How will a post-coronavirus Asia look like?

It may be too early to predict what will happen in the post-coronavirus world. Yet already one hears that when the crisis is over, the world will not be the same. For example, globalisation will surely decline and nationalism will rise instead, because many people believe globalisation is responsible for the spread of the pandemic.

Undeniably, easy international travel and borderless mobility contributed to the spread of the disease.

However, the reverse of globalisation will not be easy because you cannot possibly deglobalise an already globalised world. As New York Times columnist Thomas Friedman said in his recent interview with the Dong-A Ilbo, globalisation will continue even after the pandemic. He said that perhaps there may be some setbacks in the economy and trade but globalisation has many other faucets that will continue to run. Of course, there may be some new restrictions and limitations on previously free activities, but we cannot stop globalisation.

The distinguished Israeli historian Yuval Harari wrote in his recent column, The World After Coronavirus, that the post-coronavirus era might see the advent of a Big Brother that closely monitors and controls the people under the excuse of emergency. Nevertheless, Professor Harari is optimistic, too; he also wrote that in the post-coronavirus era, the global village might share information and communicate with each other faster than ever, hence the world will keep globalising.

Others predict that a flood of reshoring will occur, bringing factories back from overseas to their own countries.

Experiencing economic calamity during the pandemic, people now realise that without factories supplying parts and merchandise in their own country, they cannot withstand an international crisis such as Covid-19.

If such a phenomenon prevails, those countries that have provided cheap labour for foreign companies will inevitably take the heaviest blow. Countries whose economy depends on international trade will suffer, too, as many countries will reduce import for a while. After the pandemic, therefore, quite a few countries will face unprecedented economic recessions.

The wounds inflicted by the coronavirus will surely leave indelible scars in our world. Still, however, we should try hard to make this catastrophe a new opportunity to build a better world.

Since its accession to the World Trade Organisation, China has been increasingly integrated into the global value chain. But as China has become more embedded into the global value chain, it is increasingly dependent on the global supply chain. That means that whenever a crisis strikes, all it takes is an interruption in one part of the global value chain for the entire supply chain to grind to a halt.

The novel coronavirus has proven more deadly than trade frictions, as the latter are manageable to a certain extent. It is hard to gauge the duration of the epidemic and its effects. Additionally, the diminishing demographic dividends in China are squeezing its comparative advantage. Competition has been fierce in the textile, electromechanical and chemical industries, given the high degree of similarity in exports between China and South-east Asian countries and the overlaps in export destinations. As the cost of labour in China is rising, developed economies are moving their factories to more cost-competitive countries in South-east Asia, including Vietnam and Cambodia. The novel coronavirus is likely to catalyse this shift of labour-intensive industries.

The coronavirus will also affect the supply chain through both supply and demand. Domestic demand for production and consumption will plunge in the immediate term, which will squeeze imports. On the supply side, most domestic factories have pushed back their reopening dates due to the outbreak, which has hindered the production processes in downstream companies overseas.

The foreign epidemic situation, especially in developed countries in Europe and the United States, is out of control unexpectedly, which means China's economy faces the pressure of both sides of supply and demand again.

In terms of trade structure, the hardest-hit economies will be the ones that are heavily dependent on China for supply or demand. Countries in the upstream of the global value chain are mainly resource exporters, especially those that rely on oil or mineral exports, such as Saudi Arabia, Russia, Brazil and Australia.

Countries in the downstream are mainly developed economies such as the United States - one of China's biggest trading partners.

As US companies move their suppliers from China to Canada and Mexico, the pandemic will accelerate the decoupling of the US and China in the global value chain.

Among Asian countries, China is the largest export destination for Japan and the Republic of Korea, while both are the largest and second-largest source of imports for China. As all three countries have been hard hit by the virus, they will struggle to maintain their value chain as it is.

In 2019, Asean replaced the US as China's second-largest trading partner. As Asean countries are not among the hardest hit by the epidemic, the China-Asean value chain has only suffered mild impacts.

On the other hand, China's total trade with the European Union, its largest trading partner, saw a significant decline. Compounded by the gravity of the epidemic in Europe, Sino-European trade can also expect to take a big hit in 2020.

Even though the epidemic has been contained in China and things continue to improve, the virus is spreading rapidly in China's major trading partners, Europe and the US, which translates into rising trade risks. The risk of decoupling is real.

While it is impossible to predict the exact type of scar that Covid-19 will leave, we do know that the world after this catastrophe will look very different. The big question is, in what ways? Recent developments provide us with some hints.

First, the economic impact of Covid-19 will be worse for developing countries like Pakistan. Since the developed world has more fiscal space, the countries are able to afford a situation where businesses shut down while their governments foot the bill.

Developing countries, unfortunately, do not have the fiscal space to pay for people to stay home for a long duration.

Second, government power has been used in unprecedented ways across the world which will have implications for how governments function in the future. Sacrosanct freedoms such as freedom of movement and religion have taken a back seat, at least temporarily. It is quite likely that governments in the post-Covid-19 world will be bigger and more powerful. This is something that citizens around the world need to guard against.

Finally, Covid-19 might shift the global power structure from the Western world towards East Asia. Ignoring the possibility of a second wave of infections in the future, current evidence has pointed towards the effectiveness of places like China, South Korea, Taiwan and Singapore in "flattening the curve" even when these countries had less response time compared to Western nations.

Power shifts in the global world order are unlikely to happen quickly, but the Covid-19 crisis can certainly act as a potent catalyst in this process.

After the crisis is finally over, we will be faced with a fork in the road. One path will be to try to go back to business as usual as it was before the pandemic. The other path is an opportunity to forsake the "business as usual" model and move towards a completely different future.

An important disruption of the coronavirus on the old normal is our dependence on oil and other fossil fuels to provide energy to the global economy. As the global demand for oil drops drastically due to the lack of economic activity, the price war between the oil producers is removing the veil that used to protect their cartel-like collusion to keep prices higher.

Another revelation is that the destruction of biodiversity and the potential of viruses to jump from animals to humans (which we had so far ignored) have revealed how shortsighted our actions have been. If we ignore this particular revelation and go back to business as usual, we will have shown that we are beyond redemption.