SSome of the traditional forms of globalization (the free movement of goods, money, people, etc.) are partly on the decline, but globalization is changing as new agendas emerge. These are now leading to actions on climate change control, the taxation of global companies, the fight against terrorism, the sharing of vaccines, etc. Cross-border issues in a more integrated world force countries to regroup, even as elements of traditional globalization lose their strength. The old globalization was essentially good for India. The new globalization could be a mix of good news and bad news.
Global trade, for example, has started to grow more slowly than global GDP. This dramatically reverses a long-term trend. In only one of the past seven years, the volume of merchandise trade has grown faster than the global economy. In 2019, world trade contracted in absolute terms for the first time in a decade, and fell again in 2020 due to the pandemic. Protectionist walls have been erected in several countries, including India.
Consider then the free movement of people. Europe and North America account for more than half of the world’s total migrants, and their numbers have declined, albeit by a small margin. The policies of Brexit and Donald Trump marked the reversal of a 70-year trend towards progressively more liberal immigration regimes. Some countries in West Asia have also started to tighten their visa policies.
India will lose out if these new trends take hold. It is the world’s largest source of migrants, which also makes it the number one recipient of remittances. And global trade liberalization has benefited India immensely over the past three decades. There is still a window of opportunity, as many countries want to reduce their dependence on China, which is the world’s largest industrial and trading power. India could take advantage of the tide, but other countries have snatched the first-mover advantage.
It goes without saying that other elements of globalization continue unabated, such as the cross-border movement of capital – useful for India as it is a net importer of capital. Then there is the impact of new technologies which led to Thomas Friedman’s “Flat World” thesis. An accountant in Bangalore can calculate taxes for someone in Boston, and a radiologist in Calcutta can analyze the results of a medical exam for a patient in London. The IT services revolution in India is not in jeopardy.
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Global rules for a global business
What about phase II of globalization? It only exists now as government agendas; their impact on companies and countries will be known over time. Agenda setting by governments is not good news for India, as it is still primarily a decision maker and not a decision maker. Any benefit or cost to her therefore tends to be a coincidence. One example is the new international corporate tax regime we are working on. It stipulates a minimum tax rate to be paid in the country where the income is generated. India should be happy about this, but the main beneficiaries of the new regime, when it takes effect, will be the rich countries.
The situation with the climate change agenda is more typical. Although India is an enthusiastic implementation of the 2015 Paris Agreement, it will not receive any help (financial or technical) to switch to new technologies and abandon old ones like coal-based power. At the same time, the countries responsible for much of the historic carbon dioxide emissions are granted a pass. Even when it comes to the international vaccine supply, the numbers agreed at the recent meeting of the wealthy club of G7 countries are mundane, while pressure from India for a patent waiver on Covid vaccines awaits. Warning.
It remains the most important element of the new globalization, namely the growth of social media platforms. The giant tech companies that dominate the field have had the field but have increasingly clashed with sovereign power, including in India. This should be an appropriate case for setting global rules for a global business. Given the rise of powerful autocratic states, this will be a difficult challenge. All the more important that it is assumed.
By special arrangement with Business Standard
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