Trade Slowdown May Not Mean End To Globalization
Is A Slowdown In Global Trade The End Of Globalization? Shaun Donnan of The Financial Times considers what the reason is behind a reversal in the expansion in global trade. For the second year, the trade has not grown – a contrast to the 30-year trend.
“This year, trade is expected to grow just 2.5 per cent, compared with GDP growth of 2.9 per cent. In 2012, trade expanded only 2 per cent. IMF and WTO forecasts for next year suggest trade growth will be 4.5 per cent against global GDP growth of 3.6 per cent. This break from a roughly 2:1 historic relationship between trade and growth has sparked a debate among economists about whether we are merely experiencing a blip or a more fundamental structural twist in global commerce,” he writes.
In September, the World Trade Organization warned that global trade expectations would be revised down from 3.3 percent to 2.5 percent.
“Protectionism is going up, it’s going up slowly, gradually, inching up; but it’s also growing in different ways, it’s become more sophisticated, it’s become more complex, more difficult to detect,” said Roberto Azevedo, director-general of the WTO.
Time magazine columnist Rana Fooroohar takes on that question and responds that the slowing trend may be more of a sign of “localization,” rather than a move away from globalization.
He points out that the signs may be there: Trade complaints are up, protectionist tendencies are increasing and trade has slowed. But, he argues, there is also good news.
“But there’s also good news is this new trade trend. The recent renaissance in American manufacturing that my colleague Bill Saporito and I wrote about recently means that more of what we produce in this country is staying here at home. The same is true in places like China, which are developing more of their own consumer spending cultures. As I have been saying for some time, I think we’re entering a new era of “localnomics,” in which growth will be driving more by local ecosystems than by unfettered global trade. If that means more consumption and job creation here at home, then maybe the global trade slowdown isn’t a bad thing.
Foroohar’s view is shared by Washington Post columnist Robert Samuelson. He also believes there has been a change in the dynamics of globalization and the international market. But, he says, it is not a sign of a “repeal” of globalization.
“Times have changed. Globalization hasn’t been repealed, but it has entered a more cautious and regulated phase,” he writes.
He points to an analysis by The Economist’s economics editor in which he defines this new world as a “gated globe.”
Ip concedes globalization has “clearly paused,” but believes much of it is cyclical.
“The recent crises and recessions in the rich world have subdued the animal spirits that drive international investment. But much of it is a matter of deliberate policy. In finance, for instance, where the ease of cross-border lending had made it possible for places like America and some southern European countries to run up ever larger current-account deficits, banks now face growing pressure to bolster domestic lending, raise capital and ring-fence foreign units,” argues Ip.