Good afternoon. Thank you very much. It is a great honor and pleasure to address this Bund Summit. If we're to try to understand what's happening in the world today, maybe one of the approaches we could adopt was to place the GPS, the Global Positioning System, really up there, and then try to look down on it with a panoramic and bird's eye view. And by looking at that picture, if we could summarize it in one sentence, I guess it would be correct for us to say that we are experiencing the metamorphosis of globalization.
Globalization is like an organism. For a number of years, it has some characteristics that define that era. But then these characteristics evolve, they change, and they're going to morph into something else. If everyone in this auditorium and those who are watching us through web streaming could board with me on a time machine and fly back to 1989, we will see that there was another metamorphosis of globalization, with the fall of the Berlin Wall, and the dismantling of the Soviet Union.
Characteristics were very visible. There was the notion that free trade, the free flow of investment, the free flow of people wasgaining pace. Global trade was increasing at a faster pace, with more volume than global GDP. Same for foreign direct investment, regional integration went beyond the economic sphere. And perhaps the European Union was one of the most remarkable examples, a common agricultural policy, but also a common court in Strasburg, a common parliament in Brussels.
Many different areas of the world were getting together in regional integration systems, like NAFTA in North America, like MERCOSUR in South America. So, it was like regional integration was a stopover towards more and more globalization. And the same is true about the spread of global supply chains. We were experiencing a situation in which it was possible to say that the trend was for more and more made in the world goods.
Even when you think about a low value-added goods, such as a volleyball, you would look at a volleyball and the design would be realized in Germany, the glue would come from Indonesia, the packaging would come from Thailand, the marketing would come from Brazil. So, in a very single simple product, the contribution of 5,6,7,10 different countries.
So, these three characteristics that I have mentioned, and I could mention many more, really made for the world where we were experiencing a deep globalization mode. If you want to acknowledge the time references of that phase of globalization, we were probably looking to 1989 all the way to 2008, with the fall of Lehman Brothers, and then my friends, I think we are experiencing a different kind of mode in global affairs. We have left behind deep globalization, and for the past 12 years, we are in the new mode, the mode of de-globalization, where the risk of de-globalization truly exists.
So, more restrictions to trade, more restrictions to investment, more restrictions to the free flow of people, more restrictions in terms of industrial policymaking, it's just like we were living a rebirth, a renaissance of old import substitution strategies that were common in the 50s, and the 60s. The question here, are we going to be in this de-globalization mode for very long? Or is there something else emerging now? Or is there something else that's about to happen?
And my impression is that with this COVID world, or in a post COVID world, we were about to be engaged in a new metamorphosis of globalization. So what is the next chapter of globalization going to look like? In this next chapter, the notion of the next chapter is very important, because if there's one lesson that history teaches us, it is that nations rise when they competitively adapt to the changing contours of globalization, not to mention that nations rise when they help shape the contours of globalization.
So I would like to mention to you at least three characteristics of the next globalization cycle that I think will be with us for the next 25 years, the next quarter of a century. The first one is, there is a change in the tectonic plates around the world. In the year of 2019, for example, the E7, China, India, Russia, Brazil, Indonesia, Mexico, Turkey together, had a combined gross domestic product measured in terms of purchase power parity of $53 trillion dollars. Whereas the traditional G7, the US, Japan, Germany, the UK, France, Italy, Canada, had a combined GDP measured in PPP terms of $40 trillion.
So this emerging world is here to stay. And this is going to manifest in many different ways. I take the example of my country, Brazil. In the first nine months of 2020, Brazil has exported more to Bangladesh, than to all Scandinavian countries combined. Brazil has exported more to Hong Kong, than to the United Kingdom. Brazil has exported more to Singapore, than to France. So there are many different aspects involving trade and investment that will come with this emergence of the E7.
The second characteristic, and one that has a lot to do with the title of our conference here, has to do with the rerouting of value chains. And here, I prefer to use the term value chains and not simply supply chains, because we're talking about a much more comprehensive phenomenon. Not only supply chains are rerouting, but also consumption chains are rerouting. R&D chains are routing. Marketing chains are rerouting. And many people now say that this is happening because of geopolitics. And doubtlessly geopolitics is one of the factors. As I see it, it's far from being the most decisive element in how these global value chains are being reconfigured.
There are at least three other characteristics that are more important. One is the very natural evolution of economies. China, for example, is no longer a low-cost country. It's competing in some of the most state-of-the-art technologies out there. 28 years ago, when I started work at the Science and Technology Division of Brazil's Ministry for External Relations, I did a study on how much each country devoted to research, development and innovation as a percentage of its GDP. And back then I remember that China was devoting about 0.2% of its GDP to research, development and innovation.
Well, China today devotes north of 2% of its GDP towards research, development and innovation. So it's a completely different ballgame. There's more value addition. So in the sense that China is going to become more of a tech-intensive, value-added economy, it's natural, that some of those more labor-intensive activities that were once housed in China during this long period of deep globalization, try and find opportunities elsewhere. This is not new in history.
Perhaps the most recent example of this phenomenon is the one that occurred between Japan and the so-called Asian Tigers, as many corporations projected out of Japan towards its geo-economic vicinity, and once again, as a result of Japan's economic evolution. So this is something that we are going to see.
Two other characteristics. International trade agreements going forward are as much as about trade as they are about investment. So the way countries come together in defining the rules for the flow of investments will also be a major impacting characteristic in how value chains are configured.
And forth, with even with all of the availability of capital out there, and manufacturing hubs looking for the best place to locate or relocate their economic activities, this will depend very much on the kind of domestic reforms each country is willing to embrace, so as to become more competitive, and more friendly to business. Well, the last characteristic of a very chief nature, in this next chapter of globalization, has to do with something that at the World Economic Forum, some are calling the rise of talent-ism, a new age of talent. Talent has become such an important factor of production that perhaps it's outplacing capitalism.
Some say that we shouldn't even talk about capitalism anymore, but about talent-ism. But talent, unlike our traditional understanding, will not be only about vocations. It will be about the transition to value addition. So in this new age of talent, at the individual level, there's a transition from the expert to the multitasker. At company level, at firm level, there's a transition from core business to a 360-degree approach, looking for opportunities.
And at country level, this new age of talent means that we are living in a world in which you see the immobilism of traditional Ricardian comparative advantages to a world in which you can build competitive advantages based upon technology. So this new age of talent is the third characteristic of this next chapter of globalization.
But then, I'm here in Shanghai, heading a multilateral development bank, a New Development Bank. And from what I've seen so far, there is a major role to play for multilateral development banks in defining, in a positive way, this next chapter of globalization, and this impact can be even more benign, if all development banks become New Development Banks. And they are going to be new, if they are able to accomplish at least three objectives.
One, development banks have to have their eyes open for the metamorphosis of infrastructure. We traditionally thought of physical infrastructure here, technological infrastructure there, and it's all going to be about smart infrastructure. So even in the traditional physical areas, there's going to be an important element of technology. Not to mention that the other day, I was talking to a very prominent public intellectual, and I asked him, what do you think is the most important infrastructure challenge today, and he was telling me, well, Marcos, in the world, as we speak, that are about 500 million children, half a billion children that do not have access to school, because of the pandemic, because of social distance, but also because they do not count on the basic connectivity elements to allow them some sort of distance education.
So it's natural that development banks have to pay attention to this evolving metamorphosis of infrastructure and play a constructive role there. Second, multilateral development banks must lead the conversation in terms of what development policymaking is going to look like towards the future. The traditional export led model, domestic market led model, state led model, private sector led model, everything is going to be recombined from now on, and therefore, development banks have to play a leading role in that conversation.
And thirdly, as many of my predecessors have mentioned here, this situation we are living today brings about an extraordinary deficit in terms of international cooperation, unlike other crisis where the domestic response was balanced with the collective response. Today, there is a deficit of international cooperation. So if multilateral development banks can strengthen their role as hubs for international cooperation where nations can come together and work constructively on the issues in which they have shared interests, I think the road ahead would be much more smooth, and leading to the prosperity of all. This is what we want to do at the New Development Bank.
And by the way, here's an invitation for the Bund Summit organizers. It is my great satisfaction to say that come next year 2021, the New Development Bank will have its new headquarters in one of the most modern and green buildings in the world here in Shanghai. And what an honor it would be for us to house the third Bund Summit. Thank you very much.
