Surface Ripples

A New Era of Protectionism?

Recently, I asked whether global globalisation was finally in retreat. The retreat was mainly caused by the coronavirus pandemic of 2020 to 2022 which saw the worlds factory (China) close down because of coronavirus concerns. Even now China continues to pursue a “Zero-Covid“ policy. 

On realising the downside of relying on overseas partners to produce strategically important products, many countries began to consider “re-shoring“ production previously outsourced overseas.

This is a perfectly natural and understandable reaction. The downside, however, is that it can also act as a justification for a new round of protectionism. At times this may have little significance.  At others, especially in regions such as the EU, we may find that countries that compete in the same industries not only re-shore production, but also recommence handing out state subsidies in order to boost those industries’ strength vis-a-vis competing countries.

If coronavirus and the current events in Ukraine are taken in a certain way, it clearly makes sense to become once again self–sufficient in the production and distribution of strategically important goods and services. The problem comes when this morphs into protection and subsidisation of inefficient and outdated national champions who, in the “free market”, would be consigned to oblivion. This has been a constant refrain in the EU over examples such as farming subsidies which some see as benefiting inefficient producers using outdated methods but who must be kept happy to preserve governments.

China’s rise as an industrial superpower resulted in a number of small and medium-sized businesses not only competing against cheaper products, but also, at times, becoming customers of the very country that was putting them out of business. This is one of the drawbacks of so-called “globalisation”. It’s necessarily implies a re-distribution of production capacity and this is usually accompanied by a fall in demand for workers in the industry affected in the other country.

Offshoring has its benefits; of that there can be little doubt. Balance is necessary, as we have seen, to ensure that in an emergency, vital supplies can still be obtained. We none of us want to rely, for example, on another country racked with pandemic or that has become a political foe (as is the case with the invasion of the Ukraine by Russia) and can therefore “turn off the taps” as Russia has done with the flow of gas to Europe.

I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management.  I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website  provides a full picture of my portfolio of services.  For strategic questions that you should be asking yourself, follow me at @wkm610

Labels: Crisis Management, Customer Care, Financial, Productivity, Risk, Strategy

posted by William Martin @ 10:20