There are signs that a dominant trend over the past several decades, globalization, is slowing, and maybe even reversing, or perhaps changing into a new form of globalization driven by data rather than trade in goods. A classic indicator of globalization is trade as a share of GDP. This ratio peaked in 2008 and seems to be stalled, or even declining. Is this a blip, or an inflection point?
Traditional economic thinking views globalization as a pathway to prosperity, and indeed between 1980 and 2015 average global real income rose by 120%. The rationale is that trade increases wealth because it makes nations more efficient by allowing them to specialize in what they do best, sell that, and buy other needed items from countries who can produce them more efficiently. Recently, however, the downsides of globalization have become apparent, as evidenced by the backlash of workers in the U.S. and Europe as manufacturing and other jobs moved to nations with cheaper labor.
In response to slowing globalization, banks and corporations are developing strategies for a more localized world. The World Bank reported that global supply chains stopped growing in 2011. During the previous two decades they had expanded about 4% a year. Multinational companies had been building global supply chains in the 90’s and 2000’s, but now this trend is reversing as companies localize their production and import fewer components for product assembly. Another sign of slowing trade is this statistic from the World Trade Organization: between 2011 and 2015 the value of global merchandise exports went down by 10%. This is the largest drop over a four year period in post WWII history.
Ports are facing slower growth as fundamental structural changes in the container shipping industry and global trade impact throughput volumes. In the 1990s, container volume growth was 3.5 times global GDP growth; from 2000 to 2009 it was 2.7 times global GDP growth, and since 2010 it has been moving towards par. One key factor contributing to this slower growth is the maturing container industry. The container industry is maturing because there are few goods left which can be containerized. So ports may be dealing with overcapacity, and consequent increased competition, in the near future.
Even as movement of goods and money has slowed across the globe, a surge is mounting in the flow of cross-border data. The flow of digital information around the world more than doubled between 2013 and 2015 alone. Flow of data now is 20 times greater than it was in 2008. And it is not just Facebook and smartphones. Major companies are using 3D printers to make component parts for jet engines and other products. So in the future, companies may receive equipment by a digital set of orders destined for a 3D printer, rather than by container ship.