Globalisation is at a record high despite the pandemic and geopolitical conflict: DHL report

Globalisation hit a record high in 2022 and remained close to that level in 2023 despite a series of global shocks over the past decade, including the pandemic, wars in Ukraine and Gaza, the US-China trade conflict, and the UK's withdrawal from the EU, the DHL Global Connectedness Report, 2024 said.

This evidence strongly rebuts the notion that the growth of global flows has gone into reverse. Trade growth played a crucial role in boosting global connectedness, said the report, adding that the share of global output traded internationally hit a record high in 2022 and, after a slowdown in 2023, is expected to accelerate in 2024.

The report, released by DHL and New York University’s Stern School of Business in Delhi on Wednesday, is regarded as one of the most comprehensive available analyses of the state and trajectory of globalisation. It tracks flows of trade, capital, information and people to measure the globalisation of 181 countries and territories.

The globalisation of information flows has been especially strong over the past two decades, even though the latest data shows this growth has stalled, partly due to less research collaboration between the US and China, the report said. Corporate globalisation is rising, it added, with companies expanding their international presence and earning more sales abroad.

John Pearson, CEO, DHL Express, said, “The [report’s findings] unequivocally dispel the notion of globalisation reversing course. Far from being a mere buzzword, globalisation is an influential force that has profoundly reshaped our world and has further great potential. Expanding markets and fostering opportunities empower individuals, businesses, and entire nations to flourish in unique ways. Embracing globalisation allows us and our customers to forge a promising future, fostering an increasingly interconnected world, more prosperous for all, and poised for further growth.”

The report said there was considerable potential to continue growing global flows. It pegged the world’s current level of globalisation at just 25%, with 0% meaning no flows across national borders and 100% meaning the disappearance of borders.

Headroom

Singapore is the world’s most globalised country, the report said, with the Netherlands and Ireland at second and third. It added that 143 countries have become more globally connected, and only 38 less so. Europe is the world’s most globally connected region, followed by North America, and the Middle East & North Africa, said the report.

The report also said, however, that US-China ties continue to diminish, with the shares of both countries' flows to the other decreasing by about 25% since 2016. However, the two countries remain significantly connected, with larger flows than almost any other pair of nations. Russia and Europe have decoupled, resulting in Russia facing an unprecedented drop in connectedness – more than twice as much as any previous decline on record among the world's 20 largest economies. At the same time, the data showed that there is no wider split of the global economy between rival geopolitical blocs, the report said.

It said that predictions of a global shift from globalisation to regionalisation are not – at least not yet – borne out in patterns of international flows. In fact, most international flows are taking place over the same or even longer distances. In the realm of trade, only North America showed a clear shift to more regionalised trade patterns.

The India story

Regarding India, the report said that the world’s fastest-growing major economy was poised to play an increasingly central role in the development of globalisation over the coming decades. This year’s DHL Global Connectedness Index ranked India 62nd out of 181 economies on globalisation, based on 2022 data tracking international flows of trade, capital, information, and people. This rank reflects both the geographic reach of India’s international flows (the ‘breadth’ dimension of the index, on which India ranks 16th) and the size of India’s international flows relative to its domestic activity (the ‘depth’ dimension, on which India ranks 161st).

Large countries naturally have a higher share of their activity within their national borders (resulting in low depth scores). But they also have the scale required to support direct ties with a wide variety of countries all around the world (leading to high breadth scores). Thus, for example, the US ranks 2nd on breadth but only 122nd on depth (and 44th overall). Similarly, China ranks 23rd on breadth and 171st on depth (80th overall), said the report.

The DHL Trade Growth Atlas 2022, a sister publication of the connectedness report, identified India as one of three countries forecast to excel on both the speed (growth rate) and scale (absolute amount) of their trade growth between 2021 and 2026. Current forecasts continue to highlight India’s strong trade growth prospects and data on international investment plans in India’s manufacturing sector point to substantial momentum in India’s integration into global and regional supply chains.

Of the four pillars of the DHL Global Connectedness Index (measuring trade, capital, information, and people flow), India’s highest rank was on capital flows (35th out of 159 countries). This was due mainly to the strength and the diversity of India’s announced greenfield foreign direct investment (FDI), mergers and acquisitions, and portfolio equity investment, said the report.

India’s current connectedness profile is consistent with expectations, but the country’s economic trajectory implies that expectations for India’s connectedness will rise swiftly in the coming years. A more globally connected India would both reinforce the country’s growth and development and make it an increasingly important partner for other countries’ international flows, the report added.

It said businesses around the world were increasingly focusing their expansion plans on India. “This is mainly driven by India’s attractive growth prospects along with efforts to diversify China-centric supply chains and business models (“China + 1 strategies”). There was a surge in the value of announced greenfield foreign direct investment (FDI) projects in India by foreign companies in 2022, followed by a smaller increase in 2023. In 2023, companies announced plans to invest more in greenfield FDI in India than in any other country except the United States,” the report said.

Companies cited a wide variety of reasons for choosing to invest in India, the report said. The most prominent motive by far was the growth of its domestic market. Many companies saw great market potential in India, and the country’s skilled workforce was also a major factor in attracting investment into the country, the report said.

The DHL Global Connectedness Report (previously DHL Global Connectedness Index) provides insights into globalisation trends by analysing 15 types of international trade, capital, information, and people flows. The 2024 edition was based on almost nine million data points. It ranked the connectedness of 181 countries, accounting for 99.7% of the world's gross domestic product and 98.7% of its population.