There is another development being felt by the whole world, and that is deglobalization. As global supply chains get disrupted due to many factors – among them unpredictable shipping schedules, lack of workers due to lockdowns, delayed deliveries of goods, etc. – the countries are slowly turning to its own supply and labor. This has encouraged campaigns to lessen dependence on importation like “Buy America” and “Buy local” campaigns elsewhere.
And some people are liking it, as this may be the sustainability solution everyone is waiting for, both for workers and the environment. Though leaders will not think of effects on environment but more of the effects on their economy, Mother Nature seems to know best. Already, workers are coming back to their countries of origin to be reunited with their families due to business closures in places of work (e.g. cruise ships that stopped operating, hotels and casinos that closed). And economies are thinking of better ways to produce without using low wage earners.
I was listening to a discussion among economists and trade union experts for the World Economic Forum moderated by a Wall Street Journal columnist. And these are my take aways that each panelist explained so well:
• The pandemic fast tracked our conversion to domestic sourcing and domestic production.
• Many rich importing countries left low-wage sources of goods due to disrupted shipping schedules.
• There developed a permanent expansion of support for local business.
• Tax avoidance may be a thing of the past once countries globally have an even tax regime of about 20-25 percent. No tax shopping will happen anymore.
• Low wages and weak social protection may also be a thing of the past as employers will now have to face real labor costs in their own countries instead of passing jobs to lower wage economies.
• There will be lower Trade in Goods, but more Trade in Services. Because of borderless internet connectivity, services may be exported without making the worker leave his or her family.
What this COVID pandemic started is a stop to the import of cheap labor, the sending of jobs to low wage markets, and the tax avoidance in off-shore accounts where companies are not even physically present. Truly the past three to four decades have been rife with greed and abuse of power. And things will soon change because of this pandemic.
What is also needed is for countries and economies to work together to review:
• Antiquated labor laws. The US will start these reforms to remove inequality of wealth and wages; inequality of power between employers and employees and these can be done with a review of why labor rates in the US skyrocketed and it priced the laborer out of the market.
• Laws on better wages. This will mean more consumers can buy and turn the economy more often and contribute to the GDP.
• Taxation. Countries have to cooperate not to steal taxpayers away from their countries with lower tax rates or tax shields. If global tax rates are on the same levels, there will be no need to look for tax havens. Tax shopping will be a thing of the past.
• Stimulus packages must be offered by governments to drive the smallest businesses to continue and carry on.
The panelists in this discussion were: Beata Javorcik, chief economist of European Bank for Reconstruction and Development (EBRD); Simon Evenett of St. Gallen Endowment For Prosperity through Trade and Richard Trumka of American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). He passed in August 2021 and has since been replaced by a woman president, Liz Shuler. The discussion was moderated by Wall Street Journal’s editor-at-large Gerard Baker. You can still catch it on YouTube.
Everything happening has happened organically, brought about by Mother Nature.
“We have exhausted the benefits of moving production to low wage locations,” says Javorcik. “And the pandemic has also accelerated the Trade in Services due to remote work.”
And this is happening to our own OFWs. They can work remotely and be with family back home and finally solve the social problem of families being separated because of overseas work of parents driven by higher wages in other countries. They will need to work as virtual assistants or find more meaningful work back home, like going back to the farms.
“COVID exposed the ills of a business model we have been living with for the past 30 years,” says Trumka. Being a pro-labor leader, he of course spoke about workers not getting fair wages due to old and antiquated labor laws made 80 years ago.
Governments have a role to help companies who are suffering due to COVID. This, though, is different in communist countries where state-owned companies have an advantage. But in countries like ours, governments can surely help business with stimulus packages and tax breaks. We got a reprieve during the lockdowns but now, it’s business as usual.
I happen to be a tenant in a government-owned building but my landlord will not give me a break because of COA rules. I happen to be a small business just wanting to survive but bureaucratic procedures do not favor small entrepreneurs like myself. Our laws are stiff and I understand it has to be so to avoid corruption. But it does not favor an SME entrepreneur.
The Social Security System and Bureau of Internal Revenue are back at work with no let up for the suffering SME (small and medium enterprise). So it makes one wonder: Should I even pursue helping local producers, encouraging consumers to buy local when government is not on your side? Or should I just close down and forget that we provide employment for several families?
With deglobalization, government has a role to play. Help thriving businesses. I call on Trade Secretary Ramon Lopez to look at the other agencies and see how they can help. Not just by the reopening of businesses, especially retail, but to let other agencies give a break to small entrepreneurs who make up 99 percent of our economy.
For the above reasons, I am thankful COVID opened our eyes to the BUY LOCAL movement and at the same time, may it open government’s eyes to help struggling SMEs.