“Deglobalization” has entered the narrative zeitgeist. But what’s happening on the ground? This weekly series seeks to answer that question with a round-up of deglobalization developments from the week that’s done.
1. Chris Hughes writes in Bloomberg Opinion that deglobalization is positioned to “determine M&A priorities” in 2023: “Boards in the US and Europe have two strategic concerns in a turbulent world – diversifying supply chains, and allocating capital away from riskier markets and toward what they will see as the relative political and economic safe haven of the US. And whether they make cars or smartphones, companies are reassessing their reliance on China.”
1.5. He’s not alone: JP Morgan strategists say that “globalization’s demise” will be a major theme for 2023.
2. Industry bolsters the argument: Apple is planning to start making its own custom displays for mobile devices as early as 2024, an effort to reduce reliance on technology partners like Samsung and LG. These changes are part of a sweeping effort to bolster Apple supply chains with homegrown parts – and therefore to claim more control over the design and capabilities of products.
3. Plus: An expansion of Tesla’s plant in Shanghai has been delayed, over what Beijing is calling data concerns: The Chinese government says it worries about a US company tied to Elon Musk’s Starlink initiative having such a large presence in the country.
4. Need an intellectual framework for all of this? In an HEC Paris piece, Guillaume Vuillemy – author of The Time of Deglobalization – argues that emergent costs of free trade, brought about by deterritorialization, “can be used to justify new forms of protectionism, and a reasoned deglobalization.” The goal: “To make sure that trade is conducted in a way that is once again conditional on common values.”
5. And in government action, China has halted issuing several types of visas to South Korean and Japanese citizens in response to their COVID-19 restrictions on travelers from China. These were the first retaliatory moves taken by China after the US, Japan, and other countries sought to limit the number of Chinese travelers – while an additional set, South Korea included, imposed testing requirements.
6. President Biden is planning an executive order imposing new controls on US companies and investors looking to develop and support Chinese projects – namely in quantum computing, artificial intelligence, and semiconductors.
7. In Korea, the administration of President Yoon Suk-yeol has pledged to enhance support for the reshoring of Korean businesses – especially in order to secure supply chains that have been increasingly disrupted due to the pandemic and escalating geopolitical tensions. For Korean companies reshoring from overseas, the government offers a 100 percent tax exemption for the first five years from the point of return, then a 50 percent tax exemption for the following two years.
8. And, finally, Navy Secretary Carlos Del Toro says that US weapons manufacturers must ramp up production in the coming months – or the US might find it “challenging” to equip itself with weapons systems and help Ukraine defend itself against Russia. “If the conflict does go on for another six months, for another year, it certainly continues to stress the supply chain in ways that are challenging.”
(Photo by Pexabay/Pexels)
