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Elections in 2024 Will Cement a New Era of Security-Centric Globalization

April 30, 2024

Four billion voters across more than 60 countries are deciding the direction of their nations in 2024. Regardless of who these voters select, 2024 bookends a period of transition from a 20th century model of globalization to a new era of 21st century, security-centric globalization. This new model of global commerce, which will be cemented through this year’s voting in countries including the United States, EU, India and Mexico, is defined by an increasingly familiar playbook for “nation first-ist” governments. It is built around new constellations of regional and ideological clusters. It recognizes the primacy of security over everything else, including economic prosperity driven by the free flow of goods, ideas, people and capital.  And it subjugates globalist efficiencies and supply chains to a patchwork of more resilient, protectionist and sometimes duplicative regional economic and ideological hubs. 

The outcome of these elections will mean 2024 marks the end of a period of gestation that began in 2016 with Brexit, the election of Donald Trump and the realization that Xi Jinping intended to hold on to power and accelerate a more full-throated agenda of Chinese nationalism.  The intervening eight years have witnessed a slew of developments—including trade wars, novel use of industrial policies, the COVID-19 pandemic, climate-driven migration and the launch of interstate wars and armed conflicts—which have reinforced the forces that first came to the fore in 2016.  

As we enter 2025, we will see an acceleration in protectionism and fragmentation, with further advances in industrial policies in the name of security—national security, economic security, health security and other security-inspired constructs. In short, this 21st century model will make the success of businesses much more beholden to government intervention and activism, anointing winners and losers in their home markets—and in some cases beyond. Their actions are defined by: 

Restrictions. Governments will increasingly deploy arsenals of tariffs, sanctions, capital constraints, blacklists, rule of origin mandates and other mechanisms that stop the businesses of geopolitical rivals from trading with and investing in their countries. Think U.S. tariffs on white goods, EU’s Foreign Subsidies Regulation, China’s Unreliable Entity List and India’s bans on Chinese mobile apps using its Information Technology Act, among others.  

Incentives. Whether historically left or right-leaning, newly empowered political leaders will subsidize home market interest groups and companies from “friendly” nations. They will use tax breaks and procurement preferences. They will underwrite research and development and other investments to spur public and private investment in what are deemed industries that are “essential” because they align with policy priorities (such as the green transition or defence), or because they are seen as being pillars of the future (like AI, quantum computing and next generation life sciences).  Think the United States’ CHIPs Act, Italy’s Superbonus energy efficiency tax credits, Argentina’s Incentive Regime for Large Investments and South Korea’s “K-Chips Act” for semiconductor investments. 

Activism.  With the wind of public sentiment in their sails, state agencies will employ a range of legal and rhetorical mechanisms that add roadblocks to cross-border commercial and investment activity, including antitrust reviews, foreign ownership limits, investigations and dawn raids, data localization mandates, standards requirements and normative screenings on topics such as human rights, social justice and climate.  Think the United States’ Uyghur Forced Labor Prevention Act, Adobe-Fagma and Intel-Towers Semiconductor acquisitions, Committee on Foreign Investment in the United States review of U.S. Steel-Nippon Steel acquisition; UK’s Telegraph sale and EU’s Digital Markets Act. 

To be clear, this does not mark an end to globalization. Very few countries can be entirely self-sufficient and most governments know their growth and prosperity rely on trade and cooperation with other states to fulfil the needs and aspirations of their people. While the United States is perhaps the only country that has the inherent resources, wealth and demographic profile to cut itself off from the rest of the world, even it would suffer extreme economic pain if it were to close its borders entirely.  

The temptation would be to view this new era of security-first globalization as a zero-sum game where businesses must pick a side and give up well-established business interests in the opposing hemisphere.   

Four strategies companies can use to avoid this costly and limiting scenario include:    

  • Know your security exposures. Audit supply chains, investors, customers and business partners and perform red team exercises to find and address vulnerabilities, whether real or potential. 
  • Lead with local value ecosystems. Identify local ecosystem beneficiaries who wield political power and significance.  This might be second or third tier suppliers, the enabling power of products or alignment with political or national agendas.   
  • Find competitive advantage. Create mechanisms to monitor and pursue local incentive programs, engage a wide variety of stakeholders to gather local insights and intelligence and look for ways to differentiate from competitors that may be less attune to the wider context.   
  • Adopt multi-local strategies. Ultimately, it may be necessary to establish parallel operations that share core intellectual property but cater to different markets. This could include parallel supply chains, governance structures, data management procedure and product brands.  

Geopolitical “redlines” will inevitably render some markets irretrievable for companies from overseas, such as defence and telecommunications. And apparent “white spaces” will exist for global companies in the most benign of industries. But for most, the era of security-centric globalization will be defined by commercial “grey areas” that require agile navigation and astute advocacy. While elections will generate headlines, the trendlines are set for the second quadrans of the 21st century. In our geo-commercial world, the era of security-centric globalization is upon us. 

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