Editorial – August 2023
In last few decades, the world had seen the emergence of the concept called ‘Globalization’. An international body World Trade Organization or commonly known as WTO, was formed in 1995 to facilitate international trade. The idea was the countries should gradually decrease the trade barriers and encourage the international trade. This concept got the support of majority of the countries and accordingly the process of lowering the trade barriers started in many countries. India along with many countries is the original signatory of WTO and since it adopted the principles of liberalization and globalization in 1992, the import tariffs were being lowered gradually. This did have a positive impact and the international trade increased substantially. Of course many countries adopted these principles well before India and also benefitted from it in a big way.
This process of globalization encouraged the manufacturing giants world over to adopt an altogether different format and the system to procure their raw materials or inputs for their production lines Globalization gave them the axis to almost all the countries and they could choose the right supplier no matter in which country he was located. Thus for these companies, the supply chain really became global and this naturally resulted in higher quality and competitive prices. All were happy, the global vendors, the manufacturing company and also the customers.
All was well till the Russia – Ukraine crisis erupted. The war which was supposed to end in few weeks is still going on and the end is not in sight. The war blocked many sea routes around the world and thus the supply chain of many manufacturing companies got damaged. They were procuring raw materials/ inputs from different countries and those could not be shipped due to the ongoing war. Thus the production was held up and the process lines stopped Along with many other industries, this was true for the iron & steel industry as well. The sourcing for iron ore, coal, refractories, ferro alloys, lime etc. was so scattered all over the world, many companies had to suffer. The manufacturing giants realized that the global supply chain did provide a distinct advantage during good days but in a war like situation, it is a big disadvantage. It can completely jeopardize the production lines and put a big question mark on the company’s viability, Further, in the turbulent times like this, providing access to overseas companies into one’s domestic markets may be damaging to the indigenous producers of the same product.
This has supposed to have initiated the process of ‘De-Globalization’ and is today is being considered seriously by many countries as an effective strategy. On one hand many companies have shifted from their policy of having global supply chain to having a regional (if not local) supply chain. By doing this, they would substantially counter the risk factor in having a seamless production. Also, many countries have started debating the idea of increasing the trade barriers, directly or indirectly, in order to protect the domestic industry. Today, many countries in the world are facing the recessionary trends in their economy and have no other option but to support their local industry in this challenging period.
Is the world really going on the path of ‘De-Globalization’? Has the era of Globalization come to an end ? What will happen to WTO? Only the ‘TIME’ has these answers!