Analysis | We will miss globalization when it’s over –

Analysis |  We will miss globalization when it’s over –
Container ship Osaka Express, operated by Hapag-Lloyd AG, departed from DP World Ltd in Southampton, England on Friday 2 October 2015. Leaves container terminal operated by DP World is a global container and operator. . It operates in maritime terminals and on six continents and derives its main income from cargo containers. (Photographer: Bloomberg / Bloomberg)

At the dawn of the 20th century, Norman Angel famously (or shamefully) predicted that the era of global trade integration had made conflict between great powers so costly and devastating as to be unthinkable.

A few years later, the outbreak of World War I proved him right about valor and destruction, but he was incredibly wrong. The Great War put an end to the first era of globalization and it took generations to re-establish the level of world integration linked to the assassination of Francesco Ferdinando.

The Russian invasion of Ukraine is far less of a conflict than World War I, and the trade delays associated with the US / Europe semi-embargo on Russia are less than the British central powers’ blockade. But the conflict is still a giant step away from globalization, and unlike World War I, it comes at a time when the world is moving away from economic integration: the share of trade in global GDP peaked in 2008 and it is getting smaller. the last ten years.

Therefore, the war in Ukraine does not mean an abrupt break in history. But this underlines the decline of globalization and can be demonstrated.

This decline began with a populist response to the Great Recession and a slow rise in employment, making job-saving policies more attractive than productivity policies. Finally, the logic of geopolitical conflict entered the equation. For example, President Xi Jinping’s “Made in China 2025” initiative is not about job creation, but about giving China economic space for political autonomy.

Likewise, when Vladimir Putin threatened sanctions on Russia after the capture of Crimea in 2014, he responded not by abandoning Crimea, but by supporting economic sanctions, emphasizing domestic production. It has cost Russia dearly, a sparsely populated country rich in natural resources and therefore in need of a truly trade-dependent economy. But that didn’t work, the current sanctions regime shows that countries seeking to protect themselves from American bullying need to further reduce their reliance on international supply chains.

Of course, most countries don’t try to invade their neighbors for no reason. However, more well-meaning actors than Putin see the value of autonomy.

When the Covid-19 pandemic hit, national sovereignty took priority over free trade almost everywhere. The question arose of where exactly the masks and other personal protective equipment were made.

Likewise, the United States and Europe instilled not only low-income countries, but other rich countries as well, because they had manufacturing capabilities. The Australian Opposition Labor Party is now committed to working to create an internal mRNA vaccine industry, recognizing that Covid-19 will not be the last pandemic in the world and that dependence on global supply chains is a source of distrust.

Meanwhile, in the United States, one of the issues President Joe Biden disagrees with his predecessor is trade with China. Like Donald Trump, Biden prefers to “cut” the US and Chinese economies and make the US less dependent on Chinese imports. Despite concerns about inflation, Trump-era tariffs continue on Chinese goods. Bilateral infrastructure law passed last year includes stricter provisions for Buy America that increase costs; One of Biden’s best polls in the US was this: “Make sure everything is done in America, from the deck of the aircraft carrier to the tracks. “It’s all over.”

Foreign countries see it too. The sanctions regime against Russia is extremely rigid and surprisingly non-global. Enthusiastic regional powers such as India, Brazil and Nigeria are examining financial weapons of mass destruction in the Americas and asking how to change their defenses to avoid being caught in the crossfire.

There are good reasons for all this deregulation. However, it is important to remember that this will come at a cost. The nations of the world have not tied their economies just for fun or as an abstract exercise of international relations. Customers around the world have benefited enormously from the world of experience, comparative advantage, on-time delivery and sophisticated supply chain.

The security concerns currently driving globalization make sense. But the populist economy that escalated the current wave a decade ago is largely wrong. Mass unemployment after the financial crisis was not a sin of globalization, but a tragic mistake in demand policy. America can extract more oil and gas, produce more machinery, microchips and more steel. But a large army of the unemployed is unfit for work. If the United States supports much of the commodity trade, then there will be fewer people left to build homes, brush their teeth, cut their hair, prepare meals, and care for children and the elderly.

This could be a price to pay for meeting real security imperatives. However, make no mistake – it comes at a cost. And the more countries move away from globalization, the higher the price will be. A poorer world offers fewer customers to export to, while a less economically connected world is one in which delays and conflicts are more weighted.

Are these costs unavoidable? Probably. However, they can be alleviated. For example, one of the alternatives to importing foreign goods is to import foreign-born workers. In an inflationary and supply-constrained world, immigrants are valuable assets, including so-called “unskilled” individuals who clean houses, wash dishes, and harvest crops. And automating routine tasks should be seen as an opportunity, not a cause for alarm.

It is also crucial to think pragmatically about the factual issue that any policy is trying to address. The words “NAFTA” and “China” are equally dirty in Midwestern cities. But in Washington, there is a worldwide difference between a supply chain tied to China and a supply chain in Mexico, Central America, or the Caribbean.

You lose this difference if you upgrade the economic benefits. But in reality, focusing on trade with friendly neighbors is a cheap alternative to the false goal of autarchy. Mexican President Andres Manuel Lopez Obrador is a well-known critic of globalization, but his country would greatly benefit from positioning itself as a strategically safe place for outsourcing.

The point is, while global interdependence is falling apart for good reasons – I don’t want Russian aggression to go unpunished or the Chinese economy to be held hostage – international trade isn’t as big as populist critics. We will miss globalization when it disappears and it is not too early to start thinking about what could replace it.

Regarding Bloomberg’s opinion:

• Omicron rings the death bell for globalization 2.0: Niall Ferguson

• What we fear in globalization started the coronavirus: Robert d. Tiger

Coronavirus Does Not Kill Globalization: James Gibney

• Globalization is Hitting the Wall: Justin Fox

This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.

Matthew Iglesias is a Bloomberg Opinion commentator and author of the Slow Boring blog and newsletter. The co-founder and former critic of Vox is also the author of the most recent One Billion Americans.

Source: Washington Post