Rarely has an anniversary triggered such diverse reactions as that of China’s accession to the World Trade Organization 20 years ago. WTO Director General Okonjo-Iweala spoke of a “decisive event in the history of the multilateral trading system”. China is “a prime example of how the integration of world trade can drive growth and development”.
The economic reality is different: China could slow down digital globalization and thus split the world economy.
For many industrialized countries, and especially for the USA, China’s accession to the WTO was a “shock” anyway, the negative effects of which on trade balances and labor markets they have not yet digested. A look at the new “DHL Global Connectedness Index” also shows that China’s WTO accession in 2001 was the starting signal for the hyperglobalization of the world economy: within the first six years the globalization barometer shot up by more than 20 points.
Since then, the pace of globalization has slowed down, but – interrupted by setbacks such as the financial crisis – it has mostly been steadily improving. However, the pandemic is probably the biggest acid test to date for the international networking of the world economy: borders were closed, geopolitical tensions flared up, global supply chains were cut or diverted, the specter of a “decoupling” between China and the West made the rounds.
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The result of the DHL study is all the more astonishing: “More than one and a half years after the outbreak of the pandemic, the data clearly refute the initial speculations that Covid-19 would mean the end of globalization,” write the New York University researchers commissioned by the logistics group ( NYU). The globalization index fell only very slightly in 2020 and experts see “clear signs of a recovery” for 2021. There can be no question of the end of globalization, which has already been prophesied by many.
The recovery is by no means clear, however. While the trend in international trade in goods and capital traffic is pointing strongly upwards again after a bend, the biggest slump was in passenger traffic. And the Omikron mutant has already dashed hopes of a sustainable trend reversal.
Traffic comes to a standstill
The global flow of information, on the other hand, poses a riddle. After a sharp increase at the beginning of the pandemic, the growth in global data flows on the Internet has declined noticeably again this year. One could actually have expected that the corona virus would accelerate international data traffic like a turbo. Has this already refuted the expectation of many economists that globalization will continue to digitize?
The DHL data shows that global internet platforms are not as global as many believe. Only twelve percent of Facebook friends live in different countries. And only a quarter of Twitter followers follow someone outside of national borders. The picture is similar in the business world: although online trade has grown vigorously during the pandemic, the majority of e-commerce with consumers (B2C) takes place within national borders.
It is therefore quite possible that globalization has its Achilles heel exactly where very few people suspect it: in digitization. Compared to the movement of goods, capital and people, the international data flows are a far greater threat to political power and stability in the recipient countries.
This is especially true for authoritarian states like China and Russia, which seal off their internet from politically undesirable information from abroad. But different regulations also ensure that the World Wide Web has long since become a splinternet in which data traffic is repeatedly slowed down by national firewalls.
Digital Achilles heel of globalization
This does not bode well for the future of globalization. The major economic regions of the world remain dependent on one another, as the strong recovery in international goods and capital traffic shows in particular. However, the further the digitization of the global economy advances, the greater the importance of digital value creation. And this is exactly where the greatest cracks in globalization can be seen.
More: 20 years in the WTO: How China turned from a beacon of hope into a threat