More Details on Globalization Study

The Global Connectedness Index (GCI), a study released by DHL last week indicates that globalization is still not as advanced as most people believe.

The DHL Global Connectedness Index 2011 examines data on 10 different types of international flows, covering the categories of trade, capital, information and people, over the years from 2005 to 2010. Unlike existing indices, the GCI analyzes not only the depth of countries’ cross-border interactions but also their geographic breadth – distinguishing countries that are truly connected across the globe from those with deep ties only to a small set of partner countries. Additionally, it is based exclusively on hard quantitative data.

The 2011 GCI found that the 10 most connected countries are the Netherlands, Singapore, Ireland, Switzerland, Luxembourg, the United Kingdom, Sweden, Belgium, Hong Kong (China) and Malta. The diversity of the leading countries is even greater in the top 50 list, which includes representatives from all six continents. These patterns indicate that the benefits of connectedness are accessible to a broad range of countries, not just trading hubs that lead many other globalization indices.



“The positive impact of global connectedness on world prosperity will continue to be of great importance. The misgivings some political leaders have about increasing global integration are misplaced; its benefits far outweigh the potential downsides,” said Ghemawat.

 Key takeaways from the index include:



• The actual level of connectedness today is much lower than commonly believed; its potential for positive growth, therefore, is significant.



• The Netherlands ranks No. 1 in terms of overall connectedness, Hong Kong scores the highest regarding the depth of its international connections, and the United Kingdom tops the list for the breadth of its connections.



• Despite increasing its trade interaction in recent years, the United States ranks No. 25 overall. The United States is a leader in term of breadth (#3), but as is expected for a country with a very large internal market, it lags on depth (#84).



• The lion’s share of international connections are still concentrated among countries that share borders (such as in Northern Europe) as well as cultural and historical ties, which indicates that much of today’s globalization is actually regionalization.



• Larger countries score higher on the global breadth of their connections; smaller countries excel in the depth of their connectedness.



• Countries that pursue public policies that directly encourage greater international flows, as well as policies that improve the domestic business environment, can enhance their global connectedness.

Georg Schaur, assistant professor of economics, The University of Tennessee told SCMR that if national initiatives shorten transit times, exporters and importers to benefit, because trade times decrease for both.

“Firms like short response times to smooth uncertainty,” he said. “The bottom line is that firms like short response times for many reasons other than just capital cost savings of short delivery times.”