Globalization arrived in the world in a few critical moments. One of them was the opening of China to world markets in 1989 followed by the end of the Soviet Union in 1991. Since that time, the world has grown ever smaller. But the trend of an ever-smaller world and a free flow of capital, goods, and services has come to an end and not everyone is exactly sad about it.
Trade Wars and Protectionism
One of the trends around globalization was the reduction of trade barriers and a strong trend away from protectionism. The IMF and the World Bank helped to open markets and forced many countries to open their markets and reduce trade barriers. This has created investment opportunities the world over for major banks and companies. It has contributed to the ability for companies to take advantage of cheaper labor costs and ever longer supply lines to move goods and services around the world.
The trade war with China, though conducted by tweet, signals that the end of free trade. China never fully opened its markets to the West. Indeed, China embraced capitalism on it’s own terms. China requires that foreign companies have a Chinese partner company that owns part of the chinese interest and restricts the areas in which this trade goes on into free trade zones around the south eastern coast. Doing business in China, at least as a major corporation is no easy thing.
The United States did not often use mercantilist policies to protect its own markets. Europe was more protectionist but often, industries were decimated as factories moved elsewhere to take advantage of fewer labor costs and more relaxed legal environments. This was to the advantage of developing economies in Asia and South America as well as to the large corporations who earned large profits from reducing their labor costs.
An Ever Closer Global Union
For the past 30 years, it seemed like that trend would continue. It began to affect all areas of life. Manufacturing centers in the developed world emptied out and the economic progress returned to cities and moved into services and knowledge tasks. Air travel, in its growing efficiency, has enabled business people to move around the globe quickly and easily. A relaxing of passport and visa controls has allowed both business people and tourists to travel around the world quickly and easily. However, protectionism seems to be creeping back into the international conversation. The global system, like many before it has overstretched itself. More and more nations want local control of their destinies, their economies, and their future. Rather than having the economy of the world decided in Brussels, Washington D.C. or Beijing, more and more people want their own governments to decide their future of their country. The global system is breaking down and the nation-state is coming back to the fore. This is opposite of what we thought would happen even as recently as 8 years ago. When I was in grad school, the natural presumption was that the world would continue to grow ever smaller and the global economy would become ever-more integrated. That system is being undermined.
Welcome to the Multi-Polar World
Since World War II, most of the world has operated under one trading regime: the so-called Liberal order. As mentioned before, the Liberal order has prioritized open markets and free capital flows around the world. This has allowed banks and companies from around the world to invest all over the globe. The future is going to be more closed off than before. Trading networks like China’s Belt and Road initiative is indicative of the new trading regime. In the future, the world might even sign agreements between different trading agreements. The first one of these may very well be an agreement between China’s Belt and Road and the European Union. How will the United States fit into all this? Time will tell. The US has a global trading empire underpinned by the World Bank, the IMF, and various trading agreements. It is not formed under one central organization but that may change. The US may want to form it’s own trading syndicate to compete with the EU or the Belt and Road. It could be a great way to create opportunity for nations on its own continent as well. One thing is clear: the multi-polar world is arriving and how the US welcomes it or tries to resist it will be a definitive part of foreign policy for the next 50 years.