Deglobalisation: when distance grows, Europe glows?

The ghost of deglobalisation haunts the global economy, as protectionism, trade barriers, and anti-immigration sentiment gain ground, writes economist Moisés Naím in a commentary for El País in response to the atmosphere at the summit of finance ministers and central bank governors held in Washington at the end of October.

"It has long been said that business partners eventually become friends. Today, it is clear that friends are more likely to become business partners", writes Aloysius Widmann in the Viennese daily Die Presse. Since Russia's invasion of Ukraine in 2022, a new commercial geography has emerged: trade flows within political blocs are swelling while cross-bloc commerce withers. Western companies are increasingly choosing higher-cost goods from allies over bargains from countries in Beijing's or Moscow's orbit. This great rewiring of supply chains – dubbed "friendshoring" – may yet prove a boon for European economies, despite its challenges.

Spain stands to gain from the current wave of deglobalisation, a trend fueled by a confluence of factors including geopolitical tensions, the COVID-19 pandemic, rising protectionism, nationalistic sentiment, and technological advancements, according to Luís Alberto Peralta, editor of the economic daily Cinco Días. The country is already reaping the benefits of the textile and clothing industry's relocation efforts, driven by the desire to minimise the distance between production and consumption and the increased demand for flexibility in the sector. Inditex, the parent company of fashion retailer Zara, now produces half of its goods in Spain and three neighbouring countries.

Moreover, semiconductor giant Broadcom announced last year its plans to invest around €920 million in a new semiconductor factory in Spain, aligning with Europe's broader strategy to achieve autonomy in this critical industry.

In a telling sign of shifting global dynamics, Portugal – hardly a traditional industrial powerhouse – has emerged as the world's most attractive destination for new manufacturing investment, according to Savills' Nearshoring Index 2024. The Portugal News reports that the Iberian nation's appeal lies not in industrial heritage but in modern assets: renewable-based energy independence, political stability, skilled labour, robust environmental credentials and a strategic perch between Europe and America. 

Italy, too, sees an opportunity in the changing global trade environment. The boot-shaped peninsula's strategic position in the Mediterranean proves crucial on two fronts, writes Carlotta Scozzari in La Repubblica. It serves both the traditional Asia-Europe container routes – where Chinese influence remains muscular, evidenced by Beijing's stake in ports like Savona – and emerging shorter supply chains. Far-right’s Prime minister Giorgia Meloni aims to leverage this geographic sweet spot through her Mediterranean strategy, particularly eyeing Africa's burgeoning economic heft. The question is whether Italy can transform its fortunate location into lasting commercial advantage.

As globalisation's lustre fades, Central Europe senses opportunity. Writing in Hospodářské noviny, economist Jaroslav Vybíral notes that amid frosty US-China relations and a lexicon heavy with tariff talk, Western European firms are rethinking supply chains. The pandemic's lessons about medical supplies have prompted a broader re-evaluationabout where to locate production. Investors now weigh regulatory stability, infrastructure and political alignment alongside traditional metrics such as labour and energy costs. Hungary illustrates this new calculus: while its political stance attracts Chinese investment – from BYD cars to NIO batteries – it also scuppered Hungarian attempts to acquire Spain's Talgo, deemed too risky in the current geopolitical climate.

"We are the China of Europe. Will we also become Taiwan?" asks Zbigniew Bartuś on Forsal.pl. The question captures Poland's industrial metamorphosis. Once dubbed Europe's workshop for its prowess in manufacturing everything from dishwashers to car parts, the country is eyeing a more ambitious role: becoming the continent's semiconductor hub. As global firms rethink supply chains amid geopolitical tensions, Poland finds itself at the nexus of two trends: glocalisation – the adaptation of global products to local markets—and nearshoring, the relocation of production closer to home markets. 

A dramatic increase in interest in relocating to Europe – 67% of potential investors are now considering the move, up from 27% in 2020 – has put Poland second only to companies' home markets as a preferred destination. Intel's $4.6 billion semiconductor plant near Wrocław signals this shift from basic manufacturing to high-tech production. But Poland's transformation faces headwinds, with wage pressures, bureaucratic red tape and a sluggish green transition hampering its ambitions. Most tellingly, 60% of local companies remain ESG laggards in an increasingly sustainability-conscious market.

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"The phase of globalisation that was primarily focused on China is coming to an end," writes Alexander Börsch in the Frankfurter Allgemeine Zeitung, who argues that this development – alongside neologisms that until recently held no meaning, such as deglobalisation, friendshoring, decoupling and derisking – brings a great opportunity through supply chain diversification, potentially initiating a new and more complex phase of globalisation that integrates new markets and countries. Contrary to claims of deglobalisation driving firms homeward, companies are charting a different course. For export powerhouses like Germany, retreat is hardly an option. Instead, German firms are spreading their bets across new markets and regions, potentially ushering in a more diverse phase of global trade.

Writing in the same daily, Karl Haeusgen and Jeff Rathke pour cold water on the enthusiasm for "friendshoring"– the reorientation of supply chains toward political and economic allies. With democracies accounting for only two-thirds of global GDP, such a discriminatory trade policy would be a recipe for self-impoverishment. The authors advocate a more nuanced approach: restricting trade only in the most sensitive sectors and with genuine rogue states, while maintaining open markets elsewhere. The aim, they argue, should be to enhance economic security through strategic partnerships, not to reject non-democratic trading partners outright.