Globalization is not just about trade and technology. It is also about politics. Political change, especially the collapse of communism, has created the conditions for an era of hyper-globalization. Today, political changes, and especially the rise of nationalism, threaten the dense web of economic ties built over the past three decades.
The enemies of globalization can be found on all political horizons, from the nationalist right to the anti-capitalist left, and from the environmental movement to the intelligence services.
It is true that de-globalization has not yet really manifested itself in trade figures. As my colleague Alan Beattie pointed out recently, “most of the standard measures of globalization – the cross-border movement of goods, services, capital, data and people – are doing quite well”.
One possible conclusion to draw is that global economic connections and supply chains are now too complex to untangle. While there may be a will to de-globalize, there really isn’t a way.
A sudden return to economic autarky among the world’s major trading nations would certainly bring chaos and hardship. But despite all the upheaval involved, international economic ties can suddenly break. Over the past two years, the pandemic and the war in Ukraine have shown how vulnerable international trade is to unexpected shocks. Covid-19 has interrupted global travel and disrupted supply chains. The war in Ukraine led to a severing of the West’s economic ties with Russia. And the combined political and social forces currently opposing globalization mean that there are likely to be more shocks to come.
Ten years ago, protectionism was still a dirty word in American politics. But the Trump administration started a trade war with China and the Biden administration kept the tariffs in place. A bipartisan consensus in the United States is now pushing for policies to reduce economic dependence on China and bring back key industries, especially semiconductors. India has followed the decoupling trend, banning Chinese tech companies, such as TikTok, in response to rising tensions with Beijing.
The Chinese themselves are actively participating in this decoupling process. We can say that they have taken the first significant step, with a desire to promote the national production of key technologies. Beijing’s “Made in China 2025” policy was announced in 2015, before Donald Trump was elected.
When economic logic was more powerful than geopolitical rivalry, the dominant question was: where is it cheaper or more efficient to buy or produce? This has led to the construction of complex cross-border supply chains. But in a world where international rivalries are multiplying, different questions arise. Where is it safer to produce or buy? And should we even trade with nations we consider a threat?
The invasion of Ukraine not only made it seem unwise to rely on political rivals for key economic inputs, it also allowed the national security establishment of the West to seize the moral ground. free traders. Jens Stoltenberg, the Secretary General of NATO, says that “freedom is more important than free trade”. There aren’t many influential voices making the counter-argument.
Political and strategic arguments for cutting trade ties are increasingly complemented by arguments about the environment and social resilience. After the pandemic, governments are reluctant to return to a world in which the production of vaccines, for example, or even rubber gloves, is concentrated in just one or two countries. Insisting on domestic production facilities, which once seemed inefficient, now seems prudent. As one seasoned industrialist put it, “We move from just-in-time to just-in-case.
The potential vulnerability that worries national security establishments everywhere is semiconductors – crucial to everything from cellphones to missiles. According to US President Joe Biden, around 90% of the world’s most advanced semiconductors are made in Taiwan by a single producer, TSMC. A senior US official has said that a Chinese invasion or blockade of Taiwan would create a “semiconductor nuclear winter”. Correcting this situation could take many years. But the push to do just that is now afoot with the passage of the US flea law.
The United States has long had rules that can restrict foreign investment for national security reasons. The Chips Act creates new rules that will restrict outside investment, discouraging US companies from manufacturing semiconductors in China.
National security hawks believe that globalization means Western democracies have naively sponsored the rise of hostile rivals such as Russia or China. Left-wing critics associate the “neoliberal” era of globalization with growing inequality and environmental degradation. There are elements of truth in both of these criticisms. But the push to cut trade and investment ties is not just a product of rising nationalism and economic tensions – it is contributing to both processes as well.
Despite all the discontent that hyper-globalization has created, I suspect that in the decades to come, the period from 1989 to 2022 will be seen as a golden age of peace and prosperity. The world may soon discover that globalization is the worst possible system — out of all the alternatives.