It can seem that evidence of deglobalization isn’t hard to come by. One might cite Britain’s exit from the European Union trading bloc in 2020 or Donald Trump’s protectionist policies that shaped the United States’ role in global diplomacy. Even the war in Ukraine, which has been raging since 2021, can be construed as proof that deglobalization is occurring.
But at the same time, there are events and trends that indicate the world is still very much interconnected and countries are more profoundly interdependent than ever before.
Disruptions caused by the COVID-19 pandemic illustrated just how much we all rely on international supply chains. And climate change is also commonly cited as proof that globalization is alive and well.
So, how real is deglobalization? What impacts are leaders seeing on their businesses as a result of it, and where might we go from here? In mid-June, experts from academia and industry gathered for the 3rd Annual Global Business Forum at the Jerome A. Chazen Institute for Global Business at Columbia Business School to tackle these questions and more.
In a series of conversations facilitated by Glenn Hubbard, dean emeritus and the Russell L. Carson Professor of Finance and Economics, forum panelists were somewhat divided on whether we should be thinking of deglobalization as a real trend or an evolutionary phase in the broader journey toward globalization. But all agreed it's a complex and fascinating topic that deserves nuanced analysis and dissection.
Here are five takeaways from the forum:
1. There may be a shift to deglobalization, but it’s complicated.
While some of the panelists posited that we’re seeing a shift toward deglobalization, it’s clearly a complicated argument to make.
“I do think that there is a shift towards a little bit of deglobalization, particularly around some of the supply chain issues we're seeing,” said Marie Ffolkes '01, founder and CEO of Axxelist LLC, a real estate technology company. “Many companies are very focused on the resiliency of building what they need to] deliver products to their customers.”
At the same time, though, speakers cited figures showing that trade between the United States and China was at an all-time high in 2022.
“I don't think deglobalization is really happening to the degree it’s purported to be happening,” said Thomas Christensen, professor of public and International affairs and director of the China and the World Program at Columbia University.
“We’ve had supply chain shocks that came out of the pandemic [and] out of political risk factors in particular related to China and China's relations with the United States and some of its neighbors,” he said. “Most of the reaction seems to have been diversification of the supply chain, which in many ways, is the opposite of deglobalization.”
Christensen acknowledged there are “some aspects of US-China relations where you've seen some decoupling” but added this is a “very narrow strip of the overall relationship.” It relates to national security — artificial intelligence and high-level semiconductors — but that’s not really a new US policy,” he said.
2. Drivers of deglobalization can be varied.
Yes, a desire to be less exposed to possible supply chain shocks is a considerable driver of the deglobalization many forum participants said they are observing, but there are other factors, too.
For example, panelists agreed sustainability might be a concern, with a growing demand among consumers for businesses to reduce their carbon footprint where possible. But they also highlighted a need to respond to changing consumer expectations.
Garret van Ryzin, vice president and a distinguished scientist on Amazon’s Supply Chain Optimization Technology team, explained that consumers’ growing demands for near-instant delivery of goods means companies frequently have no choice but to source locally.
“One of the things that we definitely see from a supply chain standpoint is that consumers are getting used to getting things quickly at their fingertips, faster and faster. [You] can't do that if stuff is spread all over the continent. So you have to be much more localized [in terms of] inventory,” he said.
“We've made a huge expansion in our fulfillment center network,” van Ryzin added, explaining that, to meet evolving customer demands, some facilities have to be within a couple hundred miles of the customer ordering the goods. It’s simply a necessity to remain competitive.
3. There are perils involved in being an 'anywhere company.'
One of the themes panelists touched on was how the risks of trying to be a so-called anywhere company play into the conversation around deglobalization.
As defined by Peter Coy, a New York Times economics writer and forum moderator, anywhere companies are businesses that aim to “live happily in every country where they do business.”
But, as Coy pointed out, with the rise of deglobalization and nationalism, some governments are pushing companies to answer an often high-stakes question: Are you with us or are you against us?
Against this backdrop, it’s important that organizations constantly consider the overarching impact their actions are going to have on their brand and therefore their customer base and perception, said Ffolkes.
“I think companies really have to think about the regulatory and operating environment of each country,” she said. They must make sure the political landscape in which they choose to operate doesn’t “pigeonhole them into taking sides” on any particular issue, Ffolkes added.
And again, it’s about building resiliency by being agile. In this context, there’s a simple equation for resiliency, said Glenn Steinberg '91, global and Americas supply chain leader at EY. “Resiliency equals visibility plus agility,” he explained. “You have to have visibility into your full supply chain. And that means not only into your suppliers, but into your suppliers’ suppliers and your suppliers’ suppliers’ suppliers.”
He added, “It starts with visibility. But if you don't have agility built into your supply chain to do something about it, it doesn't matter.”
4. Deglobalization is never a one-way street.
Despite agreement among some of the experts that deglobalization is real, others took a slightly different view.
“I believe very strongly that what we are seeing is an evolution of globalization rather than a deglobalization,” said Abby Joseph Cohen, a former senior investment strategist at Goldman Sachs who’s now a professor of business at CBS.
“I base that on what I am seeing in terms of what companies are actually doing,” she said. “Obviously, there are some industries where there are some national security concerns and also industries that had a rude awakening during the pandemic that perhaps they had gone too far with regard to their globalization trends.”
What we’re seeing now, she explained, is businesses doing what they can to ensure they are not “buffeted by extremes,” and that is something they will continue to do. Sometimes, like now, that can mean fixing their supply chains. But it’s not, as such, a sign that globalization is being reversed entirely.
5. Resiliency must be a strategic priority.
Finally, whatever the exact terminology of what’s happening, panelists tended to agree that the trajectory of globalization is being shaped by the need to build resilience.
“The great supply chain reset is underway,” said Steinberg, noting that supply chain disruptions started well before the pandemic with developments like Brexit and America's tax reform. These “had ripple effects around the world, and these disruptions are now continuing,” he added.
Steinberg said he believes the “economic order of the planet is changing.”
“Since the fall of the Soviet Union, we've been operating in what we call a unipolar economic order. Basically, the United States has been leading the way ... and all of our supply chains were designed in that economic order,” he said. “We went all the way to China to save a nickel because we could; we had geographic concentration, vendor concentration.”
But now, with the rise of China, Steinberg said we're moving into “a bipolar economic order,” which might even become what some predict will be a so-called multi-polar world. That kind of order, he concluded, is inherently less stable, which is why we’re seeing economic nationalism. In other words, companies are becoming less global because they “realize they need to build resiliency into their supply chains,” he said.
One way in which companies are building resilience—and can build resilience—explained Ffolkes, is by reshoring to reduce distribution time and costs. Prices for shipping containers, for example, soared during the pandemic. The downside of reshoring, however, is that skilled labor in the United States is frequently more expensive than elsewhere.
Steinberg, meanwhile, noted that for some companies, a “China plus one” strategy makes sense, whereby businesses diversify operations and explore outside of China while maintaining a presence in the country.
“Where we are mostly landing with clients is that [we’re advising them to] have a plus-one strategy. You've got to have some resiliency built into your supply chain,” he said. “You can't have geographic concentration; you can't have vendor concentration. And that plus one could be anywhere.”