Photo: Hiroshi Miyazaki / Flickr / CC BY 2.0

Globalization more resilient during Covid-19 pandemic than thought, DHL study finds

The DHL Global Connectedness Index 2021 Update shows that globalization has been much more resilient through the Covid-19 crisis than many predicted. World trade in goods has soared to well above pre-pandemic levels, and most other international flows are also rebounding strongly.

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After steeply plummeting early in the pandemic, trade in goods rebounded to above its pre-pandemic level before the end of 2020, reads the 2021 update of DHL Global Connectedness Index released by DHL and the NYU Stern School of Business.

Key points in the report are as follows:

  • Global trade in goods has set new records in 2021.
  • Foreign direct investment flows shrunk even more than trade in 2020, but they are on track for a full recovery in 2021.
  • International data flows surged in 2020 as in-person interactions went online, but this did not break a longer-term slowdown in the globalization of information flows.
  • International flows of people were hit the hardest by the pandemic, and they are recovering slowly. International travel fell 73% in 2020, but there are glimmers of a recovery starting in mid-2021.

“The resilience of global flows is good news, because a connected world offers the best prospects for a strong and sustainable recovery from the Covid-19 pandemic. When a crisis strikes, many of us naturally feel a strong impulse to hunker down behind borders,” says Steven A. Altman, Senior Research Scholar and Director of the DHL Initiative on Globalization, NYU Stern. “But the more extreme the challenge, the more urgent it becomes to draw upon the best ideas and resources from at home and abroad.”

The surge in international trade since mid-2020 far surpassed initial forecasts, even as the mix of goods traded changed more than usual.

Trade in goods used to fight the pandemic soared, while trade in many other products declined. Meanwhile, contrary to expectations that the pandemic would cause a shift to more regionalized trade, trade in goods took place over longer distances, on average, in 2020.

Data on capital, information, and people flows, also show no clear evidence of a shift from globalization to regionalization.

The world’s poorest countries, meanwhile, are still lagging behind in the globalization recovery. Even as global trade was setting new records in early 2021, the countries with the lowest per-capita incomes were still trading less than they did in 2019.

Likewise, foreign direct investment into low-income countries fell over the same period, while it grew strongly in both middle and high-income countries. The world’s poorest countries are still dangerously disconnected, and stronger links to the wider world could help accelerate their recoveries from the Covid-19 pandemic.

“The pandemic has not caused globalization to collapse. After initial dips in 2020, the DHL Global Connectedness Index is already on the rise again this year,” commented John Pearson, CEO of DHL Express.

Special report shows lessons learned from 10 years of analyses

In a special report on the 10th anniversary of the DHL Global Connectedness Index, DHL and the NYU Stern School of Business highlight strong links between global connectedness and prosperity. This report shows how policymakers can actively impact the connectedness of their countries.

Five key areas for improving a country’s connectedness are peace and security, an attractive domestic business environment, openness to international flows, regional integration, and societal support. Remarkably, an attractive domestic business environment may boost a country’s global connectedness even more than traditional pro-globalization policies.

The report also examines five countries (Mexico, The Netherlands, Sierra Leone, The United Arab Emirates, Vietnam) that have stood out for their strong or rising connectedness over the past two decades. The various paths these countries took to greater connectedness show that there is no one-size-fits-all prescription – instead, each country can pursue the international opportunities that make the most sense in its own local context.

Large untapped opportunities

Both reports highlight how, despite setbacks, the world remains close to a record high level of globalization. At the same time, they also show that globalization is still limited, with large untapped opportunities available for countries and companies.

Most business activity still takes place inside national borders, and the flows that do cross-national borders mainly take place between neighbouring countries.

Prevailing trends still point to a future with large opportunities to gain from stronger links to the wider world.

Photo: Hiroshi Miyazaki / Flickr / CC BY 2.0