|
The
End of Globalisation?
BY
PETER G. HALL
EDC
Vice-President and Chief Economist
We’ve
had a fair amount of time to think about a topic that surfaced before
recession hit us just over three years ago. The end of globalisation is
still being discussed, and the longer the world battles meagre growth,
the more intense the conversation is likely to become. But does that
suggest any particular outcome – is the fabric of international
commerce really coming apart at the seams?
Multiple arguments for the end of globalisation have been made.
Neo-protectionism in the early days of the recession was perhaps the
most compelling argument. Fears of financial market contagion led to
talk of more subtle regulatory forms of protectionism. Supply-chain risk
– highlighted by last year’s devastating natural disasters –
prompted re-thinking of the current globalisation model. Fears that
globalisation is responsible for widening income disparity continues to
feed globo-skepticism. And then there’s the sustainability argument:
globalisation leads to sky-high commodity prices, which makes
international shipment too expensive, leading to neo-localisation of
commerce.
Data argue against globalisation’s demise. Global exports are up 6.5%
through last October, almost double our projected world GDP growth for
the year. Recent performance is uneven, but there are more regional
zones that are well into the black than otherwise. Foreign investment
has not been as promising, but as it typically lags the cycle, it is too
early to pick on this indicator.
If globalisation were to end, it would be a sad day for developed
countries. With aging populations and in most cases, weak productivity
records, collective annual potential growth is set to slow to the 1%-2%
range. Contrast that with emerging markets, which can sustain growth in
the 5%-6% range well into the future, and the developed economies’
sales strategy is obvious. This dynamic is core to the bold,
export-led-growth policy pronouncements over the past two years by the
US, Japan, the UK and others, and the resumption of bilateral trade
discussions on a number of fronts.
Emerging markets get this too. Although most of their exports of final
goods were headed to developed markets in the middle of the 2000s,
growth dynamics are gradually shifting the landscape. Armed with a
growing awareness of their inter-dependencies, emerging markets are
talking more about South-South trade, and discussing their own trade
agreements, both bi- and multi-lateral.
So, are arguments to the contrary winning out? Thankfully, protectionist
rhetoric seems to have remained just that. Multinational companies are
making adjustments to account for supply-chain risk, but there is
nothing to suggest anything close to wholesale divestment. As for the
commodity price argument, recent softening has taken the edge off the
argument, and an examination of supply-demand fundamentals does not
conclusively suggest we are in for debilitating near-term price spirals.
Concern about income disparity appears to remain strong, and is always
magnified when economic conditions are soft. The test of this argument
will be its durability during the coming growth phase.
The bottom line? Given these arguments, it is difficult to conclude that
globalisation is on the ropes. If one accepts that the true end of
globalisation is collective, global prosperity through increased
efficiency, then the end of globalisation as we now know it is not
imminent.
The
views expressed here are those of the author, and not necessarily of
Export Development Canada.
©EDC
|
