Pandemic may tighten ‘peak’ trade and FDI constraints

Significance

Protectionism has risen in the last decade while globalisation, having accelerated after the Second World War and especially the 1980s, has stuttered. The pandemic is exacerbating profound fault lines in the functioning of the global economy, reviving fears of ‘peak trade’.

Impacts

• Reshoring, and weaker trade and FDI, may narrow the chances for developing nations in industrial GVCs, especially at higher-value stages.
• Digitalisation may give developing states more opportunities in services GVCs; political stability, education and digital access are key.
• Large firms will increasingly dominate global exports; while these firms will innovate, new entrepreneurs may struggle to gain market share.