The rapid spread of Covid-19 around the world is attributed to a great extent to the high degree of globalisation we have today. Be that as it may, will the coronavirus kill off globalisation and the supply chains thereof?
As a beneficiary of globalisation, China will not allow Covid-19 to kill off its global supply chains.
The world raised this question when China put its own cities under lockdown and reined in the spread of the virus at the cost of halting its own economy. However, the Chinese economy is on a gradual road to recovery now. The country is also swiftly responding to ensure that the production of its major trade partners around the world does not get affected. As a beneficiary of globalisation, China will not allow Covid-19 to kill off its global supply chains.
The thing is, when the pandemic is over, the global trade and supply chains will necessarily have to undergo new adjustments even if there is no obvious decline in globalisation. Covid-19 has made many countries — especially the US, which regards China as its strategic rival — realise all of a sudden that medical supplies constitute a major national security loophole for them.
US will likely reduce risks in global supply chains
On 4 March, 2020, an article entitled “Speaking Boldly, Being in the Right: The World Should Thank China” was published on China’s Xinhuanet. Its writer claims that, since the US obtains most of its face masks and drugs from China, a declaration on China’s part to ban such exports would plunge Uncle Sam into coronavirus pandemic hell.
The Achilles heel of the US is drug-making.
We are reminded that, since the end of the Cold War, especially after China joined the World Trade Organisation (WTO) in 2000 and hastened the progress of globalisation, many Western countries have relocated their manufacturing operations completely to developing countries, such as China. The consequence of the eventual Chinese monopoly over manufacturing is that China is thus able to control America’s healthcare system.
China is the world’s largest producer of active pharmaceutical ingredients, which are the main ingredients of medications. The compounds used in almost all the basic drugs for hypertension, cancer and Alzheimer’s disease come from China. The same is true for key components for critical medical technologies, including CT scanners, X-ray machines and ultrasound equipment.
The Achilles heel of the US is drug-making. As of now, over 90% of America’s antibiotics, vitamin C and ibuprofen are produced in China. The US no longer produces old-school antibiotics like tetracycline and penicillin, and has to import them from China. China is also believed by experts to be the only country supplying raw materials for the production of cephalosporins, which are used for treating pneumonia.
To let America — and not China — be the medicine cabinet of the world will be the best clarion call to highlight America’s desire to resume a position of global leadership.
All in all, it may be said that the article mentioned above comes across as showing extremely short-sighted arrogance. It could give reason for other countries to criticise China. Opinions similar to what it is saying are the sort that serve to vindicate Donald Trump’s position, which is to bring manufacturing back to America.
Presently, there are people in America who call for the homecoming or the bringing back of medicine-related manufacturing operations and production to the US. Such talk is gradually gaining traction in public opinion. To let America — and not China — be the medicine cabinet of the world will be the best clarion call to highlight America’s desire to resume a position of global leadership. It evokes the past glory of how the US once served as the “Arsenal of Democracy” during the Second World War, producing military supplies for its allies.
The grand decoupling that Trump’s trade war failed to bring about may actually become a very real possibility under the influence of the novel coronavirus.
Given that the US regards China as its strategic rival, there are bound to be re-evaluations made for the sake of America’s economy and industrial chains. The grand decoupling that Trump’s trade war failed to bring about may actually become a very real possibility under the influence of the novel coronavirus. Even if the decoupling is not going to be a total one, its actualisation in key and strategic sectors shall be inevitable. As suggested by the recent developments, complete decoupling or semi-decoupling will become a reality in the medical sector, as well as other key industries and technologies (think, for example, the future 5G technology and artificial intelligence).
After the dreaded disease has spread westward from Asia, the European countries suddenly find themselves in serious lack of medical supplies and have to rely on foreign (especially Chinese) imports.
Will Europeans do the same?
How, then, will the European countries act? While there is no direct strategic rivalry between China and Europe, the latter will likely make similar adjustments in the wake of the current pandemic.
After the dreaded disease has spread westward from Asia, the European countries suddenly find themselves in serious lack of medical supplies and have to rely on foreign (especially Chinese) imports. But that’s not the key issue. Of greater worry is the fact that the global political gestalt is changing. Europe needs to adapt to the new changes. Globalisation in the sense of everyone singing “Kumbaya” around the campfire did not come to pass. Instead, we are seeing widening fissures in China-US relations amid increasing tension. A new “Cold War” — one fought between China and the US — is not just a play of words.
The recent war of words between Chinese and American media is seen as the beginning of something closer to a new Cold War on the ideological front. The aggravation of China-US relations and the geopolitical shifts set off by the Covid-19 pandemic will lead to a momentous turn for the future of Europe.
When the curtain fell on the Cold War, Francis Fukuyama claimed that history has come to an end. But the truth is, we are seeing the return of authoritarian rule and strongman politics in some countries today.
Although the European countries have always tried to become the third pole in global politics, the European Union (EU) conspicuously remains just a big “country” (so to speak) and not a powerful one. The impact of the pandemic, in particular, has made more evident than ever the lack of coordination and unity within the EU. The allegiance of the people lies more with their respective countries rather than the EU itself. Even Germany, the de facto leader of the EU, gives priority to its own people when dispensing medical supplies, and is unwilling to export the much-needed items to aid fellow member states of the EU. This is obviously a huge blow dealt to the progress of European integration and to so-called free trade.
The worsening antagonism between China and America is picking up pace, while sentiments that represent a mix of populism and nationalism are gaining strength in various countries. When the curtain fell on the Cold War, Francis Fukuyama claimed that history has come to an end. But the truth is, we are seeing the return of authoritarian rule and strongman politics in some countries today. Driven by the current wave of global populism, political figures and parties of an extremist bent are flourishing, even gaining the right to rule entire nations. We are certainly nowhere near the “end of history”.
The so-called liberal international order is based on the leadership of the US, as well as the establishment of world organisations. Now, however, the global leadership crisis is gradually coming to light. International organisations continue to fail to respond to global problems quickly. It may be argued that these organisations and mechanisms within them (such as the Appellate Body of the WTO that hears appeals from reports issued by panels in disputes brought by WTO members) are being rapidly marginalised or paralysed, thanks to the jockeying and tension between major powers.
Globalisation as we know it, marked by total liberalisation, shall come to an end as China and US enter into a state of all-out strategic rivalry.
Against this backdrop, the European countries will obviously have to give thought to their own interests. Whether it is done on the basis of traditional nation-state sovereignty or through establishing a regional political organisation under the EU’s unified political framework, they shall have to adjust their global supply chains to prevent suffering heavy damage amid the new political crisis. This will be a choice that they cannot avoid making. In recent years, French president Emmanuel Macron has been stressing repeatedly the need to rethink Europe, rethink the whole Western model, and thereby adjust the European policy inertia and ways of thinking that had been formed over the last two decades, so as to adapt to the advent of a new situation.
The impending adjustments to the two-decade-old globalisation process may not be the kind that yields immediate results. Nevertheless, they will be inevitable for a period of time to come. Globalisation as we know it, marked by total liberalisation, shall come to an end as China and US enter into a state of all-out strategic rivalry. But, of course, should the two countries learn to work with each other again amidst the crisis and deal with global challenges and issues together, there would still be some room for give-and-take. Such a possibility, however, seems to be dwindling even as I write.
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