Is globalisation losing steam?

Many markets and logistics chains seem to be in the process of reconfiguring themselves in view of the current global situation. However, does this mean that globalisation is already doomed? Frank Dreeke, Chairman of BLG LOGISTICS Group and member of the Central Association of German Seaport Operators (ZDS), does not think so. “I don’t think we’ll see the decline of globalisation,” he said. “I think we’ll continue to live in a globalised world. However, due to the crises we’re experiencing right now, we will have to think more about whether it makes sense to continue producing certain goods overseas or whether it is feasible to relocate more of their production to Europe. The transport routes will change, but not the amount of transport. Perhaps the railways and inland waterways will then play a greater role. Or feeder services, i.e. short-haul trucking along the coast.”

Flexibility and adaptability in demand

For Dreeke, the biggest challenge is that we have been waking up to a changed world every day for months and it does not take long for many things that we have been taking for granted to no longer apply as we know them. Concerning the global trade flows and BLG’s logistics activities, he emphasises how important flexibility and adaptability are in these times. “We have almost 100 locations and branches in Europe, America, Africa and Asia,” he explained, “and we’re increasingly active in a number of markets, such as container handling, automobile transport and finished vehicle processing, as well as a wide range of services in industrial and commercial logistics. It’s our diversified product and service portfolio that makes us robust and adaptable.”

“The crises in the ports worldwide have shown the efficiency and resilience that exist in the German ports,” continued Dreeke, addressing the ports in Bremen and Lower Saxony. “This applies to all the goods we’ve handled – not just containers, but also cars, bulk goods and conventional freight. German ports are outstandingly competitive.” He views intermodal connections as one of the main strengths German seaports have compared to their international competitors. “German ports lead the way internationally in terms of rail connections,” the manager added. “Plus, as far as the size of the vessels is concerned, the deep-water port in Wilhelmshaven gives us additional flexibility.”

With over 4.8 million vehicles transported per year, BLG LOGISTICS is the leading automotive logistics provider in Europe.

Go-it-alone approaches do not lead to success

Dreeke also takes a clear position on the question of a skilful approach to China. “Trading with China is a fundamental decision that Germany made decades ago. In doing so, we’ve always known what kind of political regime we were dealing with in terms of business. And it doesn’t matter whether it’s the automotive industry, the mechanical engineering industry or the chemical industry, China is now one of our most significant trading partners.” However, he is cautious, given the development in recent years. “What has changed is the Chinese aspiration to become economically active outside their own country – i.e. the ‘new Silk Road’. As Europeans, we would do well to find an answer to this. Each individual country won’t be able to do it alone.”

Thomas Heck, Head of the China Business Group Germany and Europe at the auditing and consulting firm PwC Germany, and his colleague Peter Kauschke, Director Transport, Logistics & Mobility at PwC, also believe that the days of globalisation are far from numbered. “We continue to see and anticipate that companies will diversify their procurement channels and also seek new sales markets without abandoning existing ones. As a result, we’re convinced that there will be a shift towards reglobalisation in the sense of reform and renewal,” said Kauschke. Accordingly, he does not expect a complete reversal of globalisation, which would be associated with a turning away from global supply chains. “After all, the core challenges of international logistics, such as the supply of raw materials, climate protection and digitalisation, can’t be mastered at all on a national level,” he stated, thus taking the same view as Frank Dreeke.

Decoupling is not a desirable outcome

As Heck sees it, the sanctions resulting from Russia’s war with Ukraine have highlighted the dependence of Western economies, especially on Russian oil and gas, which has led to an increased awareness of the risks of economic engagement with China. “Although China officially takes a neutral diplomatic position towards Russia’s aggression against Ukraine, statements by government representatives create the impression that China is actually on Russia’s side,” he explained. At the same time, he interprets the recently published drafts of the German and EU China strategies to mean that the governments intend to examine China’s influence on the domestic economy much more closely in the future. “Given the developments of recent years, it’s not only understandable but also necessary for political and business leaders to rethink their strategies, not only with regard to China, but in a much broader context,” said Heck. “While global decoupling is not a desirable outcome, companies looking for new growth opportunities must try to avoid the risk of concentrating on one country as a market or on individual suppliers and, at the same time, endeavour to look to emerging economies, for example in Southeast Asia,” he suggested.

In China’s case, Heck has identified many interesting but also contradictory developments over the past months. In the wake of the stagnating economy – according to estimates by leading economists, the Chinese economy will only grow by 3.1 per cent in 2022 – exports to Europe and the USA, among others, have recently declined, while exports to Russia and the ASEAN countries have increased. Moreover, according to recent surveys by various chambers of commerce representing foreign companies in China, overall confidence in the country has suffered, while at the same time foreign direct investment has reached record levels. “All these, in my view, are clear indicators of the uncertainty that currently prevails in the world markets. No one really knows where the path towards reglobalisation will lead,” Heck stated.

“Global supply networks will continue to decline”

The Volkswagen Group sees itself as a global player, operating at 120 sites worldwide and offering its ten brands in 153 countries. Nevertheless, the Wolfsburg-based automotive company has been pursuing a certain deglobalisation strategy for some time now. In recent years, it has built up a relatively strong regional supply network, which is why only a small proportion of its automotive parts are supplied globally, a company spokesperson told LOGISTICS PILOT. “Global supply networks will continue to decline,” they added, “also because the Group wants to contribute to protecting the environment by reducing emissions. Even today, from an overall economic perspective, we source the majority of our parts locally.”

As depicted here during the Global Climate Strike 2022 in Berlin, Fridays for Future is calling for the goals reached at the Paris Agreement to be adhered to and for greenhouse emissions to be reduced as fast as possible.

“Unilateral and protectionist action won’t solve any problems,” clarified the VW spokesperson, given the impact of the current global situation and Russia’s war of aggression in Ukraine. “Free, fair and international trade based on rules is the basis for prosperity, employment and growth worldwide.” Irrespective of the development of the global flow of goods, Volkswagen is already undergoing the biggest transformation in its corporate history with its “New Auto” group strategy, the spokesperson added. “We have a clear roadmap until 2030 and intend to develop into a sustainable, software-oriented mobility provider,” they continued. In other words, over the next few years, the group intends to transform its core automotive business. This includes, among other things, more than 30 additional fully electric models as well as the expansion of battery technology and autonomous driving.

“We are radically feeling the consequences”

For the climate change strike movement Fridays for Future, our society is at a point where we are radically feeling the consequences of our past political and economic actions, for example through the multitude of current crises. “In order to avoid ecological and social crises and to achieve a truly just society, we should alter how our society is structured and how we value people and nature,” said Darya Sotoodeh, Fridays for Future spokeswoman. She adds that this is not about globalisation in general, but about placing more value on the planet’s natural resources and human life. “Manufacturing and trade must adapt to this. In practical terms, this means, for example, that every human being enjoys a certain level of acceptance without having to prove themselves or be economically productive. Only then can the massive exploitation of people and nature that’s currently taking place in our world end,” she remarked.

In this context, she sees networking on a global level – whether for trade or another form of exchange – as a good thing generally. However, this should ideally be done out of mutual interest and on an equal footing, and not out of the motivation to maximise profits or due to the fear of losing out in the global competition. “Global trade as it is at present is driven precisely by these aspects. In the past, Europe laid a decisive foundation stone for this economic system, which China is now following. Of course, Germany can’t escape this influence completely. However, it’s important not to support human rights violations in any way and, if possible, not to become heavily economically dependent on other states,” added Sotoodeh. “We need socio-ecological transformation,” she suggested. “A tangible start might be, for example, a circular economy or consistent supply chain laws.” (bre)