LOGISTICS MONITOR
Who would have thought that the President of the United States, Joe Biden, would canvas for Made in America in his maiden State of Union address (1)? He did precisely that. His call for Made In America is synonymous with self-reliance. Or less dependency on the outside world. In a way, he was echoing his predecessor Donald Trump who also called for revitalizing the Rust Belt to generate jobs for Americans in America.
Indian Prime Minister Narendra Modi has his version of self-reliance: atma nirbhar, the Hindi equivalent. (2) Mohandas Karamchand Gandhi, the Father of Nation (for India), harped a great deal on self-reliance in his advocacy before falling prey to a bullet less than a year after India attained freedom from the British colonial clutches. Gandhi had gone to the extent of making every Indian village self-sufficient in as many aspects as possible. His followers, who began ruling the country in 1947, turned a deaf ear to his advocacy to make India truly “mahaan”. Maybe the rulers felt the idea was unimplementable. Even today, it is not an easy goal to achieve. Talk, anyone can.
It took the Chinese pandemic COVID-19 to convince the world leaders to turn the spotlight on self-reliance. The global shutdown in 2020 led to a scarcity of everything under the sun. China, which had emerged as the world’s manufacturing hub over the decades, rolled out under the wise and late Chinese premier Deng Xiaoping, convinced even matured economies such as the United States, the United Kingdom, and Europe to depend on Chinese supply right from cheap toys to expensive iPhones. Indians, for instance, began importing the clay idol of elephant-faced Hindu god Ganpati for annual celebrations, despite the abundant supply of domestic clay! Why? Cheap imports vis-a-vis local manufacture!
Supply chain disruption became the buzzword due to port congestion and global container scarcity, and the resultant inability to clear cargo at ports and move them to warehouses and then onto supermarket shelves. There was never a shortage of money in the hands of the public. But with the service sector shutting down due to the pandemic, there was a huge demand for goods which affected the supply side.
If the disruption were for a few days or a week, it would not have attracted huge attention. But when the regular 50-day shipment from the Chinese ports to the western coast of the US has begun to consume double the time, it led to a supply crunch.
With the matured economies, reliance on China increased year on year; this automatically led to existing manufacturing units shutting down and the inevitable job loss. Undoubtedly, job creation was in full swing offshore: China, Thailand, Vietnam, etc. Cheap labour is a key driver for such offshore manufacturing. So long as everything was going smoothly under the garb of globalization, there was peace and prosperity across the globe. Win-Win for all.
The scenario changed dramatically with the onset of COVID-19. Pandemic hit not only the supply of basic consumer items, even electronic items such as critical chips for various industries to come from China, Taiwan, and South Korea, hit global production of everything.
First the COVID-19 and then its variant Omicron. By the time the world was recovering and began to breathe a little better with supply chain disruption being managed tactfully, a new crisis hit in the form of the Russian invasion of Ukraine in Eastern Europe at the end of February 2022. If it was out-of- the-blue supply chain disruption in the case of COVID-19, this time it was the US-led NATO economic sanctions on account of Russian military adventure. Fresh scarcity of various items: oil, edible oil, defense equipment, grain, etc. Once again, the pain is based on a country’s dependence on Russia.
Despite the Cold War and the post-Cold War ambiance, Russia was not a pariah in the international trade arena. Nations, including its arch-rival, viz., the US, did business. Like the US-China trade relationship, despite the antipathy and distrust between the two global giants. Germany’s dependence on Russia for oil and gas needs no elaboration. (3) Germany and other west European nations, to wean away from Russia on the energy front, would need policy recalibration, to begin with, followed by an action plan and execution. Such a mammoth exercise to reduce dependence on Russia or even China is undoubtedly a long-term plan. Another Marshall Plan of the post-World War II era? Maybe.
Take India, for instance. Its dependence on Russian support to maintain its defense preparedness. India’s long association or dependence on Russia dates back to the 1960s and 1970s war with Pakistan when the erstwhile Union of Soviet Socialist Republic (USSR) stood rocklike. At the same time, the Nixon administration sent the Seventh Fleet to throw its weight behind the opposite camp.
Shashi Tharoor, former diplomat-turned-politician, touches upon India’s vulnerability to vote against Russia at the UN recently. Writes he: “… Soviet vetoes at the UN frequently shielded India on Kashmir, and the Kremlin’s protection was indispensable during the 1971 Bangladesh War of Independence when the US and China supported Pakistan.”(4)
Remember the special Rupee-Rouble trade pact between the two nations in the past? That’s why, even in the current situation, India – a key member of the Quad comprising the US, Japan, and Australia formed to mount a collective Indo-Pacific security alliance to stall the Chinese territorial ambitions in the Far East – is taking the diplomatic route of abstaining from the United Nations Security Council and UN General Assembly deliberations on censuring Russia. It’s pure self-interest. Nothing wrong.
Nation after nation began spouting self-reliance loudly of late, post-COVID. Does it signal the end of globalization? Put it differently, is it the road to deglobalization? The short and simple answer is: No. Globalization cannot be unhooked overnight. Not even over a decade.
What’s deglobalization? In simple terms, according to the global think tank Chathamhouse: “Deglobalization is a movement towards a less connected world, characterized by powerful nation-states, local solutions, and border controls rather than global institutions, treaties, and free movement.”
History is replete with trade and merchandise between people living in different parts of the world. Remember the original Silk Road? The trade happened due to not every nation is endowed with everything. You trade what you possess to acquire what you do not. Call it barter or cash transaction.
Simply put, it signifies interdependence. Christopher Columbus, Marco Polo, Vasco Da Gama did not venture out on the seas or land for entertainment. To gain financial support for their voyage, they promised their patrons something in return. After crossing the Atlantic, the Spanish, Portuguese, French, Dutch, and English, the American invasion got them precious silver, gold, and various metals to take back home and then buy the Chinese silk, Indian spices, and whatnot. If this was not an interdependence or connected world, what else?
Alexander Stubb, former prime minister and finance and foreign minister of Finland (2008-16) disagrees that we are entering the era of deglobalization. Says he: “I don’t think so. Value chains will not disappear any time soon. The biggest drivers for change will still be technology, economy and climate. Can’t cut yourself off. An isolated power has no power.” Spot on.
Made In America or atma nirbhar is the perfect recipe to escape unpredictable occasional economic hiccups due to dependence on other nations. These cannot be resolved overnight but need a long-term strategy. The import of edible sunflower oil from Ukraine/Russia or palm oil from Malaysia. Domestic production of edible oil falls short of its needs.
Despite the focused Oilseeds Mission of several decades, India has still not been able to bridge the demand-supply gap. Private investment flows in where the return on capital is good. Just not adequate, which demands the right policy prescription. Be it the edible oil or defense requirement, and it is a long race. When India has sufficient production to meet its domestic requirement has no definite answers.
In the first quarter-century after the Independence, India was short in food supply and forced to run around with the proverbial begging bowl. The success of the 1960s Green Revolution changed the scenario dramatically, with India today boasting massive wheat and rice stock and exporting them. No country can shut its doors and stop trading. Remember, trading is a two-way lane. You sell something and buy something. No country has attempted or succeeded in exporting only and banning total imports. Such a scenario is unlikely.
So long as borders cannot be closed down between nations and as long as nations cannot produce 100% of their needs, deglobalization cannot crystallize. Perhaps, a systematic and focused approach can bring down the dependence level several notches down. But never zero level independence.
In the wake of the coronavirus, the comity of nations has understood the illogicality of putting all their eggs into one basket. So, they are talking and trying to roll out China Plus One strategy or Reshoring or Nearshoring to escape supply chain disruptions witnessed of late. By the way, supply chain disruption cannot be written off totally because these are unpredictable.
Globalization won’t vanish. More nations will be working out creating domestic capacity to make essential items to forestall the Covid-like global lockdown and the painful fallout.
It is pertinent to draw attention to what Venkatesh Varma, former Indian Ambassador to Russia, says on the current Russian invasion: “Russia’s three-decade-long engagement with globalization is crashing. Its external links severed … Russia is being isolated and disconnected in the financial, trade, transport, and technology fields. … Global interdependence is a national vulnerability in equal measure. This is the small print of globalization, deadly and ruthless.” (5) Yes, deadly and ruthless. But the world has learned to live with it. No options.
Also read by the same author: The plight of Ukranian refugees: What to carry and how much, under such trying circumstances? – THE NEWS PORTER
Ref:
1) https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/03/01/remarks-of-president-joe-biden-state-of-the-union-address-as-delivered/
2) https://aatmanirbharbharat.mygov.in/
3) https://apnews.com/article/russia-ukraine-putin-business-european-union-germany-60cd9af0e990d0e95547d2c7052f898f
4) https://www.project-syndicate.org/commentary/russia-ukraine-war-boosts-india-strategic-vulnerability-by-shashi-tharoor-2022-03
5) Sharp focus on Eurasia and Globalization, The Economic Times, March 7, 2022
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