It cannot go unnoticed that the world's leading business newspapers and magazines, which have always promoted individual freedom, democracy and the free market, have raised many doubts over the future of globalisation in recent weeks.
They substantiate their argument with few key, staggering developments from key countries in the global value chains (GVCs) jigsaw. Among others, Korea's exports fell by 46% year to year and Mexico's car exports decreased by 90% in the first weeks of May; 21% of container shipping routes were cancelled in April; overall, the World Trade Organisation (WTO) expects global trade to fall between 10% and 30% this year.
As an international specialist in free zones I have received multiple calls asking what will be the role of free zones within this fragmented and new process of deglobalisation or slowbalisation. My answer is based on five major assumptions.
First, free zones will allow the relocation of distant value chains to more regional production processes. New terms such as national industrial sovereignty, pharmaceutical sovereignty, redundant supply sources and reshoring will demand locations free of bureaucratic procedures and taxes to allow the transfer of complete production processes at the lowest costs.
Second, world trade will increase between 21% and 24% in 2021, according to the World Trade Organisation (WTO), after a decline between 13% and 32% in 2020. Although different geographies and markets will experience different patterns of growth, it will involve thousands of square meters of new industrial and logistics facilities.
Third, the Covid-19 crisis entails greater personal distancing. As a consequence, there are companies that have requested up to 30% of additional space to guarantee sanitary safety.
Fourth, national and regional governments must design incentives for industrial and logistics park developers to promote these projects at the lowest possible cost: free trade zones are the best instrument to achieve this objective.
Fifth, the contact-free economy that will be developed because of Covid-19 will require drastic changes and spur further the development of new products and services. Things like e-commerce, telecommunications and digital content will support the rise of high-tech and automated industrial processes across geographies. That is why free zones, which in the last 50 years have been testbeds for new business processes and practices, will have a second, more powerful chance to shine this time around.
Martín Ibarra Pardo is the chairman of Araújo Ibarra & Asociados, a law firm based in Bogotá. He also serves as vice-president of the World Free Zones Organisation.