The COVID-19 pandemic is a significant de-globalisation shock at a time when globalisation was already under challenge from President Trump’s trade war. Post-pandemic public policy responses can either compound or alleviate this shock.
A push for greater economic sovereignty aimed at increasing resilience with respect to foreign shocks would continue recent trends which hinder globalisation. At the same time, policymakers around the world are keen to re-boot their economies’ productive potential to recover from the global downturn.
This report shows re-establishing international connectedness can help boost productivity in ways which are consistent with increased resilience to international shocks. The report extends the author's previous Failure to Converge? publication on the Australian-US productivity gap by examining the relationship between measures of globalisation and productivity across the Organisation for Economic Cooperation and Development (OECD) economies for the period 1970 to 2017.
The findings of the report can be used to measure the cost to labour productivity and living standards from the COVID-19 de-globalisation shock, as well as the costs and benefits of post-pandemic policy responses aimed at either decreasing or increasing international connectedness. Coordinated diversification of trading partners within the US alliance network can increase resilience to international shocks and reduce dependence on individual countries as a source of supply.