Remember the demise of globalization?
As the COVID-19 pandemic wreaked havoc on the global economy and US-China tensions soared, many a commentator trotted out a “globalization is dying” narrative, claiming that the dizzying flow of goods, services, people, capital, and ideas that define our world would soon be confined to history.
Russia’s invasion of Ukraine and the associated geopolitical fracturing added to the chorus. Yet the reality is that globalization is neither dying nor in decline. Our world is more connected than ever and, if history is any guide, connectivity – like time – does not move backwards. Yes, major shocks like a world war or a pandemic can slow the clock, but eventually it begins ticking back toward the mean of relentless connectivity.
A recent report by the United Nations Conference on Trade and Development (UNCTAD) on global trade offered just one snapshot of where we are headed. World trade hit a new record of $32 trillion in 2022, UNCTAD reported. Goods trade hit $25 trillion, a 10 percent increase from 2021, and services trade clocked in at a record $7 trillion, rising 15 percent from the previous year.
Perhaps more importantly than the dollar figure, the volume of trade was up 3 percent on the year. As UNCTAD noted, “positive growth in the volume of international trade indicates resilience of global demand.”
By now, we all have heard the stories of the dizzying supply chains that bring us our coffee and tea in the morning, or the fuel and the vehicles that transport us, the proteins and grains that energize us, the medicines and vaccines that heal us, and so much more. The global shipping revolution is why Europeans wear fast fashion shirts made in Bangladesh, Africans and Arabs swipe for information on their smartphones, and soybeans from Brazil nourish pigs in China.
We should still marvel at our interconnected world of trade, but we should not use it as the only marker for globalization. What about people flows? Before the pandemic, the air travel industry recorded more than a billion international passengers. According to the International Air Travel Association (IATA), we are now back at about 75 percent of the pre-pandemic peak. Airlines are on track to be profitable again in 2023. Global wanderlust is hard to contain.
As for global migration, we’ve witnessed a steady rise in numbers over the past few decades, hitting some 281 million people classified as international migrants worldwide, according to the International Organization for Migration (IOM). While this is still a modest percentage of the world population, the fact of the matter is that migration has emerged as a key option toward upward mobility in many parts of the developing world.
As for global capital flows, they remain resilient and strong, according to research by the Brookings Institution. These include everything from public stock market purchases to international debt issuance to foreign direct investment. Today, with the swipe of a finger, we can buy shares in everything from a Chilean copper mine to a Chinese electric vehicle maker. Stock markets worldwide now exceed $100 trillion in market capitalization.
Many of the “globalization is dying” narratives have emerged from Western commentators and industry leaders. Their vision is myopic. All they need to do is look around. The US stock market, the deepest and most active in the world, benefits from foreign investors to the tune of some $13.7 trillion in holdings of US equities. Those foreign holdings account for nearly 30 percent of the entire US stock market capitalization.
What’s more, the US International Trade Administration estimates that some 9 million jobs are supported by American exports. Meanwhile, the US Commerce Department notes that 16 million jobs – 10 percent of total US employment – is “directly or indirectly attributable to foreign direct investment.” If you’re keeping count, that’s 25 million jobs in the US owing to globalization.
As for the rest of the world, they never got the memo that “globalization is dying.” In fact, by the looks of it, governments and people across Africa, Asia, and the Middle East – home to 75 percent of the world’s population – are busy doing trade deals that will fuel the future. The African Continental Free Trade Area agreement represents an ambitious vision for continent-wide trade. While many bumps remain in the road, it sets an important marker. Meanwhile, the Regional Comprehensive Economic Partnership (RCEP), a mostly Asia-wide multilateral trade deal, brings together 15 countries representing about 31 percent of global GDP.
The Middle East and North Africa region benefits from strategic geography as a crossroads of trade flows between east and west, while also serving as a major source of the world’s energy and surplus capital that powers globalization. The United Arab Emirates has been busy striking new bilateral trade deals with India, Israel, and Indonesia, with more in the works. The UAE, in many ways, sits at the intersection of globalization, both as a recipient of its flows of goods, people, capital, and services, as well as a catalyst of its growth as an investor, trader, and enabler of connectivity via its aviation and shipping hubs.
For Egypt to achieve its true potential, it would need to better leverage its enviable geography at the intersection of Africa, Europe, and the Middle East. Saudi Arabia is finally leveraging its geo-economic potential through a series of reforms that are connecting the Kingdom to the world in ways unimaginable a few years ago. Simply put, the countries that leverage connectivity will succeed, and those that do not will fall behind.
In the end, the pandemic demonstrated that even the most dramatic shock to our systems cannot dislodge the relentless flows that make up globalization.