Recent events in international trade brings a curious development in front of us – the globalization has shown a red card in their birth places. UK and the US were the leading countries where ideas were born. Over the last two decades they crowned the champions of globalization and it emerged as a philosophy of sharing the fruits of an open world economy with collaborative effort. WTO was fortified and Free Trade Agreements were mushroomed.
But last three months shows a surprising reversal in the stands of these big friends across the Atlantic. First was UK which decided to exit from the European Union. Britain’s economic divorce from the powerful trade bloc came as a no confidence vote against the ill structure of the EU.
Second development is even shocking and surprising – the US Presidential candidates announced the world super power’s exit from the new born Trans Pacific Partnership (TPP). In fact, the TPP was the outcome of the tiring effort of the outgoing Obama administration and seen as an arrangement to counterweight the Chinese in the Pacific.
In just three months, world’s leading advocates of globalization have withdrawn from their economic liberalization commitments. This gives a food for through for the rest of the world. There is no question – the reversal time for globalization has just started.
“Globalization, which has become a dominant global trend over the past generation, is now facing a huge challenge in the very birthplace of industrial countries.”
“Globalization, which has become a dominant global trend over the past generation, is not facing a huge challenge in the very birthplace of industrial countries.” says the South Korean LG Economic Research Institute.
Why this retreat?
There are several interpretations. More dominant opinion is that globalization no more fit the economic interest of its original proponents according to the Eastern countries who are no capable of challenging the industrial sector superiority of the West.
They feel that the protectionist measures of the Europeans and the US are aimed at China, South Korea and Taiwan.
For UK and the US, the current globalization environment doesn’t give them space to grow fast rather it gives somebody else to do so. Understandably, the strategy is to slow the pace of it.
The major beneficiary from opening up of economies is China whose tradeable sector (industry) has grown to 40% of its GDP over the last two decades. Chinese are challenging the West with an advanced level of industrialization where the former is trying hard to hang on.
The trend of anti-globalization has arrived; now political arrangements will grow to induct it as a policy tool. Before that policy makers especially, economic policy makers warn the limitations of a reversal. Institutions and people are trained and habituated with the globalization trend; it pace can be slowed down but stopping it is impossible.