Where are globalisation and trade relations heading? And how does this fit with our efforts to protect the environment? Prof. Lisandra Flach and Dr Guido Baldi shed light on the current situation.
Flach: The pandemic and the war in Ukraine are turning points, in a way. Many companies are rethinking their supply chains and their procurement strategies. They’re reassessing the global risks, especially in view of the geo-economic tensions. But this doesn’t mean the end of globalisation, rather a reassessment of it and changes to it.
Baldi:It’s definitely true that our world is in upheaval. Whether we should call it radical in a historical context is up for debate, but there are far-reaching structural changes on the horizon, without a doubt. Restructuring our energy supply in light of climate change as well as the current war in Ukraine is an enormous short-term challenge.
Globalisation will probably not recede completely, but its face is changing. At the moment, indications suggest that we could end up with a world consisting of different blocs, led by the USA and China. Nevertheless, we shouldn’t forget that such structural changes can always take us in a new direction that we can’t really visualise yet. For example, only a few people foresaw the fall of the Soviet Union and German reunification.
What – in your view – will change most dramatically as the world economy progresses towards a new order, compared to how it is at present?
Flach: Companies are calculating global risks more and recognise the importance of investing in more resilient supply chains. Policymakers recognise the importance of the environment and politics when shaping trade policy.
Baldi: Global risks are on the rise as more and more events are transpiring throughout the world that we can’t imagine. International rules are less likely to be enforced or bent, for example in conflicts or in international trade. Russia justified its war of aggression on Ukraine very adventurously under international law, so as to give the impression that it was legal. International trade rules are less respected, which increases the risks of unexpected tariff increases or other trade restrictions.
“Indications suggest that we could end up with a world consisting of different blocs, led by the USA and China.”
Dr Guido Baldi, Research assistant in the Department of Economic Policy at DIW Berlin