Professor Thomas Holt describes four reasons why abandoning globalization due to the COVID-19 pandemic will hurt the United States in his latest piece for Harvard Business Review.
We are still in the midst — perhaps even the early days — of the coronavirus pandemic, but there have been many predictions of how it has permanently changed the world. The virus exposed the vulnerability of our supply chains, interrupting the flow of critical imports into the U.S., and triggering calls for American multinationals to reshore production. Coming on the heels of the trade war and Washington’s push to de-couple economically from China, this has brought widespread predictions of deglobalization. The U.S. Special Trade Representative even wrote a recent op-ed calling for the end of offshoring.Thomas Holt, Harvard Business Review
But American multinational corporations know the future will look different than these mid-crisis pronouncements. They know that deglobalization of supply chains and de-coupling from China will actually reduce their ability to produce in the U.S. and compete with Chinese companies in the long run. They know that a U.S.-led deglobalization of commerce will play right into China’s hands, isolating the U.S. economically and politically. And they know that reshoring is only a small part of putting more resilience into their supply chains. So they will resist well-intended calls by others for actions that would shoot the U.S. economy in the foot.
Ultimately the pandemic and economic cold war with China will lead to changes in the way the global economy works, such as manufacturing key health care supplies closer to home and more embargoes of strategic technology. But the fundamentals of our globalized economy — and China’s role within it — will not change.