Strategy Note /

The return of pro-globalisation politics post-coronavirus?

  • The global response to coronavirus has been uncoordinated, late and incomplete, with potentially catastrophic results

  • Will this mark a peak for de-globalisation populist politics (eg anti free-trade and immigration policies)...

  • ...And act as a catalyst for a rebuild of global organisation and coordination of economic and security policies?

Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Tellimer Research
12 March 2020
Published byTellimer Research

Three examples of how such a shift back to globalisation may begin are the following: 

  1. Poor handling of the crisis in the US could pose an unforeseen challenge to the re-election of US President Trump and the anti-globalisation foreign policy he has championed; 
  2. Iran has already made a request for emergency funding from the IMF and any (geopolitically tinged) reticence by IMF Board members in responding positively may prompt Iran to soften the foreign policies that have led to its ostracisation; and 
  3. Global bodies like the IMF and the WHO are again coming to the fore as necessary parts of a solution to a global crisis.

The world’s health-care and economic policy response to coronavirus has been uncoordinated, late and incomplete. Once (hopefully not if) the disruption from coronavirus fades will it mark the peak for de-globalisation politics and a return to support for international institutions that can manage policy coordination but come at a cost of ceding sovereignty? Or, alternatively, will this episode reinforce all the fears about globalisation, including trade and migration, exploited successfully by populist politicians, and lead to more permanent isolationism? The more severe the disruption from coronavirus, the more likely globalisation stages a comeback.

The answer matters not only for global economic growth but also how future universal threats (the next flash event like a virus, regional war or natural disaster, or existing long-gestation risks like climate change or extreme economic inequality). 

Globalisation also matters for smaller emerging and frontier markets, which generally benefit from a shift to more globalisation (eg greater trade, tourism, remittances, capital flows) more than they suffer (greater vulnerability to hot capital flows, trade sanctions, local high-net-worth capital flight, competition for indigenous sectors and higher cost of compliance with global standards).

We have written in the past about the growth of China as an alternative source of trade and finance in emerging and frontier markets, the US-China trade war, the withdrawal from global coordinating bodies by the US under President Trump, the decline in what has been called (flatteringly) the international liberal order or 'westlessness', the growth of conflict (both military and commodity wars) in the geopolitical space vacated by the erosion of the singular superpower, the universality of the coronavirus threat (there is no hiding place for citizens or investors), and the incomplete coordination of the economic policy response. 

Will the next global trend we discuss be one of greater integration and coordination?

Related reading

Coronavirus – The international policy response, 5 March 2020

Coronavirus: Should it be ignored because it is such an unquantifiable risk?, 25 February 2020

Coronavirus: Commodity prices hit as fears grow more global, 3 February 2020

Coronavirus: UAE case a warning for global tourism, 29 January 2020

Oil war: Saudi, Russia can sustain a long war, but a 35% price drop shortens it, 9 March 2020

EM Wars: The changing art and risk of war in Emerging and Frontier markets, 6 March 2020

'Westlessness': What it means for investors in EM and FM, 17 February 2020

Turkey: Inevitable escalation with Russia-Syria, negative, 28 February 2020

Nigeria: Sahel West Africa violence, minor risk compared with others, 3 March 2020

2020s Vision: Technology disruption and the emerging markets, 5 December 2019

Aramco attack: Saudi, oil and regional insecurity risks raised, 15 September 2019

India, Pakistan: "Air strike" raises tensions, NOT likelihood of hot military conflict, 26 February 2019

Trump impeachment: What it means for Emerging Markets, 19 December 2019