At Davos, retreat of globalisation stokes fears for poor nations

Wed Jan 18, 2017 9:48am EST
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By Sujata Rao

DAVOS, Switzerland (Reuters) - In 2014, Arnold Kamler, CEO of New Jersey-based Kent International, took a big step: he resumed making bicycles in the United States, 23 years after uprooting production to China. This year, he hopes to sell half a million U.S.-made bikes.

For business and political leaders gathered in the Swiss Alps town of Davos for this year's World Economic Forum, Kamler's experience - part of a process Morgan Stanley once dubbed the "re-industrialization" of America - is a cause for some anxiety.

If a mix of accelerating automation and trade protectionism is the defining economic climate of the moment, globalisation may well be in decline, and developing nations that failed to capitalize on the past two decades of economic integration - notably those in Africa - may have missed the boat altogether.

It is an issue with profound consequences - for emerging economies that have built their fortunes on exports, and for richer nations that hope a "reshoring" of industrial production will appease disgruntled blue-collar workers at home and re-ignite stagnant wage growth.

Global trade likely grew last year at just 1.7 percent, lagging world economic growth for the first time in 15 years and for only the second time since 1982, according to the World Trade Organization which expects a further slowdown in 2017.

While there are complex reasons behind the slowdown, it's hard to ignore the rising popularity of trade protectionism and anti-globalisation. U.S. President-elect Donald Trump's campaign pledges and plans for "a very large border tax" on firms producing overseas fall into this category.

But perhaps even more influential is businesses' push towards automation, digitization, robotics and innovations such as 3-D printing that undermine low-wage countries' biggest comparative advantage.

That contributed to the return of 250,000 manufacturing jobs to the United States between 2010 and 2015, according to data from Reshoring Initiative, a group that advises U.S. businesses.   Continued...

A patriotic label is affixed to the handlebars of each bike at the new Bicycle Corporation of America plant in Manning, South Carolina, November 19, 2014. The BCA plant, which is owned and operated by Kent International, started the new U.S. assembly line in October 2014. REUTERS/Randall Hill