Digital trade: A new era in globalization

One purported casualty of the coronavirus disease 2019 (Covid-19) pandemic is globalization. Headlines abound about it: “The Post-Coronavirus World May Be The End Of Globalization,” “Globalization is Dead,” “Coronavirus Could Mean the End of Globalization.”

For instance, the World Trade Organization WTO) warned that global trade could fall by up to a third due to the recession caused by the pandemic. In addition, the imposition of physical distancing on aircraft will mean the end of cheap travel, according to Alexandre de Juniac, director general and chief executive officer of the International Air Transport Association (IATA).

Indeed, globalization as we know it — i.e. the “physical” spread of products, technology, information and jobs across national borders and cultures through an interconnected supply chain networks — is experiencing a precipitous decline. What the pandemic has brought to the fore is the acceleration of the plateauing, if not the decline of globalization, as evidenced by the peaking of world exports as a percentage of gross domestic product from 2009 up to the present, according to the WTO.

While “physical” globalization has been stalled by the pandemic, global trade is being rewritten as we speak. Look at these recent facts and figures:

– Video-conferencing and online-meeting platform Zoom says its user base grew to 300 million in the last three weeks, a 50-percent jump from 200 million at the beginning of the month.

– Netflix added 15.8 million new subscribers worldwide during the first three months of 2020, more than doubling its growth forecast for the quarter. It was the largest one-quarter growth spurt in the company’s history.

– Data from SimilarWeb show desktop and mobile visits to the e-commerce sites of Amazon, Walmart, Costco and Target soared by between 28 and 76 percent in the first half of March versus a year ago.

– Cloud-computing providers, such as AWS, Google and Microsoft, reportedly sustained a 50-percent increase in utilization during the past month, as they become the essential link for many people to remain connected with work and families.

All these point to the acceleration of digital trade, i.e. the growth of “digitally-enabled transactions of trade in goods and services that can either be digitally or physically delivered, and that involve consumers, firms and governments,” as defined by the Organization for Economic Cooperation and Development (OECD). At the heart of the growth in digital trade are digitally delivered services, such as cloud computing services, video and music streaming, collaboration tools and other digital content.

The growth spurt in these digital services will be sustained in the long term, driven by changes in the behaviors of consumers and businesses. Working from home, touted as one of the most successful social experiments, will persist to drive the consumption of internet bandwidth, and digital content and tools.

As companies streamline their operations due to the looming global recession, freelancing will experience a major growth spurt, as reported by Forbes. Upwork, the freelance marketplace, already saw a 20-percent topline growth last quarter, which will further boost the consumption of digital tools and services.

But as OECD puts it, “while all forms of digital trade are enabled by digital technologies, not all digital trade is digitally delivered. For instance, digital trade also involves digitally enabled but physically delivered trade in goods and services such as the purchase of a book through an online marketplace, or booking a stay in an apartment through a matching application.”

As countries boost their local production, instead of importing goods, the automation and digitization of production lines will require digital tools and services. Supply chains will also automate and digitize to lessen person-to-person contact.

Even central banks are now more interested in digital currency. Covid-19 concerns could accelerate its adoption, according to a new Economist Intelligence Unit survey. What’s interesting is how China and Sweden were already looking at digital currency as potential pillars of their monetary systems.

Digital trade will usher in a new era in globalization. Underpinning digital trade is the movement of data. Data is not only a means of production, but also an asset that can itself be traded, and a way through which global value chains are organized and services delivered. The hype-dead blockchain is seeing its resurrection, as the World Economic Forum is already promoting it to provide transparency in supply chains

Countries are now gearing up for the digital globalization. That why the National Economic and Development Authority has stressed the need for the Philippines to transition to a digital economy with the Covid-19 crisis affecting the economy. I hope this time our government takes it seriously.

 

The author is the chief executive officer of Hungry Workhorse Consulting, a digital and culture transformation consulting firm. He is also the country representative of the Institute of Change and Transformation Professionals Asia and fellow at the US-based Institute for Digital Transformation. He teaches strategic management in the MBA program of De La Salle University. He can be reached at rey.lugtu@hungryworkhorse.com.

Source: https://www.manilatimes.net/2020/05/14/business/columnists-business/digital-trade-a-new-era-in-globalization/724731/

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