Foreign Trade and Globalism Remain Strong

The global toy industry is an interconnected web that ties Asia, North America, Europe, and to a lesser degree, Africa in a symbiotic relationship of creativity, production, and consumption. It is not static but functions more like a living thing, an ecosystem that continues to morph and react to outside forces, be they man-made or natural.

The last few years have been very challenging for the world toy network. The combination of corona virus-induced fear plus an administration that took a nationalistic approach to trade that favored bi-lateral rather than multilateral agreements and tariffs created political and economic tensions that caused uncertainty and concern about the stability of the global system to which we have grown accustomed.

So, what is the health of globalism? Surprisingly, globalism is in pretty good shape. Consider this quote from Bloomberg News writer Bryce Baschuk, in his article, “Globalization is Alive and Kicking in Trade’s Big 2020 Comeback.”

The Covid-19 pandemic was supposed to put the final nail in the coffin of globalization and prompt a retreat into a new era of protectionism. Instead, some are now calling the crisis the Great Accelerator.

It appears that rather than re-shoring production, companies are sourcing from Thailand, Viet Nam, and Cambodia. What impact has this had on China? Consider this headline from December 6, 2020, Bloomberg News: “China’s Exports Surge in Year-End Rush as Pandemic Fuels Demand.”

Here is how the article puts it:

China’s exports jumped in November by the most since early 2018, pushing its trade surplus to a monthly record high and underlining how global demand for pandemic-related goods is supporting a growth rebound in the world’s second-largest economy.

To understand why China continues to dominate despite some companies moving manufacturing to other Asian countries, consider its population. Cambodia, Viet Nam, and Thailand have a total population of 181 million people. China’s population is 1.4 billion, 9.5 times the population of those three countries put together. Add China’s far more developed infrastructure, and you can see why China is relatively impervious to competition.

The new Biden administration, though wary of China, is globalist in outlook. Mr. Biden has said he favors multilateral deals, and his personality is less combative than Mr. Trump’s. Therefore, I anticipate things to calm down and next year to be a robust one for global trade.

Still, the Corona Virus experience has rattled many nerves, and after everything calms down, some companies may decide to invest in domestic production. That will take a lot of time and money and will, therefore not happen overnight.

Based upon these factors, expect global trade and off-shore sourcing to be the rule for the next several years.

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