Geo-economic Fragmentation

 As one may know, the factors that affect economy on the basis of the features of what geography poses, is known as geo-economics. It tells about how economy is seen in various regions, across the political boundaries. This holds a lot of power to make sense of a turbulent world. A recent example includes that of Russia and Ukraine. When US refused to buy oil and gas from Russia as it invaded Ukraine, it didnt lead to a bigger impact as it would have if India and China would've been a part of the coalition. This resulted Russia to still have larger markets to cater and hence only had a limited impact on its economy. This is how geo-economics can play a role in shaping the country's economy even across states. countries and continents. So we can say that economic geography acts as a critical lens to assess the impacts of various policies and interventions a government might take upon  to influence the spatial allocation and distribution of economic activities and resources, such as regional development, urban planning, transport, trade, and environmental policies.

However, in recent times the topic of geo-economic fragmentation can be seen rising up. In economics, fragmentation often refers to a supply chain thats broken up into different parts. Most of the MNCs we see today use the tool of fragmentation to distribute their supply processes and chains into various geo-economic areas. Such as, Apple Inc. has its headquarters in California (Cupertino) but its assembly order of production lies in various countries like China, Japan and Europe. So fragmentation actually helps firms to collect the best resource at the minimum cost and spready their production chain across borders. Not only production, but fragmentation can also be seen in selling. We all use imported products that set the best example for this.

In the recent times, this powerful tool is seen as a culprit, contributing to climate change. You see, since geo-economic fragmentation brings the case of binding relations with other countries it can also pose problems apart from that relating to just trade and economics. Politics, environmental changes and international relations must be taken care of when dealing with the same. Rising trade barriers and trade wars, reduced foreign direct investment (FDI), increased technological decoupling, and weak or faltered multilateralism are some channels through which geo-economic fragmentation could affect global climate targets. Now, trade remains the only channel through which this fragmentation could reshape the global economy. Not excessive trade, but trade in its full form. With trade barriers to only increase trade. With more and more FDI to improve both the parties' economy. Imposing restrictions on trade would diminish the efficiency gains from specialization, limit economies of scale, and reduce competition.

Hence, to conclude, I purely believe that geo-economic fragmentation when used in its perfect sense can be really useful to us and can overcome a lot of problems the global economy faces. This fragmentation has actually over the years, turned to be useful for individual economies but increased fragmentation has also translated to more breakups leading to more trade restrictions between countries or world regions and into a lot less multilateral agreements.