the saturation of ports. It also comes up against the multiplication of risk factors. “For decades, globalization has been easy, benefiting from a stable economic and geopolitical environment, says Fabrice Montagné. It was not difficult to set up long and complex production lines. But since then, we have hit the wall. We saw that we had underestimated the problems of resilience and the logistical difficulties…”
Both the global pandemic and the war in Ukraine have demonstrated that each of these events has resulted in a blockage of trade flows. “The relationship between economics and geopolitics has changed. The idea that trade educates for peace is taking on water,” observes Jean Pisani-Ferry. From now on, each country or each major commercial area is trying to regain its strategic autonomy, so as to no longer depend on masks and semiconductors imported from China, energy from Russia or Ukrainian wheat. And also to bring back industrial jobs that had moved en masse to Asia.
► What will be the consequences of the current changes?
Relocations and the slowdown in trade are likely to have consequences on the price of goods consumed. In Europe, for example, the desire to create a semiconductor industry requires massive investment, commensurate with the productivity gains achieved. According to François Candelon, of BCG, the organization of the sector in a globalized way has saved more than 1,000 billion dollars in investments. « Rto achieve this optimization, it will necessarily have a cost”, he said.
→ THE FACTS. Reindustrialisation: 2021, a year of “records” in France
“In addition, we must be wary of this idea that the new globalization will allow a great repatriation of jobs in the developed countries.believes Jeremy Ghez. Indeed, if there are relocations, they will take the form of ultra-sophisticated factories requiring highly skilled jobs. » Thus, it is not surprising that, to invest in Europe, the giant of the semiconductors Intel privileged Germany and its strong industrial culture.
Basically, despite the promises of a more reasonable, more local and more virtuous world, the fear is that this new globalization will also result in more instability and poverty. “When world trade tightens, it is the most vulnerable populations who suffer, whether in developed countries, and of course in poor countries, which are currently facing a violent food crisis”, recalls Sébastien Jean. Recently, the IMF and the WTO warned of the risks that the fragmentation of the world would pose to poor countries, recalling that, in times of crisis, international trade was the guarantee of stable and equitable access to first-class products need.
For the former Western powers, the fear is also to see developing countries move away. “China does not hide it, it wants to become the leader of emerging countries, in particular with the aim of building up insurance in a fragmented world”, observes François Chimits, economist at the Mercator Institute for China Studies (Merics, Berlin). However, the more unstable the world, the more likely this ambition is to be realized. The refusal of many emerging countries to apply Western sanctions against Russia could be an illustration of this.
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“It is abnormal that Africa accounts for only 3% of world trade”
Lionel Zinsou, economist and former prime minister of Benin
“Developing countries are the winners of globalization. It has enabled them to experience an unprecedented reduction in poverty. So, today, the questioning of this model does not come from them. On the contrary, they seek to consolidate the benefits it has brought them. For Africa, globalization has meant the opening of new outlets, but also the arrival of new investors from China, India, the Gulf or Eastern Europe.
This is why Africa is beginning to equip itself with a free trade zone, and for the first time is making an effort to coordinate on a continental scale in the management of public debts or in the health industries. African countries are seeking to attract investment, to trade more, and are not in a retreat attitude. They consider that it is not normal that Africa weighs only 3% of world trade, when it is home to 15% of the world’s population. »