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New report finds globalisation resilient despite geopolitical difficulties

Globalisation has demonstrated resilience in the face of escalating geopolitical tensions, according to the latest DHL Global Connectedness Report 2024.

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Amid widespread speculation about the decline of globalisation, the 2024 DHL Global Connectedness Report has concluded that ‘global connectedness’ reached an all-time high in 2022 and maintained near-record levels in 2023.

According to DHL, this resilience is evidence of the enduring strength of international flows of trade, capital, information, and people – despite significant global challenges.

Globalisation trends amidst geopolitical tensions

The DHL Global Connectedness Report, authored by Steven A. Altman and Caroline R. Bastian from the NYU Stern School of Business, bases its findings on a comprehensive analysis of globalisation trends based on nearly 9 million data points tracking international flows among 181 countries.

The report challenges the prevalent narrative of deglobalisation, highlighting that “the resilience and growth of international flows in the face of recent crises strongly rebuts the notion that globalisation has gone into reverse.”

Several high-profile economic figures were also quoted in the report about these trends, with many referring to the evolution of globalisation as opposed to its reverse.

“Globalisation is not over, nor should anyone wish for it to be. But it needs to be improved and reimagined for the age ahead,” said Ngozi Okonjo-Iweala, Director General of the World Trade Organization.

Pablo Hernández de Cos, Governor of the Bank of Spain, added:

“It appears that for the time being there is no consistent trend towards ‘deglobalization’ but rather a change in the nature of globalisation, leading to a rise in the regionalization of trade and supply chains, a diversification of sourcing and a certain slowdown in global value chain fragmentation.” — Pablo Hernández de Cos, Governor of the Bank of Spain.

Geopolitical tensions, notably the U.S.-China trade conflict and Russia’s invasion of Ukraine, have reshaped certain aspects of globalisation but have not led to a widespread retreat, conclude the report’s authors.

The report also notes a significant reduction in direct flows between the USA and China, with both countries’ share of flows involving each other falling by about one-quarter since 2016. Despite this, the USA and China remain among the most interconnected nations globally.

The importance of the European Single Market was also referred to in the report.

Although the country in the top spot was Singapore, 17 of the top 20 with the highest global connectedness scores are in the European Single Market.

In its explanation as to why this is the case, the report states:

“Europe’s strength across the four pillars of the DHL Global Connectedness Index is supported by the pillars’ close correspondence to core principles of the EU. Three pillars (trade, capital, and people) are addressed directly by the EU’s “four freedoms”—the free movement of goods, capital, services, and people.23 The remaining pillar, information, is addressed in part by the EU’s Copenhagen Criteria for accession to the Union, based on which “the EU makes press freedom one of the criteria for accession.”

Regionalisation and the resilience of global connectedness

Despite discussions about regionalisation, the report also finds no substantial evidence that globalisation is giving way to regionalisation.

The research concludes that most international flows continue to occur over stable or longer distances, with a declining share occurring within major geographic regions. Only North America shows a clear trend towards nearshoring.

“Globalisation has not given way to regionalisation. Most international flows are taking place over stable or longer distances, with a declining share happening inside major geographic regions. Focusing specifically on trade, only North America shows a clear nearshoring trend,” reads the report.

The report suggests that the benefits of global connectedness are substantial, contributing to its resilience.

It notes that “the world’s absolute level of globalisation remains limited, with domestic flows still far exceeding international flows.” This indicates ample potential for further growth in international engagement.

Corporate globalisation and international trade

Another of the key findings of the report was that corporate globalisation continues to advance robustly.

The research states that companies are increasingly generating revenue from international markets, and the value of announced international expansion projects has reached its highest level relative to world GDP in over a decade.

“Corporate globalisation is advancing as companies earn more of their sales abroad and international expansion projects hit record levels,” the report states.

The share of global output produced by companies outside their home countries remains steady too, indicating sustained international engagement.

In terms of trade, the report observes that global trade’s share of world GDP reached a record high in 2022, before experiencing a modest decline in 2023, consistent with the usual pattern of trade slowing more than GDP during periods of weak global growth. However, trade growth is forecasted to accelerate in 2024, slightly outpacing GDP growth.

Information flows and geopolitical impact

Finally, the report highlights a notable stall in the globalisation of information flows, which had previously seen significant growth over the past two decades.

“The globalisation of information flows has increased more than all other aspects of globalisation over the past two decades, but the latest data show this trend stalling. U.S. – China tensions have weighed on international research collaboration, and many countries have imposed restrictions on international data flows.” the report explains.

Photo by Hanson Lu on Unsplash