The World Trade Organization’s annual World Trade Report is calling for a focus on “re-globalization” amid early indications of trade fragmentation across the world that it says are threatening to “unwind growth and development.”
According to the report, ongoing global crises in geopolitics, public health, the environment, and the economy have led many to argue that globalization exposes countries to excessive risks and that greater economic independence, rather than interdependence, would better serve the well-being of their constituencies. These views are beginning to affect trade flows, including in ways that point toward fragmentation of trading relationships along geopolitical lines.
For example, the WTO has calculated that goods trade flows between two hypothetical geopolitical blocs (based on voting patterns at the United Nations General Assembly) have grown 4-6 per cent more slowly than trade within these blocs. There have also been setbacks in regional trade integration efforts, a shift toward unilateral trade policies, and a concomitant jump in the number of concerns being escalated to a more political level at the WTO.
The report cautions against following this trend, pointing to “three disastrous decades of deglobalization” in the 20th century “marked by two world wars, the Great Depression, and political extremism.” But the report also notes that claims of de-globalization in the world today “are still greatly exaggerated” and that international trade is continuing to thrive. Evidence includes the expansion of digital services trade, environmental goods trade, and global value chains in addition to the resilience of trade to recent global crises.
The report also argues that re-globalization – i.e., a renewed drive toward integrating more people, economies, and pressing issues into world trade – is a more promising solution to existing problems than fragmentation.
“The long-term evidence suggests that trade has contributed positively to peace among nations,” said WTO Director-General Ngozi Okonjo-Iweala. “With regard to economic security, recent experiences with the COVID-19 pandemic, extreme weather events and the war in Ukraine have demonstrated how deep and diversified international markets help countries cope with unanticipated shortages by securing supplies from alternative sources.”
In addition, she said, there is overwhelming evidence that closer economic integration has led to “a massive reduction” in the share of the global population living in extreme poverty, reduced inequality between rich and poor countries and across the global population as a whole, and enabled technology improvements that have increased the participation of historically under-represented countries in global trade and have had a strong impact in reducing carbon emissions.
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