Globalization is generally defined as the process by which the world is becoming increasingly interconnected as a result of dramatically increased trade and cultural exchange.[i] Such processes have governed our global economy for more than 70 years, and have been accelerated in recent years through electronic communication. Globalization has had a profound affect on nearly every economy, business, and person on earth.
As a company that was founded on the principles of NAFTA, we are a product of globalization. The past three years have seen our company continue to expand internationally with the addition of companies in the U.K. and Hong Kong. As we extend our global reach to bring new opportunities closer to us, socio-political trends seem to be moving in the opposite direction. It is hard to ignore the strong anti-globalist sentiments that have been taking over headlines and ballot boxes. This emerging world-view is inextricably linked to the rise of movements such as the Donald Trump presidential campaign, as well as the monumental Brexit vote. Many pundits have gone so far to say that the era of globalization has ended; however, we are inclined to disagree. The globalization process has become tenuous, but that doesn’t mean that a different kind of globalism cannot emerge. A new globalism is taking shape, and we think there are more worldwide opportunities than ever before.
There have always been winners and losers as a result of globalization, but its fundamental theory has largely been proven correct; that when individuals are free to trade, the size of the economic pie increases, leaving everyone better off. However too many people feel left behind by globalism, and it is not something we can overlook. The “Leave” voters, Trump supporters and populist activists are acting in earnest, and it would be unwise and elitist not to take them seriously. Evidently, large numbers of people across North America and Europe do not believe our globalized economy is working for them.
Despite its great achievements, globalization has inflicted painful collateral damage, particularly for manufacturing-dependent communities who have lost out to the cheap labour and fierce competition from China. Close to home, the Canadian-made garment industry has been decimated by globalization. Canadian GDP in clothing manufacturing declined from $3.6 billion in 2002 to $1.4 billion in 2011[ii]. However, this calamity also created new opportunities for more niche, specialized garment companies to emerge. The success of Canadian companies such as Lululemon and Canada Goose can attest to the benefits of shifting a company strategy towards such specialization. As President Barrack Obama stated in his address to the United Nations last week, global integration requires a “course correction” to make sure that all share in the prosperity.
“We don’t need a faster or slower globalization. We need a better globalization,” said Homi Kharas, Deputy Director for the Global Economy and Development at the Brookings Institution.[iii] The negative repercussions of globalism must be recognized, but it cannot lead us down the dangerous path towards isolationism. Those opposed to globalization, however, will not be able to stop it entirely as too many countries are pining for progress and success. Despite the growing opposition in the US and Europe to trade deals, China is pushing for a pan-Asia free-trade zone, and African countries have started negotiating a continent-wide free-trade area.[iv]
Specialization is also a by-product of globalization, and a core component of our business. Through specialization, companies are able to maximize efficiency at every stage of production, a strategy that has been used for centuries. This division of labor increases economic efficiency by optimizing the use of people’s unique talents and skills. Specialization also allows for different parts of a product to be manufactured in different countries. While one country may excel in, for example, manufacturing bicycle tires, another might be uniquely suited for pedals. At our company, we create value for our customers by searching the globe for the best solution possible. We explore the strengths and unique areas of expertise that each production center has to offer, and tailor each program to match those strengths. It is through international cooperation and trade that we are able to conduct business in this way, and also why the trend of isolationism goes against our business principals.
Though Canada shares a similar culture to the US and UK, we have proven to be less susceptible to the anti-globalist, protectionist attitudes displayed by our neighbors and allies. We are working towards ratifying the Canada-EU Comprehensive Economic and Trade Agreement (CETA). Although still embroiled in negotiations, the opportunity to eliminate almost all customs and duties from trade between our cultures is exciting, and fosters international community and collaboration in a time when it is truly needed.
Changes in policy are both symbolic and important, however more crucial than treaties is a change in perspective. Globalization has not ended, but rather is entering a new phase. What connects us has fundamentally changed, as digital flows of data now exert a larger impact on GDP growth than the trade of goods.[v] This new digital era presents new risks and challenges, but also great opportunity for those that have been traditionally hampered by the capital-intensive requirements for international growth.
Digital globalization champions the little guy. It has opened the door to developing countries, small companies and to start-ups. Approximately 12% of the global goods trade is now conducted via international e-commerce, empowering tens of millions of small and mid-size companies to go global. Even the smallest start-up can compete with large multinationals in this new environment. A new report estimates that 914 million people have at least one international connection on social media, and 360 million take part in cross-border e-commerce.[vi] These open platforms create worldwide markets with a huge base of potential customers and built-in ways to access and influence them. This also opens up new possibilities for procurement, allowing a garment manufacturer in Vancouver to source trims from a small supplier in Sri Lanka with limited expense and risk. Traditional globalization may have come to an end, but the opportunities for growth in the new era of digital globalization are too great to ignore.
Growth and success are aspirations of all businesses, and they must remain flexible and open-minded in order to succeed in this new era of globalization. Advancements in digital technology are allowing businesses to expand globally in a much leaner, less capital-intensive way; sometimes without establishing a physical presence at all. We intend to learn from these strategies, and remain sharp and nimble as an ever-expanding company. The future may be unpredictable, but it certainly looks bright to those wearing the right glasses.
[i] “Geography: Globalisation”, BBC, http://www.bbc.co.uk/schools/gcsebitesize/geography/globalisation/globalisation_rev1.shtml
[ii] Sandro Contenta, “Made In Canada: How globalization has hit the Canadian apparel industry”, The Toronto Star, May 27, 2016, https://www.thestar.com/news/insight/2013/05/27/made_in_canada_how_globalization_has_hit_the_canadian_apparel_industry.html
[iii] Andreas Becker, “Brexit – the end of globalization?”, DW, June 30, 2016, http://dw.com/p/1JGwC
[iv] Michael Schuman, “Brexit Won’t Stop Globalization”, Bloomberg Businessweek, July 14, 2016, http://www.bloomberg.com/news/articles/2016-07-14/brexit-won-t-stop-globalization
[v] James Manyika et. al., “Digital Globalization: The new era of global flows”, McKinsey Global Institute, March 2016.
[vi] Manyika et. al., “Digital Globalization”.