The last decade has been a prolonged lesson on the impacts of globalisation. Arguably since Columbus voyaged to the New World in 1492, globalisation has opened international trade, creating the foundations for unforeseen growth that has since lifted millions out of poverty and enabled countries to chart a course for a future of certainty and peace.
Now, the tides of history are turning as the current state of globalisation appears weakened and uncertain. Criticisms of globalisation are not new, but in 2018, they entered a new paradigm when Donald Trump, former President of the United States, levied sanctions on Chinese imports. In the early months, the sanctions were ostensibly to balance the US’s trade deficit with China and protect its local industries.
However, over time, China levied retaliatory sanctions. Put together, these events laid the groundwork for a trade war that has (somewhat inevitably) resulted in several unintended consequences.
The US, for one, lost an estimated 245,000 jobs, not to mention that it saw incomes reduce and growth go sluggish. One 2019 analysis found that the trade war cost the US economy as much as 0.7% of its GDP. The US-levied trade sanctions have had a particularly significant impact on global supply chains, especially for smaller countries dependent on the movement of trade across the entire value chain. Global trade as a percentage of GDP fell to 56% in 2019 from 60% in 2011.
Then, just as the world was coming to terms with the trade war, the coronavirus pandemic landed, heaping pressure on the global economy. The health crisis resulted in countries being abruptly cut-off by border closures and having supply chains disrupted. Prolonged lockdowns were especially hard on small businesses that relied on foot traffic, as well as marginalised communities dependent on day wages to survive. In 2020, global GDP growth experienced negative growth of 3.1%, the worst recorded fall in the history of trade since 1970.
Moreover, as border closures cut countries off and supply chains faced never-before-seen disruption, the health crisis revealed just how embedded globalisation is in today’s world. In its wake, the pandemic left geopolitical uncertainty that is fueling rhetoric around self-sufficiency and reshoring of companies to strengthen local capabilities. Deglobalisation is now on the upswing, threatening to undo decades of global work as protectionism abounds. A sort of fear for the future has gripped political leaders as they scour for a path forward for their citizens in an increasingly fragile world.
However, all is not lost. Amid all the uncertainties, there is still hope that the future of globalisation is salvageable. Today, there are ample examples of countries forming bilateral and multilateral trade partnerships, demonstrating that appetite for multilateralism and international cooperation still exists.
One such example is the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement between 13 countries along the Pacific Rim, including China, the 10 ASEAN states, Australia and Japan. The agreement was designed to enable RCEP members reap the benefits of engaging in open trade and supply chain transparency, while also streamlining trade rules, regulatory disparities, reducing non-tariff barriers and supporting the crossborder movement of people and investments.
Prior to its launch in 2022, Lim Jock Hoi, the Secretary-General of ASEAN, said that the agreement would “give tremendous boost to the [region’s] post COVID-19 economic recovery efforts.”
Another example of a major free trade deal is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the most recent iteration of former US President Barack Obama’s Trans-Pacific Partnership (TPP). The deal was designed to re-energise international trade by bringing together trade partners representing 13.5% of global GDP and 500 million consumers across North America, Latin American and Asia.
By some estimates, the CPTPP could help eliminate trade barriers for 98% of goods and foster inclusive trade ensuring benefits for under-represented groups such as women, SMEs and indigenous communities. In April 2023, the United Kingdom became the first European country to join the CPTTP, whose other members include Australia, Brunei, Canada, Chile, Malaysia, Japan, Mexico, New Zealand and Vietnam.
Future of globalisation
As rhetoric around protectionism and deglobalisation grows louder, trade agreements like the RCEP and CPTPP offer evidence that cooperation and multilateralism can create socioeconomic benefits by enforcing a rules-based order. Despite criticisms, a rules-based order can still deliver the structures needed to enforce minimum standards when it comes to matters of trade and geopolitics.
What’s clear is that the shape of globalisation is changing, as are its outcomes, which is prompting us to look beyond trade for its benefits. Globalisation today may look more like the blossoming of partnerships to bolster access to education, science and healthcare—or solve immense problems like poverty and climate change. If we can make this mindset shift, globalisation may yet return to its past glory and possibly even claim more with the power of emerging technologies.
Only time will tell what the future holds for globalisation, but allowing the forces of deglobalisation and protectionism to flourish will undoubtedly spell doom for future trade and prosperity—undoing the hard-won victories of the post-WWII world.
Frank-Jürgen Richter is the founder and chairman of Horasis: The Global Visions Community. He was earlier a director of the World Economic Forum. He has lived, studied and worked in Asia for almost a decade, principally in Tokyo and in Beijing. Mr Richter has also authored and edited a series of books on global strategy and Asian business. His writing has appeared in The International Herald Tribune, The Wall Street Journal, The Far Eastern Economic Review, The Straits Times and the South China Morning Post, among others.