Ukraine war and Covid-19 pandemic force nations to retreat from globalisation

WASHINGTON (NYTIMES) – When the Cold War ended, governments and companies believed that stronger global economic ties would lead to greater stability. But the Ukraine war and the coronavirus pandemic are pushing the world in the opposite direction and upending those ideas.

Important parts of the integrated economy are unwinding. United States and European officials are now using sanctions to sever major parts of the Russian economy – the 11th largest in the world – from global commerce, and hundreds of Western companies have halted operations in Russia on their own.

Amid the pandemic, companies are reorganising how they obtain their goods because of soaring costs and unpredictable delays in global supply chains.

Western officials and executives are also rethinking how they do business with China, the world’s second-largest economy, as geopolitical tensions and the Chinese Communist Party’s human rights abuses and use of advanced technology to reinforce autocratic control make corporate dealings more fraught.

The moves reverse core tenets of post-Cold War economic and foreign policies forged by the US and its allies that were even adopted by rivals like Russia and China.

“What we’re headed towards is a more divided world economically that will mirror what is clearly a more divided world politically,” said Mr Edward Alden, a senior fellow at the Council on Foreign Relations. “I don’t think economic integration survives a period of political disintegration.”

“Does globalisation and economic interdependence reduce conflict?” he added. “I think the answer is yes, until it doesn’t.”

Opposition to globalisation gained momentum with the Trump administration’s trade policies and “America First” drive, and as the progressive left became more powerful. But the pandemic and President Vladimir Putin’s invasion of Ukraine have brought into sharp relief the uncertainty of the existing economic order.

US President Joe Biden warned President Xi Jinping of China on Friday (March 18) that there would be “consequences” if Beijing gave material aid to Russia for the war in Ukraine, an implicit threat of sanctions.

China has criticised sanctions on Russia, and Mr Le Yucheng, the vice-foreign minister, said in a speech on Saturday that “globalisation should not be weaponised”. Yet China increasingly has imposed economic punishments – Lithuania, Norway, Australia, Japan and South Korea have been among the targets.

The result of all the disruptions may well be a fracturing of the world into economic blocs, as countries and companies gravitate to ideological corners with distinct markets and pools of labour, as they did in much of the 20th century.

Mr Biden already frames his foreign policy in ideological terms, as a mission of unifying democracies against autocracies.

Mr Biden also says he is enacting a foreign policy for middle-class Americans, and central to that is getting companies to move critical supply chains and manufacturing out of China and to friendlier countries.

The goal is given urgency by the hobbling of those global links over two years of the pandemic, which has brought about a realisation among the world’s most powerful companies that they need to focus on not just efficiency and cost, but also resiliency. This month, lockdowns China imposed to contain Covid-19 outbreaks have once again threatened to stall global supply chains.