Business English News 56 the globalization the past few years have been a very interesting time for the world economy the pandemic has exposed the vulnerabilities of global supply chains geopolitical tensions around the world have intensified exacerbating inflation in response to these disruptive forces
we are seeing a new international dynamic emerge as Schroeder's reports a decades long process of globalization is coming to an end as the world becomes more protectionist favoring opportunities closer to home multinational corporations are diversifying where they produce goods and relocating closer
to home this trend represents backtracking from the globalized model of extended supply chains that have defined international trade in the past few decades many saw globalization as an unassailable model for economic development one that brought universal benefits and there are many who see deglobalization as
its being called as either regressive or bad for business but the cracks in the globalized economy are evident as Chatham House noted the pandemic illustrates the danger of relying on global supply chains for essential medical supplies while climate change demands reductions in the enormous carbon footprint
of international trade and globalization also contains inherent disadvantages it has led to the emergence of unaccountable world monopolies such as Amazon and it has worsened income inequality both between and within countries in response to these experiences there is an increasing trend toward onshoring
the onshoring movement encompasses a strategic shift by companies to relocate operations back to their home countries in a related strategy called friendshoring companies are rerouting supply chains to countries they see as carrying less risk this notion of risk is central to this trend according to
the Guardian as companies opt for resilience over efficiency they will increasingly shift their approach to supply chains from just in time to just in case this will come at a time when security concerns gain greater weight in commercial considerations and companies will move away from risk sharing
and general partnerships to more narrowly designed arrangements meanwhile consumers will increasingly look for an emphasis on purpose in their commercial interactions of course some of the discussion of deglobalization is driven by political bluster in the United States and while there is evidence of the realigning
of supply chains in large economies like the US the trend isn't consistent across the globe as the European Central Bank points out factors such as labor shortages resulting from immigration, population aging, and skills shortfalls may make EU countries less attractive for reshoring while other cost
considerations such as rising labor or energy costs and regulatory differences might have encouraged firms to locate production abroad advancements in digital technologies also make it easier to trade services across borders this makes relocating business processes internationally even easier it would appear
that there are still many compelling reasons for offshoring and talking about the demise of globalization may be rash for every multinational talking about shortening supply chains there's another that is offshoring even more of its operations and it's up in the air whether deglobalization is good news
for the world economy overall as the ECB explains the deglobalizing effects of reshoring can also reduce international trade and cross -border investment while making it harder to transfer productivity gains from one country to another all this can reduce prosperity especially in the small open economies
that benefit most from international trade transferring production back from overseas can eliminate previous gains from international comparative advantages and increase domestic production costs whether or not one believes onshoring and deglobalization are appropriate there's an undeniable change of foot
in navigating the future business leaders will have to remain strategic they'll need to emphasize adaptation as they deal with changes in technology, talent and trade and they'll have to accept that the landscape has fundamentally changed as Walter Frick at the Harvard Business Review concludes globalization as
we've known it has been fueled by three things cheap capital, cheap energy and cheap labor they've all ended, interest rates are fluctuating, energy is more expensive and wages in Asia are rising economic pendulums always shift and ours is shifting right now from unfettered globalization to more regionalization and
localization
