DHL: the pandemic has not caused globalization to collapse
Now in its 10th year, this report provides a fresh view on the impact of the pandemic on globalization by analyzing international flows of trade, capital, information, and people. While there are different trends across types of flows, the overall DHL Global Connectedness Index just declined very modestly in 2020 and is on track to rise in 2021. Nonetheless, the Covid-19 ‘stress test’ also revealed longstanding vulnerabilities that demand attention moving forward.
“Many feared that the global crisis would jeopardize the progress of globalization. We have been analyzing the various international flows worldwide for years and after 1.5 years of the pandemic, we can now safely assure: the pandemic has not caused globalization to collapse. After initial dips in 2020, the DHL Global Connectedness Index is already on the rise again this year,” says John Pearson, CEO DHL Express. “Trade has provided a lifeline for countries around the world, and DHL Express has played a key role in areas ranging from vaccine distribution to e-commerce.”
International flows of trade, capital, information, and people were affected in different ways by the pandemic
After steeply plummeting early in the pandemic, trade in goods rebounded to above its pre-pandemic level before the end of 2020. Global trade in goods has set new records in 2021. Foreign direct investment flows shrunk even more than trade in 2020, but they are on track for a full recovery in 2021. International data flows surged in 2020 as in-person interactions went online, but this did not break a longer-term slowdown in the globalization of information flows. Finally, international flows of people were hit the hardest by the pandemic, and they are recovering slowly. International travel fell 73% in 2020, but there are glimmers of a recovery starting in mid-2021.
“The resilience of global flows is good news, because a connected world offers the best prospects for a strong and sustainable recovery from the Covid-19 pandemic. When a crisis strikes, many of us naturally feel a strong impulse to hunker down behind borders. But the more extreme the challenge, the more urgent it becomes to draw upon the best ideas and resources from at home and abroad,” says Steven A. Altman, Senior Research Scholar and Director of the DHL Initiative on Globalization, NYU Stern.
The surge of international trade since mid-2020 far surpassed initial forecasts, even as the mix of goods traded changed more than usual. Trade in goods used to fight the pandemic soared while trade in many other products declined. Meanwhile, contrary to expectations that the pandemic would cause a shift to more regionalized trade, trade in goods took place over longer distances, on average, in 2020. Data on capital, information, and people flows also show no clear evidence of a shift underway from globalization to regionalization.
The world’s poorest countries, meanwhile, are still lagging behind in the globalization recovery. Even as global trade was setting new records in early 2021, the countries with the lowest per-capita incomes were still trading less than they did in 2019. Likewise, foreign direct investment into low-income countries fell over the same period, while it grew strongly in middle- and high-income countries. The world’s poorest countries are still dangerously disconnected, and stronger links to the wider world could help accelerate their recoveries from the Covid-19 pandemic.
Special report shows lessons learned from 10 years of DHL Global Connectedness Index analyses
In a special report on the 10th anniversary of the DHL Global Connectedness Index, DHL and the NYU Stern School of Business highlight strong links between global connectedness and prosperity. This report shows how policymakers can actively impact the connectedness of their countries. Five key areas for improving a country’s connectedness are peace and security, an attractive domestic business environment, openness to international flows, regional integration, and societal support. Remarkably, an attractive domestic business environment may boost a country’s global connectedness even more than traditional pro-globalization policies.
The report also examines five countries (Mexico, The Netherlands, Sierra Leone, The United Arab Emirates, Viet Nam) that have stood out for their strong or rising connectedness over the past two decades. The various paths these countries took to greater connectedness show that there is no one-size-fits-all prescription – instead, each country can pursue the international opportunities that make the most sense in its own local context.
Large untapped opportunities
Both reports highlight how, despite setbacks, the world remains close to a record high level of globalization. At the same time, they also show that globalization is still limited, with large untapped opportunities available for countries and companies. Most business activity still takes place inside national borders, and the flows that do cross national borders mainly take place between neighboring countries. Prevailing trends still point to a future with large opportunities to gain from stronger links to the wider world.