THE NEW SCENARIOS OF GLOBALIZATION:
FROM FAST-TRACK TO RESPONSIBLE AND SUSTAINABLE
Column by Antonio Acunzo
CEO MTW GROUP USA
Published on Harvard Business Review Italia
The past 3 years of the covid pandemic, the disruption in supply chain, the Russian invasion of Ukraine, all have impacted on the globalization as we know it because these factors have strongly contributed to redesigning the map of geopolitical and economic relations at a global level by shifting priorities for international affairs and international trade.
Today globalization is no longer driven only by the economy but a new element showed up: political risk.
"Freedom is more important than free trade", declared Jens Stoltenberg, Secretary General of NATO, and with this principle the new globalization is being reconfigured on the basis of new relations between countries perceived as "friends", safe and secure, and on the basis of new
political, economic and military alliances as a consequence of the complex fracture that today opposes the front of Western countries with the front of the new Russian-Chinese alliance.
Reshoring and Nearshoring: USA+1
A first reaction to the competing rivalry between the 2 main economic powers, USA and China, was that of Reshoring by American companies in China which have progressively limited or suspended expansion and investments in the Middle Kingdom and transferred their production capacity back to the USA, more than offsetting the initial costs with the projection of long-term benefits such as reduced lead time, reduction of customs tariffs, better quality of the product made
in the USA, more effective distribution logistics.
A second reaction was that of Nearshoring, to diversify production as per the former China+1 model, which envisaged not to concentrate investments only in China but to evaluate alternative solutions in markets where, in the face of reduced production costs, one could count also on the local strong domestic consumer market (as in the case of Vietnam and Malaysia), and to consider a similar model called USA+1 where +1 in this case is represented by 3 markets geographically
closer to the United States such as Mexico (Mexico, along with the USA and Canada, is part of
the USMCA free trade agreement, a new version of the previous NAFTA), Puerto Rico (an unincorporated territory of the United States), and the Dominican Republic (particularly important for Florida, because the Dominican Republic is #1 trade partner for Port Everglades, Broward County’s seaport, #3 in trade for Miami International Airport, and #4 for PortMiami).
New Confrontations, New Alliances Globalization therefore remains an essential function of economic growth now being revised according to a new geography and new development methods.
Today’s new global scenario, with the new redesigned pro-Western marketplace, sees an Atlantic alliance led by the USA with the UK and the European Union, strengthened under the NATO military alliance and expanded to include countries considered “friends and “pro-western” and that agreed to inflict economic
sanctions to Russia as a result of the war in Ukraine: Australia, New Zealand, Japan, South Korea,
Singapore and Taiwan.
Russia is no longer a market of interest for Western companies (trade has been reduced if not
eliminated, and according to a survey done by CELI, the Chief Executive Leadership Institute of
Yale School of Management, over 1,000 foreign companies have curtailed activities in Russia.
With air links fully suspended from the US, UK, EU, if you have to travel to Russia from Miami, in lack of the former non-stop flight to Moscow you have to take long detours via Dubai, UAE or Istanbul, Turkey. And last but not least, once the pending constraint of energy dependence that still affects some European Union countries will be gradually removed, Russia will no longer be a prime economic partner for the West.
In view of this scenario, new alliances are being forged between blocks of countries united by common, shared and shareable interests and principles.
US President Biden launched IPEF (Indo-Pacific Economic Framework), in Tokyo on May 23rd, 2022, a strategic partnership between the USA and 13 countries that altogether represent 40% of world’s GDP (7 from the ASEAN marketplace + Australia, New Zealand, India, Japan, South Korea and Fiji).
The first purpose is the diversification of supply sources, reducing dependence from China, and making use of the resources of the 7 ASEAN countries (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam), the new manufacturing hub developed after reshoring from mainland China and repositioning the supply chain.
This will also allow to restore efficient manufacturing and logistics according to JIT strategy (Just In Time), dramatically penalized by the disruption of the supply chain in the last 3 years and that will lead to the new BDT model (Best Delivery Time).
Above all, the IPEF agreement aims at redefining the rules of the new global economy of the 21st century, rules based on 4 fundamental themes for the advancement of standards related to jobs
and environmental sustainability:
• fair and resilient trade and the proper conduct of trade between member countries
• resilience in the supply chain (the functionality of which implies aspects of national
security for countries that need to overcome supply dependencies)
• digital connectivity, infrastructure, renewable energy and decarbonization
• taxation and anti-corruption
Unlike the TPP (Trans Pacific Partnership) that never took off, although strongly promoted by President Obama and then cancelled in 2017 by the Trump presidency, and which evolved autonomously, and without the USA, in 2018 into the CPTPP free trade agreement (Comprehensive and Progressive Agreement for Trans Pacific Partership) between 11 countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and
Vietnam), IPEF does not currently envisage a reduction or liberalization of customs tariffs nor it's intended to become a free trade agreement.
But the differential and qualitative element of this agreement lays the foundations for mainly regulating the security interests of the USA and its allies, and it is precisely on this basis that it distinguishes itself from RCEP (Regional Comprehensive Economic Partnership), the free trade initiative promoted by China, centralized on the 10 ASEAN countries and extended to Japan,
South Korea, Australia and New Zealand, which indeed is just based on free trade only, completely excluding the 4 IPEF themes, and that basically acts as the catchment area for Chinese economic expansionism
New Developments
After IPEF, President Biden launched I2U2, in Jerusalem on July 14th, 2022, the new cooperation of investments and initiatives between India, Israel, UAE and the USA with the aim for the 4 participating countries to collaborate on issues such as investments and initiatives in the field of energy, safety on the supply of food resources, transport, space, health and water conservation.
And with a possible future expansion, I2U2 Plus, to Egypt and Saudi Arabia for the purpose of a balance of power for the maintenance of peace and security in the Middle East and, not secondary, to re-energize and revitalize American alliances mainly with India in obvious and clear purpose of countering the Chinese influence in a country, India, that represents a primary
consumer market and which is in open rivalry with China.
IPEF and I2U2 respond to the needs of the new globalization because they finally include rules
of conduct, a sense of responsibility, the need to reduce misuse and contain waste, the optimization of energy resources, the stimulus for change towards renewable energies, and the application of a long-term perspective policy in managing trade and business relations between allied and partner countries.
The Free Trade agreements remain in place but are no longer a priority precisely because of this new need for a sense of responsibility and business sustainability.
We can call this new phase as Responsible Globalization or Sustainable Globalization, or as defined by the Austrian economist Karl Aiginger: "the end of fast-track globalization".
The West must confront the unpredictability of Russia with its ambition of rebuilding the old Soviet Union
and the expansionist aims of China-led economic colonialism that hesitates between the ambitions of the Made in China 2025 plan and the real slowdown of its economic growth.
Indeed China has progressively moved from being a trade partner to competitor and systemic rival.
Hence the sense of urgency for Western economies to redesign the global map of alliances and to weave a structured dialogue mainly with those "friendly" countries, where the Atlantic alliance between the USA, UK and EU is strengthened, where the US focus is oriented towards the Indo-Pacific area, where the ASEAN markets keep growing and developing, where the Emirates and Saudi Arabia design new models of sustainable smart urbanization, and where India plays a
strategic and crucial role in balancing the weight of China (even if it has not yet fully understood
how to do it effectively).
Now trade can become a driving factor for change where Western countries can achieve political shifts in authoritarian countries by modifying trade relations and trade balance in order to reduce dependence from, for instance, an economic superpower like China.
Florida in the World
Well, to start with, should Florida be an independent country it would be the 15th largest global economy, with a GDP in line with that of Indonesia’s or Spain’s, and a legit member of the Trillion Dollar Economies of the World (countries with a GDP greater than $1 trillion).
Then, besides Florida’s natural vocation of doing business with Latin America and Caribbean markets facilitated by the geographic proximity to these markets that gives Miami unparalleled access to this marketplace and makes Miami the ideal springboard for managing business in the region, Florida Governor Ron DeSantis, and Florida Secretary of Commerce Laura DiBella at the end of April 2023 visited 4 major international markets for the Sunshine State (and these countries are also 4 key US allies: Japan, South Korea, Israel, and the UK) leading a trade mission with the
purpose of expanding Florida’s economic partnerships (in particular, UK is the major investor for FDI in Florida, and ranks #1 for FDI employment in Florida).
Florida is reinforcing its position as a leading economy (the 4th largest in the US after California, Texas, New York), capable of attracting foreign investors boosting the state’s economy thanks to
its global connectivity, highly educated, technically skilled, culturally and linguistically diverse talent pool, and favorable business climate, all business advantages that make Miami not only a global hub but the preferred gateway for US market-entry.
