As global trade evolves in these current times and the impact of COVID-19 on the world economy becomes evident, these are just some of the numerous questions companies face on a global level.
John Pearson, CEO of DHL Express, provided answers to these questions and how DHL, as a leading global provider of express services, perceives the impact of this crisis.
– Today, there is much speculation about the retreat of globalization, the formation of rival economic blocs, shorter supply chains, reshoring of production, and the expansion of key domestic industries. In the midst of the pandemic, it is certainly not surprising that pessimists and critics of globalization find some justification; anyone who was previously skeptical of global connectivity has now found new reasons. Nevertheless, it is understandable that many people today are concerned about the future of the global economy – Pearson states.
He adds that we are in a serious crisis. The sharp decline of the world economy as a result of the COVID-19 pandemic appears worse than the global financial crisis of 2008. According to the WTO, global trade flows could fall by up to a third this year.
Predictions for capital flows are similar: a decline in foreign direct investment of as much as 30-40% in 2020/21. Cross-border travel is also plummeting. The number of travelers going abroad is expected to decrease by up to 1.5 billion this year. These and various other effects of the crisis are putting many people, companies, and sectors of the economy to a serious test.
Despite the gloomy forecasts for 2020, I do not believe we will see a permanent, massive decline in global connectivity after the crisis. I think globalization will hold up again. Even the pessimistic scenarios for trade and capital flows are not collapsing. Instead, the projected decline indicates a return to levels that were largely considered a sign of hyper-globalization in the 2000s. At the same time, the pandemic has clearly shown in many places how important globalization is for our economic and social “immune system,” Pearson notes.
During this crisis, many globally active companies have found themselves in a much better position than companies with a national or regional focus, which makes sense, as companies operating in just one country are entirely dependent on the local situation. Companies operating in many countries, on the other hand, are stronger and more flexible. For example, at the beginning of the crisis, global companies in China felt the difficulties of the initial shutdowns. However, this initial disadvantage turned into an advantage, as the recovery in China has now provided a boost to companies operating there. Of course, each industry is different, but international companies are currently showing greater resilience.
– I believe that calls for as much domestic production as possible, as well as the return of economic sectors to state ownership, are misdirected. National supply chains are not necessarily more resilient. If anything, in the future, supply chains will need to diversify more, which means more globalization, not less. It certainly makes sense to take precautions and create strategic reserves of critical goods for emergencies. But let’s not forget that the global division of labor remains vital for progress. It would not make sense – and would prove unsustainable in the long run – if every country, for example, produced all its medical products – he says.
