Globalisation was a hard-won battle. It was achieved through significant changes in the mindset of various national governments. It is natural to be suspicious of systems, processes and regulations of foreign destinations and, therefore, historically, firms would operate within geographical boundaries.
Think about contract enforcement, intellectual property (IP) protection, the World Trade Organisation (WTO), data security, swift payment systems, maritime law and harmonised system codes for customs. All of these were required for multinational firms to operate and a globalised world order to exist. Such protocols were developed with considerable effort, and one must be wary of a situation where such systemic gains may be lost.
Apply, Apply, No Supply
Economics has been the key driver for globalisation, where activities are undertaken in regions with best factor conditions. However, this also leads to certain inherent risks, since countries are then able to exert control over very few variables of a product value chain. Hence, globalisation works best in a stable geopolitical environment.
Recent events like the pandemic and the Ukraine war have impacted the geopolitical environment. In this scenario, countries would try to consolidate control on stocks of essential items like food grains, drugs and fuel, which then impacts prices. Recent examples of protectionist measures underscore this trend. Take Indonesia, which disallowed palm oil exports, causing prices of edible oils to rise globally. Similarly, news that India would block exports of wheat led to a 6% rise in global prices of the grain. And even after taking a stand on banning imports from Russia, much of Europe remains hugely dependent on Russia for gas and crude oil.
Therefore, for core products and services, the global economy is, perhaps, transforming from one that was integrated around the needs of MNCs to one integrated around the needs of peoples, communities and nations. We are also likely to see a preponderance of bilateralism as opposed to multilateralism, especially for a resource-rich nation such as India. For non-core value-added products, however, deglobalisation or protectionism is not anticipated.
Read more at: https://economictimes.indiatimes.com/opinion/et-commentary/what-can-make-india100-worlds-most-integrated-developed-and-sustainable-economy/articleshow/93529002.cms