Like a meteor slamming into the earth, the COVID-19 virus has made an enormous impact on world economies. When the pandemic is over, will we see less globalization, the same, or more? Will there be less dependency on one country for component parts and finished goods? More diversification across suppliers and countries? Will companies cut fast and deep to survive or expand faster and deeper? Will changes be temporary or permanent? What will it take to get to the other side and what will globalization look like?
My theory is you cannot stop the long-term movement toward a more interconnected world, but I wanted to know what others think. So I asked an array of experts—from business owners to nonprofit directors, top global business executives to authors—to offer wisdom, insights and perspectives on what to expect in the world of globalization.
If history and previous pandemics are any indicators, a new normal will emerge post COVID-19. What is certain is that, like every reality, this new normal will be fraught with challenges and opportunities. What is uncertain is what form it will take.
Globalization will be examined more through the lens of connectivity. Despite social distancing, the emerging reality is likely to be greater connectivity, not less. Now that the pandemic has enforced virtual working, work-from-home and virtual (personal, social and professional) interactions are likely to morph and become the way of the future. While the pandemic has emphasized the need for self-reliance and self-sufficiency, it appears logical that globalization will receive a boost.
For us at Influence Solutions, a learning and development organization, a shift towards virtual learning has already opened up new markets and shorter, more targeted and focused products that deliver just-in-time, anywhere-accessible learning. It is also allowing us to scale up business operations and reach geographically-distant markets. We believe the world will see more of this—offering consumers more choices and better price options.
2. New rules of origin and abundant compliance issues will hamper a speedy re-integration of our economies.
Richard Paullin, Executive Director, International Trade Association of Greater Chicago
If anything, the pandemic has accelerated the United States’ decoupling from China and therefore the end of globalization as we know it. It is the supreme irony of our age: technology has given us the tools to reach across borders, build complex global supply chains, and fulfill consumer demand for our products from around the world. At the same time, today’s geopolitics conspire against these technological tools and our ability to thrive in a “global” economy. If the three largest economies in the world (U.S., China & EU) can’t get along with one another, then there is very little hope for a return to “globalization” as we knew it. It will take time for American firms to unwind/decouple their supply chains from China, but how long this will take is anyone’s guess.
There is, however, some hope for a return to regionalization in North America, as the U.S.- Mexico-Canada (USMCA) Trade Deal will take effect on July 1. But even that will take some getting used to: new rules of origin and abundant compliance issues will hamper a speedy re-integration of our economies. Absent a cogent U.S. trade policy and the political will to resume our global leadership role, I believe the recovery will be long, arduous, and filled with unforeseen challenges.
Globalization is definitely here to stay, but it will look different from the pre COVID-19 era. Companies will look at diversifying suppliers across different countries and will most likely pivot to a Just-in-Case inventory method instead of Just-in-Time. However, there is a fine balance here, and more companies will look at 3D printing as an option to carry raw materials instead of capital-intensive finished products. A discussion started a few weeks back about nearshoring certain products, as the president of France said they would never again rely on China for PPE. So manufacturing of products like that could potentially be brought back to ensure countries are self-sufficient when something like this strikes again.
4. This pandemic will accelerate greatly the already strong trend of increased communications around the world.
Paul A. Dillon, CMC, Dillon Consulting Services LLC, and Accenture Visiting Professor of the Practice, Sanford School of Public Policy, Duke University
If you view globalization to mean global trade, then, yes, I do think that you will see some changes, such as critical supplies for national defense, or critical supplies that affect our national healthcare profile being restricted. More of those types of things will be brought back to “on-shore” in the U.S. There will be added costs—these supplies will be more expensive—but that’s the price you will have to pay to maintain control over these critical items. Not so sure how this applies to services, other than the need to maintain control over intellectual property.
If you view globalization to mean global communication, then I think that this pandemic will accelerate greatly the already-strong trend of increased communications around the world. Why? Because CEOs are working from home and seeing how easy it is to communicate via Zoom, Go to Meeting, etc. They’re not going to go back to the old ways of doing things.
5. Stop, breathe, and just focus in on one shot at a time.
Christopher Witt, CEO & Co-Founder, Euclidic Systems
For me, it’s a bit like golf: you can’t play the whole game at one time. You need to stop, breathe, and focus on one shot at a time, like one day at a time. So it has become about anxiety control amidst the uncertainty. That’s my take: underreacting may buy you a second chance to succeed and not take yourself out of the game with anxiety or impatience! Let’s call it “self-management.”
6. As sales grow in a region the opportunity to decrease costs is a natural next focus.
Lou Longo, Partner, Global Services, Plante Moran
The US will either produce products through automation or be so specialized and strategic that production in other markets isn’t attractive. Some increase in this is possible, but not to any significant degree to our overall trade balance.
The natural force of trade is to find markets of sales growth and lower costs. The attractiveness of sales growth on profitability, cash flow, stock price, and management incentives will continue to drive companies to multiple regions to serve global customers. As sales grow in a region, the opportunity to decrease costs is a natural next focus. Localizing production in a sales market decreases logistics and inventory costs provide currency stabilization and fast production modifications for local differences, spurring even greater sales. These attractive localization features will continue to draw companies to markets away from home increasing globalization and necessitating a global supply chain strategy.
7. Businesses are going to be forced to innovate and create new procedures for crisis management given the specter of future shutdowns.
Dr. Sonat Birnecker Hart, President and Co-Founder of KOVAL Distillery
Businesses that have engaged in global trade are not going to throw in the towel because of this scourge. Given the specter of future shutdowns, they are going to be forced to innovate and create new procedures for crisis management. More consideration will undoubtedly be given to ecommerce and ways to develop these networks abroad.
8. Companies will implement speedy solutions as a catalyst for recovery, but also have levers in place to exit new territories if conditions change.
Martijn Bouwman, International Development Advisor for Velocity Global
Growth will occur on the other side of this crisis, with a focus on flexibility. We can expect a new “normal” as markets reopen whether or not we face a recovery or resurgence of the virus. The business world has learned that an unexpected event can choke worldwide markets, but also accelerate growth for business models suited to serve needs in crisis. Agile growth becomes a priority to mitigate risk. Companies will implement speedy solutions as a catalyst for recovery, but they will also have levers in place to exit new territories if conditions change.
According to [Velocity Global] data, the number of companies choosing to expand into the Asia-Pacific region more than doubled in March as compared to the first two months of the year, following a steep decline in January and February. We anticipate Europe will follow the same paradigm when the region shows signs of recovery.
Ushering in a new era of globalization means we must not only reinvent the way we do business, but we must also redefine it. It will take a group effort, global cooperation, and the strength to push through to better times ahead.