As Covid-19’s Danse Macabre continues to play out through the economy, questions are increasingly being asked about the future of globalisation. The pandemic has dealt a serious blow to public confidence in the economic and commercial virtues of our interconnected planet, with the tide now shifting definitively towards greater autonomy, less free movement and diminished free trade.

The question is, what implications does this have for businesses in Scotland, which have been told repeatedly through the years that their economic fortunes are largely dependent on an international outlook? What will recovery be like in this new and less open world?

Even before the outbreak, globalisation was in trouble. Driven by price and manufacturing efficiency – regardless of location – its mutual dependencies were meant to guarantee stability. But geopolitical tensions from Brexit and the US-China trade war were furthering a trend kicked off by the collapse of Lehman Brothers in 2008, which led to a stagnation in trade and foreign investment that never emerged into full recovery.

In a virtual debate hosted earlier this month by the foreign policy think tank at the London School of Economics, Professor Michael Cox, the group’s director, talked about the deglobalisation pressures already evident prior to the pandemic. As the disease forced the world’s top 10 manufacturing nations into simultaneous lockdown, the hunt for local suppliers acutely intensified.

“The 2008 financial crisis certainly did a massive amount of damage to globalisation, putting it under immense stress with the rise of populism and the challenge to globalism, particularly in the US,” he said.

“It raised a whole host of questions around the relationship between national economies and societies, and their integration into the wider global economy. So in a way, the challenge to globalisation we’re witnessing isn’t a new problem.

“However, at this moment in time, the challenge has intensified to a huge degree. People are now asking the question of whether Covid-19 has undermined globalisation all together, due to the fragmentation of the world economy.”

Though none foresaw the catastrophic black swan of novel coronavirus, some companies were already putting contingency plans in place to deal with potential shocks to their cross-border supply chains. Many of those plans have been co-opted into strategies for coping with the health crisis, which has simultaneously sent the rest of the business world into a scramble to secure their operations.

In the search for resilience, corporations around the world are examining their options for on-shoring or “near-shoring” certain manufacturing operations, along with the relocation of research labs and service centres. Similarly, the push is on for shorter and more diverse supply lines.

The catchphrase that’s been coined for this is “economic distancing”, as firms try to isolate themselves as much as possible from the spillover of events outside their control.

It has been estimated that multinational firms could cut their cross-border investment by up to one-third this year. Meanwhile, countries from the US and Europe to South Asia and the Far East are extolling the virtues of economic self-reliance, with citizens urged to buy nationally and corporations under pressure to repatriate factories.

But a rush to shore up defences in this sort of way brings with it the perils of an overly-protectionist world. One recent example of this in Scotland happened in October, when the latest chapter in a 15-year battle between the US and the EU over illegal subsidies for aircraft manufacturers sparked the imposition of a 25% tariff on single malt exports to the United States.

Whisky was by no means the only product targeted as American officials retaliated against what they say are illegal state subsidies that give Europe’s Airbus an advantage over US-headquartered Boeing. But with about £1 billion of Scotch exported to the United States every year, it was a significant blow to the industry.

Whisky has spearheaded the growth in recent years of Scottish exports, which according to latest Government estimates hit £85 billion in 2018, a 2.9% increase on the previous 12 months.

Scotland’s biggest market is in selling goods to the rest of the UK, which accounted for £51bn of exports in 2018, a rise of 2.5% on the previous year. On the face of it, this would seem to indicate that about 60% of Scotland’s exports would remain relatively sheltered from any broader protectionist fallout. However, that doesn’t account for the fact that many goods – particularly in the manufacturing sector – are components shipped to customers who in turn are assembling larger pieces of equipment sold internationally.

Trade with countries in the European Union was worth more than £16bn, an increase of £695 million against 2017. That 4.5% rate of growth was faster than for any other market for Scottish exports.

How those sales will be affected remains to be seen, particularly with the additional uncertainty of the UK Government’s continuing push to exit the single market on January 1.

Scotland’s biggest single foreign market was the United States, accounting for £5.5bn worth of exports.

However, the period under review was prior to when tariffs were enforced on whisky and other Scottish goods.

As important as they are, exports are only one side of the economic coin that would be tarnished if deglobalisation pushes us into a world of acute protectionism. The stream of vital elements such as raw goods, labour, intellectual and financial capital into Scotland would also be restricted, with equally damaging consequences.

Globalisation has flowed and ebbed throughout its evolution, so it would be foolish to say that Covid-19 will be the final nail in the coffin of worldwide economic integration. But compared to the latest epoch that emerged in the 1990s and took globalisation further than ever before, what comes next will look and feel far more like isolationism than anything in recent memory.

This will pose additional problems as business and Government leaders map out their economic recovery plans.

No single nation is capable of putting a halt to deglobalisation, so the next best step is to craft contingency plans to accommodate it.