Editorial Notes

[Editorial Notes] COVID-19 and Globalization

The rise of the liberal international order has been a major factor in the growing movement of people across borders. But this globalization has also allowed the entire world to be much more aware of the spread of the coronavirus, and it may ultimately be a powerful force for its own undoing.
By IASToppers
April 11, 2020


  • Introduction
  • Impact of Coronavirus on Trade inter-dependence
  • Trade Impact on Asia-pacific region
  • Impact on World Trade Organization (WTO)
  • Impact on China
  • Way Forward
  • Conclusion

COVID-19 and Globalization

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  • Due to globalization, the cross-border flow of people, goods, money and information creates new wealth and opportunity.
  • On the negative side, it can exacerbate global disparities, enable international terrorism and cross-border crime, and allow for the rapid spread of disease.

Impact of Coronavirus on Trade inter-dependence

  • Coronavirus is having devastating repercussions for corporations and businesses that have benefited from economic interdependence supported by cross-border supply chains. Since the outbreak of this coronavirus, many companies that had come to depend on China were hard hit.
  • From a risk analysis perspective, there could be rapid trend towards moving from globally dispersed production bases back in favor of domestic facilities. Also, many tourism corporation may have to start working on initiatives to increase domestic demand.
  • As per recent report of the United Nations Conference on Trade and Development, the most economies rely on export-led growth, which will now collapse as the global economy contracts.
  • World Trade Organization has estimated that in a worst-case scenario, global trade could dip as much as 32% amid COVID-19.

Trade Impact on Asia-pacific region

  • In a recently released report of United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), it was mentioned that there will be demand and supply shock.
  • Commodity prices are at their lowest in the last 10 years. For India, however, because of low oil and commodity prices and, also, since the government is not allowing a full pass-through of the lower global prices, there is some fiscal space through commodity price reduction.
  • Almost 50% of India’s trade is directly linked with the micro, small and medium enterprises (MSMEs) sector as even large players have sub-contracted to the smaller producers. This shows devastating impact covid-19 can have on trade because of the disruption in production

Impact on World Trade Organization (WTO)

Container ship in the harbor in Asia ,
  • The last time serious discussions took place at WTO was in 2008, before the complete repercussions of the crisis hit home, and it was all downhill after that.
  • If countries need to bring their domestic industries back, they would need space for policy flexibility.
  • For instance, on the issue of subsidies for small industries, no country will like the WTO to be telling them what to do or what not to do.
  • The agricultural subsidies issue is going to be junked on 31st March, India notified the WTO that it has crossed the 10% limit in rice subsidies as a good citizen.
  • However, going forward, the government of India cannot be restrained from giving more subsidies for rice or other sectors vital for food security. If the WTO rules are junked, then it’s a free-for-all situation, going back to the situation of the 1930s.

Impact on China

  • Over the past week, China’s manufacturing sector is coming back to normalcy back. So, if the China get a lead in manufacturing again, they will consolidate their position in the global economy further.
  • After the 9/11 attacks (which coincided with China joining the WTO) and the 2008-09 global recession, China came out stronger and enhance their global heft. This resulted in how India getting dependent on China after 2008.
  • Hence, this will be the phase for China to become leader of the globalised world. Countries are going to be extremely wary of the superpower that China will become and would like to disengage.

Way Forward

  • Most economies, with the exception of China, will see a very different kind of dynamic as they will try to build up from where they would be in a few months’ time and will integrate themselves again with other countries.
  • Countries will reconfigure their economies to look at import substitution with a greater clarity now, as the perils and pitfalls of overdependence on foreign supplies become clear.
  • This crisis has exposed the gaps in the health sector and social protection and the stimulus packages should focus on closing these gaps which will also help in achieving sustainable development goals.
  • Full use must be made of the International Monetary Fund’s Special Drawing Rights (SDR), a form of global money that the institution was authorised to create at its founding.
  • Creditor countries should help by announcing a stay on developing and emerging economies’ debt service. 
  • The risk of supply chain disruptions will feature a greater degree in trade calculations. Decisions about lowering barriers to international travel will face greater scrutiny. Information may continue to become more plentiful, but will be more guarded.
  • National governments will have to weigh the risks of contagious diseases against the benefits of ease of travel or may have to consider stronger safeguards.


National borders may become less porous in terms of industry and the movement of people when compared to the 30 years of globalization seen since the end of the Cold War.

In Asia, domestic pressure is increasing, with rising nationalism that emphasizes the superiority of the ethnic majority of a given country, as seen in the increased oppression of the Uyghurs in china or in rising Hindu nationalism in India.

The challenge is to take the liberal international order in a healthy direction by regulating and attenuating the burdens of globalization. At the same time, we will need to work towards eliminating problems such as social and economic disparities caused by globalization.

Mains 2020 Editorial Notes

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