Trade wars and economic sanctions may become a permanent feature of international trade
Hyperglobalization is exhausted. The smoke of the Sino-American (trade) war, followed by the real wars in Ukraine and the Middle East, is being dragged away by ever-widening inequalities and wage stagnation. Even the staunchest devotees of globalization now admit that it has brought ambivalent benefits and that threats, made visible by the pandemic and the disruption of supply chains, do not justify the weak regulatory framework and low labor costs. And the prospects for the global economy are uncertain.
In the USA, the administration of President Joe Biden is looking for economic security from within, while at the same time pursuing supremacy in the global sphere. Many other countries follow this approach and now treat bilateral relations essentially as a zero-sum game. The ascendancy of geopolitics means that trade wars and economic sanctions may become a permanent feature of international trade and financing projects.
After the fall of the Berlin Wall, taking advantage of their dominant position, Western economies extended their model, based on market fundamentalism, to regulate interstate relations through the “deregulation” of trade and capital flows. To convince the big financial institutions that they are not going to interfere with the entire functioning of the market, they set in motion a seemingly irreversible process of delegating power to external rules and autonomous “technocratic” organizations.
Nowhere was this more evident than in the decision in 1995 to replace the General Agreement on Tariffs and Trade with the World Trade Organization. Moreover, major issues have been pushed off the domestic political agenda in many countries, where politicians are not as accountable to the electorate as they are to business. Thirty years of hyperglobalization have led to sharp increases in world market concentration. Although globalization was paradoxically about the integration and integration of economies, it also entailed deconstruction within them. Another paradox is that the countries that benefited most from globalization are those that deviated from its rules, such as China.
Over the past 30 years, more than 800 million people in China have been lifted out of poverty: this means that 70% of global poverty reduction has taken place in China. This certainly would not have been possible if China had not turned to global markets, turning itself into an export superpower. But China ignored the driver of globalization, certainly in spirit, before and after joining the WTO in 2001. The coronavirus pandemic has merged with what has recently been termed a “multicrisis,” the mix of global threats such as high debt and rising interest rates, inflation and the high cost of living, fueling social unrest, geopolitical confrontation and a worsening of climate change and biodiversity loss. To overcome mistrust and maintain multilateral cooperation, we must ensure a fairer distribution of the gains from production and trade and provide citizens with greater security and confidence in the face of changing data internationally.
*Mr. P. Fortunato is an economist of the UN Conference on Trade and Development. The article is published on the “Social Europe” website, socialeurope.eu.