PART I
IMPACT OF THE COVID-19 PANDEMIC AND CRISIS ON THE GLOBAL ECONOMY AND INTERNATIONAL TRADE
International Trade in the Era of Neo-Globalization: Disintegration vs Digital Partnership
Elena G. Popkova
Abstract
The paper aims to study the main trends in the development of international trade in the era of neo-globalization and make forecasting scenarios that reflect the prospects and strategies for building international economic (foreign trade) relations. The author uses trend analysis, regression analysis, and the Monte Carlo method. The author proves that the digital economy determines the prospects for international trade in the era of neo-globalization. The author indicates several trends of international trade in the era of neo-globalization, such as the increase in the freedom of international trade (by 2.16%), the increasing level of globalization of the economy (by 4.11%), and the intensive increase in high-tech exports (by 74.94%). The most possible (28%) scenario for developing international trade is related to the digital partnership. In this scenario, a 25.11% increase in digital competitiveness provides an 8.29% increase in the globalization index and a 21.78% increase in high-tech exports. These indicators are achieved despite the growth of customs barriers by 58.86%. That is, a feature of the era of neo-globalization is the predominance of technological barriers over custom ones to the development of international trade.
Keywords: International trade; neo-globalization; global economy; disintegration; digital partnership; high-tech export
JEL Classifications: F01; F13; F14; F17; F62; F63; O31; O32; O33; O38
The current period of international trade development can be called neo-globalization. The peculiarities of the new era lie in the deep contradictions of international trade. Countries around the world are interested in the openness of their economies to increase exports and strengthen the position of domestic business in world markets. At the same time, countries seek to protect domestic markets and turn to measures restricting international competition (protectionism) at the first sign of a crisis in the economy. In the global economy, the integration of countries in some cases strengthens (e.g., EAEU) and, in other cases, weakens (e.g., Brexit in the EU).
These contradictions fundamentally distinguish neo-globalization from previous eras (milestones) of international trade, in which the strategies of foreign economic activity of countries were relatively homogeneous and consistent. For example, in the era of early globalization (colonization), the economic activity involved the seizure of new territories (colonies) by the major world powers (monopolies). During the era of mercantilism and protectionism, countries sought to limit international trade (the timeline of the first two phases is blurred). In the era of free trade under the auspices of the WTO, countries sought the fullest possible removal of foreign trade restrictions.
The problem lies in the uncertainty of the key mechanism (driving force) of the development of international trade in the era of neo-globalization, which makes the process of this development impossible to explain logically or predict. The World Bank (2021) gives an optimistic but short-term forecast of international trade. This study hypothesizes that the digital economy is the driver of international trade in the era of neo-globalization. The research aims to study the main trends in the development of international trade in the era of neo-globalization and make forecasting scenarios reflecting the prospects and strategies for building international economic (foreign trade) relations.
Literature Review
The essence and contradictions of international trade in the era of neo-globalization are revealed in the works of authors such as Bobde and Bhattacharya (2020), Evdokimov and Guliyev (2020), Ketko et al. (2020), Mihaylov and Sitek (2021), Shikha (2019), and Yadav (2021). The peculiarities of international trade in the digital economy are considered in the works of scholars such as Azmeh, Foster, and Echavarri (2020), Basu Bal and Rajput (2018), Brynjolfsson, Hui, and Liu (2019), Hooton (2019), Ma, Guo, and Zhang (2019), Morozova, Kuzmina, Kuzmina, Shevchenko, and Avdeyuk (2021), and Popkova, Bogoviz, and Sergi (2021).
Nevertheless, despite the high degree of elaboration of the studied problem, it remains unresolved. The impact of digitalization on international trade is studied fragmentally and needs further in-depth and systematic study, which is the focus of this research.
Materials and Method
The author uses several methods to test the hypothesis. The trend analysis identifies the main trends in international trade and the digital economy in 2017–2020. Using regression analysis, the author studies the impact of digital competitiveness on the manifestations of international trade – free international trade, the index of globalization, and high-tech exports in 2020.
The Monte Carlo method is used to predict the prospects of the digital economy. Future scenarios for the development of international trade are drawn up depending on the perspectives identified. The developed G7 countries and developing BRICS countries are included in the sample to ensure the most comprehensive coverage of different categories of countries (in terms of income and geographic location). The empirical basis of the research is presented in Table 1.
Table 1. Statistics on International Trade and Digital Economy in 2017 and 2021 in G7 and BRICS Countries.
Category | Country | Freedom of International Trade (Trade Tariffs), % | Globalization Index, Points 1–100 | High-Tech Export, Points 1–100 | Digital Competitiveness, Points 1–100 |
2017 | 2020 (IT) | 2017 | 2020 (GB) | 2017 | 2020 (HE) | 2017 | 2020 (dc) |
G7 | Canada | 2.82 | 2.46 | 86.51 | 84.18 | 19.15 | 50.30 | 91.671 | 90.482 |
France | 1.11 | 1.12 | 87.19 | 87.69 | 49.17 | 71.40 | 78.810 | 76.983 |
Germany | 1.11 | 1.12 | 84.57 | 88.83 | 47.41 | 69.60 | 84.108 | 81.062 |
Japan | 1.88 | 2.16 | 72.26 | 78.40 | 43.62 | 69.50 | 78.094 | 85.099 |
Italy | 1.11 | 1.12 | 82.19 | 82.82 | 19.22 | 49.10 | 65.467 | 60.911 |
UK | 1.11 | 1.12 | 87.26 | 89.39 | 31.39 | 61.80 | 88.943 | 86.314 |
USA | 1.62 | 1.65 | 79.73 | 82.28 | 24.16 | 50.70 | 95.410 | 100.00 |
BRICS | Brazil | 12.08 | 12.34 | 61.40 | 64.49 | 13.81 | 44.70 | 52.290 | 52.095 |
China | 11.65 | 11.12 | 62.02 | 64.28 | 100.00 | 91.50 | 71.452 | 84.105 |
India | 12.91 | 14.43 | 52.38 | 62.23 | 10.86 | 40.10 | 54.367 | 54.836 |
Russia | 5.08 | 4.38 | 68.25 | 71.94 | 11.60 | 32.80 | 62.854 | 59.950 |
South Africa | 6.34 | 7.07 | 66.72 | 70.51 | 7.70 | 30.00 | 55.709 | 48.353 |
Results
The trend analysis of changes in the values of international trade and the digital economy in 2020 compared to 2017 provided the following results (Fig. 1).
Fig. 1. Trends in International Trade and the Digital Economy in the Age of Neo-Globalization. Source: Calculated and compiled by the author.
According to Fig. 1, the first trend is related to an increase in the freedom of international trade, which increased from 4.90% in 2017 to 5.01% in 2020 (an increase of 2.16%) in the global economy. However, this trend is characteristic only of developing countries. In the BRICS countries, the growth of international trade freedom was 2.66%, while, in the G7 countries, this growth was negative and amounted to −0.09%.
The second trend is the increasing globalization of the world's economies – the Globalization Index increased from 74.21 points in 2017 to 77.25 points in 2020 (an increase of 4.11%). This trend is manifested more clearly in developing countries – the growth rate of globalization in the BRICS countries was 7.30%, compared with 2.39% in the G7 countries.
The third trend is the intensive growth of high-tech exports, which increased from 31.51 points in 2017 to 55.13 points in 2020 (an increase of 74.94%). This trend is more clearly manifested in developed countries – t...