Talk of deglobalisation has been fashionable for years, mainly among environmentalists angry at the carbon cost of air travel. Talk of decoupling has been more recent, spoken mainly in whispers among security-obsessed nationalists. Neither was taken very seriously, if measured by the global reach of multinationals, and steady growth in international trade and foreign investment. But two years of the pandemic, and a colossal sanctions attack on Russia in response to Vladimir Putin’s invasion of Ukraine, have aroused a deafening consensus on the need for both. At the Financial Times , Martin Wolf sadly concludes: “Economic decoupling will now surely become deep and irreversible. I see no way of avoiding this.” Adam Posen, president of the free-trade-leaning Peterson Institute, concurs: “It now seems likely that the world economy really will split into blocs – one oriented around China and one around the United States, with the European Union mostly but not wholly in the latter camp…” Making the issue mainstream in the financial markets, Larry Fink at BlackRock last week wrote to shareholders that “the Russian invasion of Ukraine has put an end to the globalisation we have experienced over the last three decades”. At Harvard, economist Dani Rodrik is certain that Russia’s invasion of Ukraine has “nailed shut the coffin of the post-1989 ‘liberal’ international order”. Whether this gloomy consensus is accurate we will learn in due course, but it has triggered an explosion of hand-wringing. As if the pandemic and the war were not inflicting harm enough, there is a consensus that economic pain will be the inevitable result of even partial decoupling and deglobalisation. On top of historically unprecedented debt, the post-pandemic imperative to augment public health spending, and the inflationary challenge arising from supply chain disruption, there will be the imperative to boost defence spending and diversify supply chains now regarded as vulnerable. All this at a time of impaired economic growth and severe restraints on international cooperation. As Edward Alden, senior fellow at the Council on Foreign Relations in New York, warns: “What we’re headed toward is a more divided world economically that will mirror what is clearly a more divided world politically. I don’t think economic integration survives a period of political disintegration.” As the Post reported last September, research from Capital Economics suggests that of the 218 economies examined worldwide, 114 would fall into the US bloc, and 90 into the China bloc – with the US bloc accounting for 68 per cent of global GDP and over half of trade, and the China bloc accounting for the majority of the world’s population. In such a two-bloc world, many multinational supply chains would either be damaged or compromised. According to Harvard Business Review , there are over a million multinationals operating in China. Why Xi Jinping will do the unthinkable and defuse the Russia threat Apple alone employs between 3 million and 4 million staff. For Intel, China accounts for 50 per cent of global semiconductor demand. Most have taken decades to build supply networks in China, relying heavily on a now-excellent infrastructure, and skills unavailable anywhere else. Harvard Business Review notes that, in 2019, 5 million out of China’s 8 million university graduates had STEM (science, technology, engineering and maths) degrees – more than the US, Japan, Germany, France, Italy, the UK and Canada combined. The Financial Times’ examination of Volkswagen’s operations in China has revealed similar severe challenges. In 2018, VW sold 4.1 million cars in China, accounting for at least half of its annual profits. VW’s group chief executive, Herbert Diess, cannot contemplate withdrawal from China: “If we would constrain our business to only established democracies, which account for about 7 to 9 per cent of world population … then clearly there would not be any viable business model for an auto manufacturer.” Separate from the logistical and commercial difficulties of thousands of Western multinationals, hundreds of thousands of small companies, and millions of Western consumers, would also pay a heavy price for economic decoupling. A 2021 study by the US Chamber of Commerce’s China Centre found that if the Trump-era 25 per cent tariffs were extended to all trade with China, the US would forgo US$190 billion in gross domestic product per year by 2025. If decoupling led to the selling of half of existing US foreign investment stock in China, US investors would lose US$25 billion a year in capital gains, and there would be a one-off GDP loss of US$500 billion. If Chinese education and tourism spending fell by 50 per cent from pre-pandemic levels, it would cost US$15 billion to US$30 billion a year. At an industry level, the study found that the US aviation sector would lose US$38 billion to US$51 billion a year, the semiconductor sector would lose US$54 billion to US$124 billion, US chemicals companies would lose output worth US$38 billion a year, and exports of medical devices would fall by over US$23 billion. This does not take account of losses to the financial sector. Nor does it take account of the cost of subsidies to support home-grown jobs, or tariff walls to protect domestic producers from cheaper imports. Nor the time that would be needed to build domestic production of, say, batteries or semiconductors, power plants or food staples. As of now, there is only the vaguest idea of how the collapse in global cooperation would damage our ability to tackle the challenges of climate change and future pandemic preparedness, both of which require intensive and long-term international collaboration. The pandemic and Putin have opened up a very unfortunate Pandora’s box. Future hopes rest on finding international statesmen who have the skill and vision to close it again. They seem in short supply. David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view