The author questions if the global trade paradigm of ‘expansion and integration’ is changing to ‘isolation and retreat’, resulting in global supply chains that cannot be relied upon giving rise to a ‘strategic discomfort’ for countries and corporations. The current dynamism in geopolitics, the aftermath of the pandemic and the global supply chain disruptions, increased polarisation and the anti-free trade moves are all exerting enormous stress on, and reshaping, the global trade system.

Today, corporates source materials across the globe and deliver products to the ‘nook and corner’ of the world. Production is broken down into hundreds of sub-assemblies scattered across countries and continents making the global value chains (GVCs) complex and powerful, not only transforming trade but arguably the very human existence! The author argues that over the last three decades, GVCs have already become a determinant of sovereign economic power!

The complex GVCs, the life-line of the global economy, have been highly fragile. Since the dawn of this millennium, four events caused severe damage; the SARS pandemic of 2003, the tsunami in Japan followed by floods in Thailand during 2011, the global financial crisis of 2008 and the recent pandemic of 2019.

The author elaborates that globalisation, through trade and GVCs, has driven a deep wedge between the haves and the have-nots; as globalisation places a premium on high technological skills and thereby increasing their incomes dramatically, whereas incomes in low skilled economies stagnate.

These sentiments led to increasing anger towards globalisation, which was exploited by political leaders like Donald Trump in the US and Boris Johnson in the UK ; Trump, for example, took to ‘make America great gain’, dramatically withdrawing from many trade treaties like the Trans Pacific Partnership (TPP), the North American Free Trade Agreement (NAFTA), and initiated a tariff war with China.

Brexit and the fractious Trump era deepened the trend where the world drew inward, away from multilateralism. To complicate things, the pandemic driven contraction led to wide disparities among least developed, developing and the developed countries and the 2021 ‘expansion’, deepened the wedge further. In this scenario, every nation had their own self-interest in playing out their strategic and economic deliberations and positioning. The China angle has impacted virtually every country and cluster part of the global trade!

The author makes an interesting point that in recent years has seen the role of the US in the global trade, shrink; its challenger being none other than China.

China’s ascent

China’s technological and financial prowess positioned it as the ‘world’s factory’, closely entrenching the West through economic and trade ties. It has been aggressively using all its levers, trade economics and increasingly military to challenge the West, and the US-led alliance, in almost every sphere.

A united Europe today, even without the UK, constitutes a formidable force, both economically and technologically. The EU’s traditional close ties with the US were dented by the recent cosying up of the EU with China, especially with its participation in China’s Belt and Road Initiative (BRI) and Asian Infrastructure Investment Bank.

But the Russia-Ukraine conflict has brought the West closer.

The Indo-Pacific is a vital cluster of around 40 countries, both in terms of national security and trade possibilities; housing some of the high growth economies of the world, including India, Japan, Singapore, Australia, New Zealand and others, has become a key strategic theatre of the world.

China’s assertive actions have triggered the formation of Quad, bringing together the US, Australia, Japan and India together, potentially a formidable force.

India has been responding to the dramatically evolving geo-economics situation and is seen as a ‘friend-shoring’ location.

India has attempted to devise incentive programmes for deepening its share of manufacturing in the global supply chain and has been pursuing trade agreements with vigour, these could potentially position India as a trade super power in the coming decades.

Large Indian companies, however, have not been able to de-risk their GVC from the clutches of China.

There is however an inherent dichotomy between how the management of companies and the political leadership of the nations have responded to the dynamics in the GVCs; while companies have their own interest in terms of retaining competitiveness and thereby resorting to scale and efficiencies in choosing their GVCs and partners, policymakers at the national level have a wider range of objectives that include timely availability of critical products and also its impact on local economies and employment

Post pandemic, China’s exports quickly surpassed the pre-pandemic level global market share. The pandemic experience will drive global firms to be more resilient in terms of future investments in GVCs; however, the author opines that a drastic restructure in the GVCs does not seem likely, but a gradual rebalancing is more probable.

The author raises a number of questions given that the growing economic clout of China and its ambitions to displace the US as the world’s central economic power is now becoming stronger.

With China thumbing its nose to the rules of the post-World War II economic order, painstakingly constructed by the US and its allies, should the US, along with its allies, work to make China behave in a responsible manner? Should the US confront or engage China? Should it decouple entirely from the Chinese economy? Is that even possible?

The reviewer is Distinguished Professor Adjunct (Strategy and Accounting), Great Lakes Institute of Management, Chennai

Title: The Global Trade Paradigm: Rethinking International Business in the Post-Pandemic World

Author: Arun Kumar

Publisher: HarperCollins India

Price: ₹699

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