제 17 호 Deglobalization
Kicker: OPINION
Deglobalization
By Jun-Seo Park, Cub-reporter
For decades, the global economy has been grown in terms of globalization. Developed country’s companies can manufacture high-quality product by using developing country’s cheap labor and low taxes. And these developing countries were able to grow by wages paid by companies in developed countries. As mentioned, so far, companies around the world have built factories anywhere in the world in pursuit of cheap labor and low taxes, free from a fear of war. But nowadays, it seems that deglobalization has been proceeding. Deglobalization is, literally, fragmentation of globalization. Countries around the world have been reducing their dependence and integration between the world by reducing exchanges of trade, investment, capital, and employment. Deglobalization is accelerating by the COVID-19 pandemic, Russia-Ukraine war, and the hegemonic conflict between the United States and China.
Deglobalization Accelerated by the Russia-Ukraine War
The impact of the Russia-Ukraine war on the global economy has been enormous. It has brought high prices to the global economy, which was about to wake up from the COVID-19 pandemic. And also it has split global supply chain into two pillars of the United States and Russia, accelerating deglobalization triggered by the United States-China’s trade war. Russia started a war, and as a result, the United States and Europe has imposed economic sanctions on Russia. Economic sanctions such as price ceiling of the Russian crude oil have worsened international relationship.
A Destroyed building at Ukraine by Russia’s invasion
Cases of Deglobalization
Have you ever heard IRA, CRMA, and Reshoring? These are the most representative examples of deglobalization. IRA is an abbreviation of ‘Inflation Reduction Act’. It was proposed to reduce government spending to curb inflation in 2022. IRA’s core content is that subsidies and tax credits are provided only for EV* produced in the United States. In addition to this, differential support is provided depending on how many of raw materials from the United States are used. IRA also includes preventing production of semiconductor companies subsidized by the United Sates government in countries that pose a threat to United States security, such as China. Accordingly, the EU introduced CRMA. CRMA is an abbreviation of the ‘Critical Raw Material Act’. It is supposed to legislate differential articles that EV batteries with low proportion of European minerals are imposed additional tariffs and curtailed subsidies. Reshoring is a phenomenon in which domestic companies that have entered overseas have been returning to their own countries.
*EV: electric vehicles
Hegemonic Conflict between the United States and China
Since the 2008 global financial crisis that resulted from Lehman Brothers, the world has overcome the crisis by cooperating with the United States. At this time, China was weak to challenge the United States. So, all countries have joined globalization, focusing on efficiency, as a one-pole system centered on the United States. But nowadays, China has become as powerful as the United States in recent years. China and the United States are in competition with each other through future’s critical industry such as information technology and semiconductors. In this situation, deglobalization seems natural for the United States, which wants to maintain its hegemony, China, which wants to be reborn as a new hegemonic country, and protectionism triggered by these countries. Protectionism will accelerate theworld’s deglobalization. When the conflict between the United States and China is escalating, Korea has been with the United States in national security and China in economy. It’s time to finish the tightrope walk and stand on one side. This is because high-tech exports to China can deprive the United States of its hegemony and cause security conflicts with Korea.
Which Side Should Korea Stand on?
As mentioned, Korea has an important relationship with the United States in terms of national security. And China is also important in economic terms because China accounts for a large proportion of exports. When you think about the Korean economy, we should cooperate with China. But I think national security is much more important than the economy, especially after COVID-19 and the Russia-Ukraine war. Therefore, economic growth can be promoted only when national security is supported. So, we have to pay a lot of attention to the United States.
Korea might have had the same proportion of diplomacy and exchange with the Unites States and China. Now, there may come a time when we need to reduce the weight of one side and increase the weight of the other. Do you think Korea should be with the United States or do you think it should be with China?
Sources:
https://www.newspim.com/news/view/20230203000450
https://www.doopedia.co.kr/search/encyber/new_totalSearch.jsp
https://www.news1.kr/articles/4943005
Image sources:
https://www.ohmynews.com/NWS_Web/View/at_pg.aspx?CNTN_CD=A0002818183
Trade war 'hasn't made America great again,' says China – DW – 06/02/2019
https://economychosun.com/site/data/html_dir/2022/11/21/2022112100001.html
