Globalization resilient even as U.S.-China decoupling advances: Report

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DHL and New York University’s Stern School of Business has released the new DHL Global Connectedness Index 2022, an in-depth report on the state of globalization and its prospects.

The report analyze data from 171 countries and territories, revealing how flows of trade, people, capital, and information move around the world.

In the midst of recent shocks caused by the pandemic and the Ukraine war, the international flow has been remarkably resilient, the report showed. After a slight decline in 2020, the composite DHL Global Connectedness Index rose back to above pre-pandemic levels in 2021.  The current data points to a further increase in 2022, despite slower growth in some flows. In mid-2022, International trade in goods was 10 percent above pre-pandemic levels, while international travel remained 37 percent below 2019 levels, but doubled compared to 2021.

“The latest DHL Global Connectedness Index data clearly debunks the perception of globalization going into reverse gear. Globalization is not just a buzzword, it’s a powerful force that has transformed our world for the better. By breaking down barriers, opening up markets and creating opportunities, it has enabled individuals, businesses and entire nations to flourish and thrive like never before. As we continue to embrace globalization, we can build a brighter future that benefits us all, creating a world that is more interconnected, more prosperous and more peaceful than ever before.”

John Pearson, CEO of DHL Express

U.S. and China: Geopolitical rivalry frays connection

U.S. and China are decoupling in many fields, The DHL Global Connectedness Index reveals. Looking at 11 types of trade, capital, information, and people flows (such as merchandise exports, M&A transactions, and scientific research collaboration), the share of U.S. flows with China declined for 8 out of 11 types since 2016. The same period saw the share of China’s flows with the U.S. decreased for 7 out of 10 types with data available for China. The report says several of these were large declines, while highlighting that despite these decline the two nations are still linked by far greater flows than any other two countries that do not share a border. Further, the data shows that, so far, the decoupling between these two countries has not led to a broader fragmentation of global flows between rival blocs of countries.

No evidence of trend towards regionalization – average distance of international flows increased

As per the report, the predictions of a shift from globalization to regionalization have not – at least yet – come to fruition. Over the past two decades, the average distance traversed by trade, capital, information, and people flows has increased, and trade flows even stretched out over longer distances during the Covid-19 pandemic. People flow was the only category that displays a clear recent shift toward regionalization,  due to the dramatic change in travel patterns during the Covid-19 pandemic.

“It remains an open question whether trade patterns will become significantly more regionalized in the future. Many companies and governments are focused on nearshoring to regionalize supply chains, and there are substantial business benefits that can come from regionalization. On the other hand, more than half of all trade already happens within regions, and the benefits of long-distance trade are still important, especially as inflation remains high, economic growth has slowed, and container shipping rates have come back down,” Steven Altman, Senior Research Scholar and Director of the DHL Initiative on Globalization at NYU Stern’s Center for the Future of Management.

Ranking of most globally connected countries:

the Netherlands was at the top in the country ranking of the DHL Global Connectedness Index 2022, once again being the most globally connected country. Bagging the second position was Singapore, which was also first in terms of the size of international relative to domestic flows. The UK has the most globally distributed flows. Among the 55 most globally connected countries, there are representatives from every world region.