Discussing the tail-end of Globalisation

Opening Plenary and Debate:
“The tail-end of globalisation − Three alternative views”
Chair: Davide Castellani
Panellists: Italo Colantone, Fabienne Fortanier, Sjoerd Beugelsdijk

The 44th AIB (UKI) and 6th Reading Conference opens with an interesting and current debate on the tail-end of globalisation.

After the introduction of the three guest panellists (Colantone, Fortanier, and Beugelsdijk), the chair Davide Castellani (Henley Business School, University of Reading) provides a preliminary overview of the discussion topic, the winners and losers of globalisation and the recent political outcomes, the counter-productive effects of protectionist policies when we take into account all the firms directly and indirectly embedded in global value chains (GVCs), and how a more fragmented and polarized society could have effects in terms of economic outcomes.

Italo Colantone (Bocconi University) talks about the recent revival of nationalism in Western democracies, with the election of Donald Trump in the US. Statistics show that the share of imports from China on the total imports in Europe (“Chinese import shock”) increases over the period with a similar trend for the share of radical right, underlining a possible link between globalisation, Chinese import shock and political preferences.

The importance of nationalism, protectionism and right political parties arises in regions more exposed to Chinese imports, related to their sectoral specialization: a manufacturing region suffers a stronger pressure from the Chinese imports, rather than a region more specialized in services sector (e.g., London).

“The protectionism is not the best solution”, as suggested by Colantone, “but a strong redistribution of the benefit of globalisation and a compensation of the losers”.

This leads us to the questions, who really could benefit from protectionist policies?

Fabienne Fortanier (OECD) offers a new perspective in order to analyse the issue of globalisation, moving the analysis on GVCs from trade to trade in value-added.

“We need to change our glasses from a traditional old-fashioned way to look at international trade to a modern approach”, she argues.

The joint OECD – WTO Trade in Value-Added (TiVA) initiative traces the value added (directly and indirectly) created by each country and industry in the production of goods and services that are traded and consumed worldwide.

From a within-industry perspective, data show a greater importance of SMEs in international trade when we look at the value added rather than the gross export. In fact, SMEs are indirectly involved in GVCs as suppliers of larger multinational enterprises (MNEs). Therefore, protectionist policies could affect not only enterprises directly involved in international trade, but also firms supplying these enterprises, mainly smaller and domestic firms.

The last panellist, Sjoerd Beugelsdijk (University of Groningen), focuses on the role of cultural diversity, that in IB is mainly defined as between-country measures by assuming a national cultural homogeneity. According to his view:

“In a globalised and fragmented world, is it appropriate using ‘cultural distance metrics’ that do not consider intra-country cultural diversity?”

He proposed a within-country index of cultural diversity, based on questions with a 10 point Likert scale answer category, that measures the degree of polarization in a society. Data show that value diversity is highly related with socio-economic outcomes. A strong negative correlation appears between the value diversity and the quality of regional governance: “the more polarized a society is, lower is the quality of governance and the level of economic development”.

Once opened the discussion, some interesting questions are brought to light. The globalisation is a complex phenomenon that we need to analyse under several conditions: the role of technological changes, the direct and indirect effects of import tariffs and protectionist policies, the back-shoring of manufacturing activities to developed countries. Therefore, particular attention has to be pay to the combination between more localised production and improvement in Information and Communication technologies (ICTs) that could bring to the first step toward a new globalisation strategy.

Katiuscia Lavoratori

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