With free trade agreements and the end of the Cold War, the 1990s kicked off an era of international business expansion. The past few years, however, have seen many countries — and companies — shifting away from a global focus. Elisabeth Braw, a senior fellow at the Atlantic Council and author of the new book Goodbye Globalization: The Return of a Divided World, spoke with b. about the reasons for this reversal and how it's playing out.
b.: Which industries are most affected by this retreat from globalization, both positively and negatively?
Manufacturing will see the biggest change, which is why it's also the focus of my book. Reducing dependence on China by setting up manufacturing facilities in other countries will be an extraordinary logistical challenge, and a costly one at first. But in the long run, having made this move will stand manufacturers in good stead, as has been the case with the apparel manufacturers that began reducing their presence in China years ago.
b.: Is the change coming more rapidly than anticipated due to political and military conflicts?
It's coming more rapidly for a whole range of reasons, and that's the tricky part for businesses. … It's the war in Ukraine, and it's [due to] unhappiness with globalization among Western citizens. … Houthi rebels in Yemen have launched a sustained campaign of attacks on ships in the Red Sea that has … caused delays in deliveries. … COVID, of course, also made painfully clear that in a crisis, countries can't assume they'll get their regular supplies from other countries.
b.: How do you think international companies should respond?
By adding second sources to their supply chains — and telling their customers, prospective customers, shareholders, and prospective shareholders about it. Supply chain resilience is more expensive than "just in time," but companies that are serious about it can use it as a selling point. … And the new arrangements they create will serve them well for years to come.
b.: You note that the "new version" of the global economy must address citizens' job losses, the need for an even playing field, and climate change. How can businesses best accomplish this?
By realizing that business is no longer neutral, and by being open and transparent with customers, prospective customers, shareholders, and prospective shareholders about their plans. Businesses can't pretend that the changes we're experiencing are just a small blip. These changes are an inflection point that require a radically different strategy …
This interview has been edited for length. Read the full Q&A at business.com.
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