Integration Without Coordination: Revisiting Globalization in the Light of the Pandemic

Free trade has led to extreme specialization, e.g., most of the world's supply of APIs for medicine come from China, critical software and microchips come from the US, etc. Therefore, a lockdown in one country can have serious effects on other economies by rupturing the global value chain. This would be bad enough; what makes it much worse is that the pandemic response across nations is not coordinated, and so lockdowns happen in a staggered way across nations. Trade liberalization without global governance has not only helped us reap all the benefits of comparative advantage but has also exposed the global economy to much greater risks. We explore this efficiency-risk trade-off and draw some normative conclusions.