WORLDVIEW: 2019’s lesson – globalisation is over & SA missed it

A lot happened in 2019, much of it loud and distracting. Most of our attention was captured by dramatic things like load shedding and corruption scandals. But on the global stage, something much more subtle and dangerous was afoot. Specifically, 2019 was the year that globalisation ended. And in SA, we managed to miss it..Don't know what you've got 'til it's gone.Globalisation is often seen as a scary or negative thing. But all it really means is a sort of global opening up. Globalisation means more trade between nations, freer flows of information and people, and more and more countries plugging into a single, global system of capital flows, trade, and rules..___STEADY_PAYWALL___.The most-recent wave of globalisation got its head of steam when China began opening itself up in the 1970s. By the mid-1980s, China was indirectly participating in the General Agreement on Tariffs and Trade (GATT), the predecessor of the World Trade Organisation (WTO), and starting to get involved in global trade. Trade boomed, particularly after the WTO was born, and finally, after a 15-year process, China managed to join the WTO in 2001. Things looked set for a golden age of globalisation..Globalisation was good for a lot of countries and people, especially those in Asia that took advantage of liberalised capital and trade flows to build up powerful, low-cost manufacturing sectors. This, in turn, was good for rich, Western countries, as it helped to keep a lid on inflation, and it was good for emerging markets because it enabled them to move up the value chain and start getting richer or, in the case of resources-based economies, to sell more minerals and oil..But the good times haven't lasted. Starting in around 2010, global trade flows began to level out. Foreign direct investment (FDI) flows began to fall, and in 2019, hit their lowest levels since the crisis years of 2007/8..The causes of this slump are multiple. The loss of manufacturing jobs in the West hurt communities and led to a backlash against globalisation, as did the growth in global migration. New technologies have changed the cost calculus of manufacturing, reducing the need for offshoring to low-cost countries. National security concerns have led to a divided internet, reducing incentives for cooperation and opportunities for integration. The US has turned against the WTO, making it impossible for the organisation to function, and started a few trade wars. And, of course, the renewed risk of a hard Brexit further undermines the goal of closer global integration..Taken together, these factors constitute a strong counter-current to globalisation that is steadily whittling away at the trade-heavy, rules-based, open global system that we spent the last 30 years creating..Now, it's true that globalisation wasn't all good. But as big fish like the US and China reassert their dominance and force the little fish to fall in line or get crushed, small countries may come to realise that they didn't know how good they had it..SA kept hitting snooze, and now we've overslept.Unfortunately for all of us, SA managed to miss out on most of the benefits of globalisation..With poor infrastructure and challenging labour markets, we weren't an attractive candidate for large-scale manufacturing enterprises – especially compared to China – and a decade under Zuma erased our ability to attract long-term FDI. The commodities boom did some good for our mining sector, but even that was undermined by the problems with the Mining Charter and the associated lack of investment..Today, we have an outward-looking government that is ready to embrace FDI. Sadly, this has happened at the very moment when the global environment is turning against open trade and capital glows..What does this mean for SA, in practical terms? Well, it means that we are going to have to get a whole lot more strategic. The US, China, and the EU are all actively looking to bring countries into their orbits. (As an aside, it's too early to tell where the post-Brexit UK is going to fall in the tri-polar world, but its decision to pursue a hard break with the EU suggests it's looking to align with the US – it's much too small to stand alone.).SA needs to get smart about the deals it signs and the partners it seeks out. It must understand that, in the new world, multilateral organizations will be less important and one-on-one relationships will be more important. It must also understand that working with one power probably means you can't work with another. For example, the US is being very harsh with allies that use Huawei 5G technology. In the new world, you can't be friends with America and shop in China – you have to choose..Given these new realities, SA must decide who it wants to partner with, and it must then drive hard bargains in exchange for entering the orbit of whichever power it chooses to work with. We desperately need FDI and should make obtaining it a must-have when deciding whether to align ourselves with the US, China, or the EU. We should also consider which environmental, labour, and product standards make the most sense for us..SA missed out on the globalisation wave, but we can still benefit from the reshuffling of global power if we play our cards right. It just means thinking smarter, negotiating harder, and accepting certain realities.

WORLDVIEW: 2019’s lesson – globalisation is over & SA missed it

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