In our recent publications, we advanced the ideas of hemispheric governance and the involvement of hemispheric blocs in global economic diplomacy[1]. We also argued in favor of a significant role that hemispheric formations could play in the emergence of environmental accords seeking to resolve some of the key challenges such as climate change[2]. But perhaps an even more fundamental question is whether there is any scope for the hemispheric platforms to play a role in transforming the global economy and to address its key economic/macroeconomic imbalances. In our view, there are a number of areas where a hemispheric perspective and platform formation could assist the global economy to address ongoing challenges in such areas as optimizing sustainable investment practices and capturing efficiency gains from seasonal variations in agricultural production.
In the production sphere the most obvious area of complementarity between the Southern and Northern Hemispheres is the seasonality in agricultural production, whereby due to opposite seasons their planting, growing, and harvesting periods are separated by around six months. With due coordination across borders, this creates scope for a continuous, year-round cycle of global food production and supply. The case for coordination across hemispheres is further strengthened by the trends of the past decades associated with a rising share of the Southern Hemisphere in the production of some of the key agricultural products (C. Zulauf (2023)) – in particular the share of world corn produced in the southern hemisphere rose from 14% in 1977/78 to 18% in 2010/11 and further to 23% in 2022/23. The respective share of world soybean production grew from 18% in 1977/78 to 55% in 2012/13-2014/15[3].
Attaining greater efficiency in production, supply logistics and storage/inventory would benefit from coordination at the hemispheric level, whereby such seasonal supplies across hemispheres would face lower import restrictions through low-tariff quotas and simplified non-tariff barriers. Such agreements could be forged between the respective hemispheric platforms if and when they are created in the G20 and the WTO[4] and would need to be supported by due monitoring/traceability and certification systems. It should be noted that there are already precedents of using instruments such as seasonal tariffs in regional agreements (EU, USMCA). There could be further scope to coordinate supply logistics and secure delivery routes within such a framework to facilitate such seasonal trade, given its benefits for stabilizing food price dynamics and raising the reliability and continuity of food supplies.
With respect to solar energy generation, existing studies reveal potential benefits from photovoltaic systems being deployed in a way that takes advantage of the alternating seasonality between the Northern and Southern Hemispheres. As noted by Lingfei Qi et al (2024), “in Sweden, the winter is very long and the solar radiant intensity is very weak, so the power generation efficiency of the photovoltaic system is very low during this period, leading to the waste of photovoltaic resources in winter”[5]. The authors of this study performed a techno-economic evaluation of a mobile photovoltaic system operating between the Northern and Southern hemispheres – their assessment is that “deploying transferable PV between high latitude regions in the northern and southern hemispheres has good technical and economic benefits”[6]. We note, however, that testing such a system may take time as it may be susceptible to the risks of high carbon footprints as well as the potential damage and overall transportation costs associated with moving the transferable PV system across the equator[7]. While reservations with respect to the viability of this approach may be significant at this stage, if tested successfully, the operation of such a system would benefit from coordination between the Northern and the Southern hemispheric platforms with respect to the elaboration of the respective ecological standards and economic efficiency criteria.
Another potential area for hemispheric economics may be the creation of digital twins of the Earth across hemispheres. In fact, such projects already exist in the form of high-resolution earth system models such as nextGEMS and the digital twins of the Earth such as DestinE, the Earth System Digital Twin (NASA’s project), NVIDIA’s Earth-2[8]. In developing such models, it may be possible to simulate the scenarios of climate change and policies geared to mitigating the effects of global warming in the respective climate zones pairs across the Northern and Southern hemispheres. This approach could support the creation of environmental alliances in the global economy, with our model of environmental policy coordination[9] calling for replicating environmental alliances in the climatic zones of the Southern hemisphere to the respective climate zones/environmental alliances in the Northern hemisphere.
In terms of the global imbalances between savings and investment, a hemispheric perspective could be particularly productive. At this stage, there are no Sovereign Wealth Funds (SWFs) from the Southern Hemisphere (SH) in the global top 10 by assets under management (AuM), the only representative in the top 20 from SH is the Australian Future Fund. The same imbalance is observed with respect to the Western Hemisphere compared to its Eastern hemisphere counterpart – no SWFs in the global top 10 or even top 20 (in some methodologies Canada enters into the top 20 with 1 or 2 of its sovereign funds)[10]. Given the sizeable resource endowments in the Southern Hemisphere, there is a strong case for greater activism in this part of the global economy for the creation of national sovereign wealth funds (we argued for such a SWF to be created in South Africa in particular[11]) and a platform for the region’s SWFs.
Another implication from the imbalances in SWF positioning is the possibility of increasing the allocations from the SWFs of the Northern Hemisphere into sustainable projects and financial instruments from the Southern Hemisphere, benefiting thus from lower geopolitical risks, greater scope for higher returns and creating a sizeable environmental core/foundation whose advances could be replicated across the rest of the global economy[12]. This allows the world economy to exploit the apparent complementarities in saving/investment between the North (bulk of production and generation of savings) and the South (a less “crowded” investment field with lower geopolitical risks) as well as the West (investment destination with resilient supply chains and scope for technological development) and the East (primary application of technology to drive greater production). With the Western and Southern hemispheres mostly exhibiting relatively high debt and twin deficits, they are likely to feature as net recipients of investment, with fund flows mostly sourced from the Northern and Eastern hemispheres that are increasingly dominated by the external surplus regions in Asia. A hemispheric approach to boosting cross-border investment would provide for a more diversified structure of fund flows that is not as fixated on the US, that exploits the complementarities in the savings/investment cycle across hemispheres and benefits to a greater degree South-South investment cooperation.
In the trade sphere, greater alignment of cross-country flows along hemispheric lines would serve to boost intra-hemispheric trade, diversify the sectoral and regional structure of international flows of goods and services, create new trade routes and connectivity infrastructure. In terms of intra-hemispheric trade, there is significant scope for boosting international economic cooperation in the Southern Hemisphere, where connectivity across the main sub-regions such as the South Atlantic, the Indo-Pacific and the South Pacific remains underdeveloped, with most of the commercial flows being directed towards the North. This intra-hemispheric route would serve to diversify the sectoral structure of the regional economies in the Southern Hemisphere towards services, including those pertaining to international finance and transportation connectivity. It would also provide a hemispheric platform for aggregating existing regional integration arrangements in the Southern hemisphere (MAPS[13]) and developing broader, hemispheric agendas for trade liberalization.
At the level of companies, hemispheric alignment is increasingly associated with antipodal corporate positioning, backup/reserve systems and diversified/resilient supply chains. Tech corporates such as Huawei locate key operations, data centers, and inventory at near-antipodal points (such as the Shanghai–Buenos Aires antipodal pair)[14] for geopolitical, climate, and operational resilience as well as 24/7 operational continuity. Leading tech giants such as IBM also resort to the “follow-the-sun” (FTS) model – a global workflow model in which tasks are passed across regional teams located in different time zones as their work shift sequentially ends – to ensure resilience and continuity in operations[15]. For global companies seeking to mitigate operational risks and ensure continuity in client services, antipodal positioning and FTS strategies may be employed increasingly to adapt to the growing intensity of shocks and adverse events in the world economy. At the same time, such corporate strategies will drive the economic inter-dependence and inter-connectedness across hemispheres from the micro-level of companies.
Overall, a hemispheric setup to international economic cooperation lends itself naturally to significant complementarities that may be exploited across such macroeconomic areas as trade policy as well as at the micro-level of companies. This in turn argues in favor of greater coordination around hemispheric governance that would allow the world economy to exploit the synergies between the abovementioned areas of hemispheric cooperation, starting with trade, production and investment, leading in turn to a stronger foundation for common environmental projects and digital alliances and further to the formation of a hemispheric economic system that prioritizes complementarities rather than competition and friction. The coordination mechanism within such a framework may be predicated on network and platform mechanisms rather than rigid institutional structures, with the view to imbuing the global economy with greater flexibility and transforming hemispheric formations into engines of economic growth and regional integration. And as is the case with regionalism and the “integration of integrations” paradigm, hemispheric economics is not about replacing the current system of global governance, but rather the provision of supporting pillars to the existing global construct that enable the world economy to derive dividends from the innate patterns of hemispheric geography and seasonality.
[1] https://brics-plus-analytics.org/hemispheric-governance-an-exercise-in-semi-globalism/
[2] https://brics-plus-analytics.org/a-hemispheric-model-of-environmental-policy-coordination/
[3] Zulauf, C., J. Colussi, G. Schnitkey and N. Paulson,. “Comparing Variability of Southern and Northern Hemisphere Production of Corn, Soybeans, and Wheat.” farmdoc daily (13):141, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, July 31, 2023; https://farmdocdaily.illinois.edu/2023/07/comparing-variability-of-southern-and-northern-hemisphere-production-of-corn-soybeans-and-wheat.html
[4] There should arguably be no issue with WTO norms on the MFN principle with such inter-hemispheric accords since in essence they cover by definition all global economy.
[5] https://www.sciencedirect.com/science/article/abs/pii/S0038092X24000598
[6] https://www.sciencedirect.com/science/article/abs/pii/S0038092X24000598
[7] One potential alternative could be space-based solar power (SBSP), though it too is still to be tested as a viable alternative.
[8] https://www.sciencedirect.com/science/article/pii/S2666386426001372
[9] https://brics-plus-analytics.org/a-hemispheric-model-of-environmental-policy-coordination/
[10] https://www.swfinstitute.org/fund-rankings/sovereign-wealth-fund
[11] https://brics-plus-analytics.org/revisiting-the-case-for-a-south-african-sovereign-wealth-fund/
[12] In particular, we see scope for replicating environmental alliances built in the Southern Hemisphere in the corresponding climatic zones in the North – as per our hemispheric model of environmental policy coordination: https://brics-plus-analytics.org/a-hemispheric-model-of-environmental-policy-coordination/
[13] Mercosur, ASEAN, PACER+, SACU/SADC: https://infobrics.org/en/post/91510
[14] https://www.bnamericas.com/en/news/huawei-expands-argentina-cloud-capacity-as-digital-demand-grows
[15] IBM was one of the pioneers in introducing the “follow-the-sun” (FTS) strategy: https://research.ibm.com/publications/follow-the-sun-workflow-in-global-software-development
Yaroslav Lissovolik, Founder, BRICS+ Analytics
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