By Jennifer Chang      Photo：Suzy Hazelwood

"Globalization" has been challenged and gradually eroded. When we look at the main threats to globalization, There are three main aspects. The first is the rise of populism, which is increasingly populism in various countries saying no to free trade and setting up tariffs and non-tariff barriers to restrict investment and immigration. The second is the rise in protectionism caused by Covid-19, and over the past two years we have seen the impact of Covid in every area. When the outbreak began, almost all countries prioritized the needs of their own populations in terms of medicines, masks and cleaning supplies. The export of these items was then banned until the situation was brought under control. The third is that political factors affect the economic layout. Russia’s aggression against Ukraine accelerated the speed of ending globalization. After the Russian-Ukrainian war, Russia did not get much advantage on the battlefield, but it has paid a heavy price economically. The airspace of various countries is prohibited from opening up to Russian aircraft and technical embargoes. The United States, relying on the control of the financial industry, froze the reserve assets of the Russian Central Bank and removed Russia from the Global Association of Banks and Financial Telecommunication. Sanctions by the international community have disrupted Russian trade, and the Russian economy has retreated for four years, with an estimated GDP drop of 4.7%, entering the longest recession in history.

What does the end of globalization mean for consumers? A  result is that prices rise, product quality declines, the price is not cheap, and the quality is not good. Globalization leads to a booming era of air and sea transport. Now it is being challenged, and the potential disruption of trade has initiated a rethinking of how fragile  global supply chains are. Geopolitics factors must be reconsidered, especially for long-distance logistics.  In theory, globalization is the best allocation of economic resources. A region should focus on producing the most advantageous products locally, so as to have scale and reduce costs.  For example, the quick-storage parts of the Apple mobile phone come from South Korea, the gyroscope from France and Italy, the audio coil from Japan, the processor and codec from the United States, the accelerometer from Germany, and the screen from Japan, but the final assembly plant is Foxconn in China. Each region has its own advantages and specialties. They are linked together by the global supply chain and exchange goods through trade. This is the benefit and ideal state of globalization.

Appreciate if you could share TGL Blog among your friends who are interested in first-hand market information of supply chain and updated economic incidents.