Global trade is not going away, but it is going transform over the next 10 years. We can already see the broad outlines of the new international trade regime – Globalism 2.0. It’s not good and it’s not bad – just different. Your job is to figure out how to navigate the new landscape.
“Decoupling”, “deglobalizing”, and “reshoring” are popular Twitter keywords, but the fact is that global trade and modern lifestyle are simply two sides of the same coin. When populists talk about the evils of globalization, they are generally trying to score political points with domestic audiences. Whether their specific complaints – usually about China – are valid or not, you must be careful not to be pulled off focus by impassioned tweets or soundbites. Economic isolation isn’t viable – and it’s certainly not profitable. Global business isn’t going away – it’s just changing. Front line managers and negotiators have to A) check their existing attitudes and processes to make sure they are current, and B) adjust for a more free-wheeling, complicated web of overlapping trade agreements and convoluted supply chains (for materials, products, and services).
Top 5 characteristics of Globalism 2.0:
- The fading of US leadership continues, regardless of internal politics.
- A few large actors will build spheres of influence, which will define economic & geo/political competition.
- Global institutions will give way to a network of multilayered, overlapping trade agreements.
- Technology will be increasingly politicized, and competing standards will become a major source of geopolitical tensions.
- The line between government and corporation will blur to the point of becoming meaningless.
If you are presently involved in cross-border trade, either directly or indirectly, you will almost definitely continue to perform the same or similar functions, even if the home of the counterparty or method of transaction change. The changes are NOT being brought about by the current US administration or the Covid19 virus, though they are accelerating the transformation to Globalism 2.0. US dominance of international trade was already fraying, and we had steadily been moving to a more multi-polar world for the past 10 years or so. Political trends in Beijing, London, and Washington have certainly accelerated transition to Globalism 2.0, as has the pandemic. But the writing has been on the wall for some time. You ignore it at your own peril.
You have two choices – get out in front of the new trends, or try to react after the fact. This article is for those wanting to take proactive steps. Let’s look at each trend in a little more detail before we start building our action plan for front-line managers.
- Loss of global US leadership will continue, regardless of which party is in the White House. The parts of the world that are growing the fastest find the US irrelevant at best, and damaging in some instances. Our corporate strategies are built on foundations of zero-sum game competition that simply don’t work in many parts of the world. When we talk about “increased productivity”, they hear “unemployment” and “social unrest”.
The US, however, is guilty of a far greater sin than violating the sensibilities of local cultures. Good managers can work with that – even profit from it. Our problem runs much deeper: WE GOT BORING. That’s why our soft power is diminishing. Here is S.E. Asia, the cool kids are taking their cues from mass-produced K-Pop boybands, while innovative policymakers and startups are watching Beijing (warily) and Singapore (enviously). Google was founded in 1998 – Facebook in 2004. They are the established incumbents – not exciting disruptors. Silicon Valley is still important in an old-timey, “what was it like when the internet was new, grampa?” kind of way, but very little is replicable in Asia, Africa, or other emerging economies. Alibaba, Gojek, and Grab are the current role models.
- Multiple Spheres of Influence. The US will always play an important role in the world economy, but it is not the only player in the Globalism 2.0 game. The PRC is, of course, the obvious second competitor, and it has been steadily pushing for a greater international presence since Xi JinPing came to power in 2013. BRI – the Belt and Road Initiative – is the most comprehensive program for projecting Chinese soft power, but it is by no means the only one. Look for China to lure allies with a new regime of financial incentives and online ecosystems that will both appeal to emerging markets and then lock them in to the PRC orbit. SE Asia, Africa, and possibly Central Asia will be influenced by PRC efforts. A third major sphere of influence will be the Eurozone, which will continue to be pushed/pulled away from the US. Eastern Europe and MENA are still attracted to Europe’s rules-based approach to global trade (and its spendy consumer markets). Spheres of influence will be soft-power and culturally based at first, but technological standards and financial commitments will solidify the relationship. India and Russia will continue to exist on the periphery of the main economic powers.
- Global institutions like the UN, World Bank and NATO will become weaker and less relevant. These bodies are policy organs of the old US-centric world order, and as US leadership fades these institutions will become less important. China will continue to build its own versions of these institutions, but the real power will come from an overlapping network of free trade agreements and security relationships. These will focus exclusively on trade and security: and social, political, or moral/human rights considerations will not play a role. These FTAs will be less stable than old-style institutions, but more effective at facilitating trade.
- Technological innovations will be increasingly politicized. The US will use its preeminence in the semiconductor supply chain to counter China’s advantages in 5G and dominance of rare earth metals. But looking out further, the truly contentious issues will be green technology, genetic research, and networking technologies. Conservative elements in the US will continue to restrict progress on issues of climate, genetics, and electronic vehicles / batteries – so for the first time since the 1980s, Western brands will find themselves with older, pricier, less desirable technology (at least some of the time).
- Global Pivot to Statist capitalism. Laissez faire is well and truly dead. In the 1990s mainstream business pundits hailed the opening of China as a great leap forward for private ownership and the glorious capitalist way of life. Now, not so much. Not only are the socialist-market economies (China, Vietnam) doing a yeoman’s job of navigating their economies through the pandemic, but Western nations are relying more and more on government – corporate cooperation. In the East, the state policy influences corporates. In the West, corporates influence state policy. We have reached a point where Facebook and Google (not to mention Tesla) develop and prosecute their own foreign policy – and conduct high level negotiations that often seem to be at odds with stated US policy goals. The competition is no longer between Socialism and Capitalism, but rather between Formal Centralized Planning and Ad-hoc Industrial Policy-making.
Andrew Hupert lives in Vietnam, where he splits his time between Hanoi and Ho Chi Minh City. He lectures on Business Strategy and Global Business Environments at Hanoi’s National Economics University. He is also the Managing Director of Realistic Scenarios, where he builds custom training simulations for international organizations. Contact Andrew to discuss your company’s professional skills training situation. He can be reached at firstname.lastname@example.org .