Integration of the world's economies is irresistible, but needs better governance
Globalization is an inevitable trend of history
By Wen Qing  ·  2021-08-09  ·   Source: NO.32 AUGUST 12, 2021

The booth of FAW-Volkswagen Automotive Co. Ltd., a Sino-German joint venture, at the 18th China (Changchun) International Automobile Expo in Changchun, Jilin Province, in July (XINHUA)

'Assuming that major players in the global semiconductor industry all have established a fully self-sufficient local supply chain, it will push up the overall prices of their products by 35 to 65 percent. And that will ultimately lead to higher sales prices to consumers, thus hurting the overall economic development," Zhao Bin, Senior Vice President of Qualcomm, said at the Seventh China and Globalization Forum in Beijing on July 30. "Therefore, this industry is in high need of global cooperation."

This is just one specific case showcasing the vital importance of globalization, a hot topic for discussion during the event, which was hosted by the Center for China and Globalization (CCG), a leading non-governmental think tank in China.

Regarding the process of globalization, people may have different opinions about what time it really began. There are those who believe that the concept in fact dates back to the Silk Road which connected the West and the East as trading routes some 1,500 years ago, while others hold that it was the Industrial Revolution (1760-1840) that truly initiated globalization.

One thing all can agree on today is that we live at a time when globalization faces one of its most daunting challenges in modern history, with resisting forces mainly hailing from the U.S.

Why has the U.S., once upon a time the most loyal supporter of free trade, now seemingly turned against globalization? Can it really reverse this trend? How should countries promote the concept to better benefit their people?

On the rocks

"Traditional globalization has reached a new crossroads. The reason behind the current difficulties lies in the reality that its governance is lagging behind," Chen Deming, honorary Chair of the CCG and former Minister of Commerce of China, said.

During the over 70 years since the end of World War II, humanity has accumulated a large amount of wealth thanks to globalization. However, its distribution is unfair. Some countries, regions and groups gained more at the expense of others. "The delay in global governance reform has led to the rise of populism and nationalist thinking in some countries, which has brought about further complications to globalization," Chen further detailed.

Chen rejected the arguments of some politicians in developed countries that China has benefited more from globalization. "As a matter of fact, the U.S. has benefited no less than China; on the contrary, even more so," he said.

In a multi-study review released in January 2020, experts concluded that advances in globalization from 1947 had added $800 billion-$1.5 trillion, or 11 to 14 percent, to the U.S. GDP of $11 trillion back in 2003. Interpreting these estimates for the 2018 U.S. GDP suggests those changes in economic interdependence since 1947 added $2.2-$4 trillion, or 11 to 19 percent, to the $20.5-trillion volume.

On the other hand, it is true that the U.S. middle class did not benefit proportionally. According to the review, in 1970, a high-income household earned 3.8 times as much as the median household, but this ratio had grown to 6.6 by 2018. This disappointing outcome then led many to oppose globalization.

The stagnation "reflected a deep-structural problem of the country, which has moved the U.S. from a thriving democracy to a plutocracy," Kishore Mahbubani, a retired Singaporean diplomat, told Beijing Review.

Echoing Chen's words, he said the U.S. domestic wealth distribution mechanism should take the blame, rather than globalization.

Irreversible trend

Globalization is an inevitable trend of history, experts said at the forum, calling for collaborative efforts to advance global interconnectivity.

The creation of a set of general rules should receive undivided attention, according to Zhao.

"Taking the mobile communication and integrated circuit industries as examples. There must be a unified global standard to achieve the interconnection and interoperability of global mobile communications. Consequently, all telecommunications operators, equipment manufacturers, and research and development institutions need to collaborate to promote the development of 5G by enhancing its standard formulation," Zhao said.

Moreover, to better integrate developing countries and emerging economies into globalization, more targeted efforts should aim to enhance their infrastructure capacity.

China proposed the Belt and Road Initiative in 2013. The U.S., Japan and Australia have proposed the Blue Dot Network. And the Group of Seven recently adopted the Build Back Better World plan. All these focus on the construction of better infrastructure.

"There is still a huge gap in the global infrastructure," Chen Jian, former Vice Minister of Commerce of China, said. "I think such plans could all be coordinated and synergized."

According to Chen Deming, by boosting infrastructure in developing countries, not only can their economies develop, the world market, too, can expand itself. This is a win-win situation. However, ideologies and social system issues must not be involved in the process. Developed and developing countries can jointly formulate investment standards and implementation rules to carry out infrastructure construction, and they must reach an agreement on a multilateral basis.

China's role

China has a lot of important roles to play in pushing forward globalization, Martin Raiser, the World Bank Country Director for China, Mongolia and the Republic of Korea, said.

The growth of China's domestic market would act as a vital driving force spurring on the growth of other countries, as the world economy strives to recover from the hits of the COVID-19 pandemic, Raiser added.

In the first half of 2021, China's GDP exceeded 53 trillion yuan ($8.18 trillion), an increase of 12.7 percent year on year.

China will continue to deepen reform and expand opening up to welcome more foreign investors, Chen Deming said. Those that have reaped the benefits of operating in China and desire to continue their business in the country can expect to receive more support in broader areas, according to him.

"For China, preferential policies for foreign investment, such as those regarding land use and taxation, already have little room for upgrading. Therefore, improvements in intellectual property protection, policy predictability and caliber of labor force have become far more important," he concluded.

(Print Edition Title: A New Crossroads)

Copyedited by Elsbeth van Paridon

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