Credit: Getty Images.
Artificial intelligence, climate change, Gaza and Ukraine wars: All these Big Things are roiling the world. But another, perhaps under your radar, is deglobalization.
Globalization too was a Big Thing, benefiting billions. It meant removing barriers to trade and investment and was widely embraced, especially after the Cold War, because such economic openness best serves overall prosperity. Half a century of globalization saw worldwide average real-dollar incomes multiply several times over. Extreme poverty plummeted.
But inevitably, as with any large economic reordering in a complex world, there were downsides and losers.
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One aspect of it was reduced tariffs. Taxes on imported goods may protect a firm against foreign competitors, but that comes at the expense of consumers, including other businesses. Steel tariffs benefit steel makers but harm steel users. Adam Smith explained that if some other country can make something more cheaply than we can, we're best off buying theirs and redirecting our own energies elsewhere. Every country doing that makes the whole world richer.
Then there are capital controls, restricting movement not of goods but of money. I experienced this in Argentina: At arrival we exchanged dollars for pesos — but changing them back to dollars was prohibited. Such restrictions hamper not just tourists but industrial investment and finance.
Remember the "giant sucking sound" of U.S. jobs going to Mexico due to the NAFTA free trade agreement? Some jobs did go. But Mexico became richer, able to buy more goods from us, which in turn created new U.S. jobs. Both countries wound up benefiting.
Globalization’s gains, however, are now being reversed, because its losers are outshouting its winners. Some see a beggar-thy-neighbor zero-sum world, making "free trade" dirty words. That’s why Donald Trump, as president, nixed the Trans-Pacific Partnership, a painstakingly negotiated trade deal with 12 Asian nations to blunt China's clout. Beijing whooped at this huge American own-goal.
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Trump also jacked up tariffs on Chinese imports to stop our taking advantage of those low-cost products. U.S. consumers paid the price for this folly.
But under President Joe Biden, America continues to undo globalization. Those Trump tariffs remain, and are even rising. Biden has added a 100% tariff on electric cars. He wants us to buy the "greener" vehicles — but not from China, which is now making them better and more cheaply than Tesla.
Another aspect of globalization is a rules-based world order, with a widely agreed-upon set of regulations for ensuring the fairness of trade among nations and disallowing anticompetitive abuses. Overseen by the World Trade Organization, the regulations include a dispute resolution process topped by a court. Trump paralyzed the WTO by refusing to fill America's seats on the court. And Biden has continued that fractious relationship with the WTO, showing how politically toxic anything relating to globalization or world trade itself has become.
Geopolitical conflict also undermines the rules-based world order, which includes barring countries from invading each other. Whether Russia gets away with it remains undecided.
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As for China, it's far from clear why we need be enemies tearing each other down. We are economic rivals, yes, which all nations are, but still we all would benefit from freely trading with one another. "Made in America” policies may sound patriotic, but they’re just another manifestation of counter-globalist protectionism — protecting a few at the expense of the many. Governments coddling favored businesses. We’re forgetting how badly that has always turned out in the past.
Due to all these blows to globalization, worldwide trade and cross-border investment are subsiding. We're collectively leaving trillions of dollars on the sidewalk. This is money that could have been used to gain a lot of social justice, human betterment and climate amelioration.
And when reversal of past gains starts biting, the mood will only get uglier.
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Frank S. Robinson of Albany is the author of “The Case for Rational Optimism.” He blogs at rationaloptimist.wordpress.com.
Commentary: Isolation impoverishes us, in more ways than one
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02.06.2024
Credit: Getty Images.
Artificial intelligence, climate change, Gaza and Ukraine wars: All these Big Things are roiling the world. But another, perhaps under your radar, is deglobalization.
Globalization too was a Big Thing, benefiting billions. It meant removing barriers to trade and investment and was widely embraced, especially after the Cold War, because such economic openness best serves overall prosperity. Half a century of globalization saw worldwide average real-dollar incomes multiply several times over. Extreme poverty plummeted.
But inevitably, as with any large economic reordering in a complex world, there were downsides and losers.
Advertisement
Article continues below this ad
One aspect of it was reduced tariffs. Taxes on imported goods may protect a firm against foreign competitors, but that comes at the expense of consumers, including other businesses. Steel tariffs benefit steel makers but harm steel users. Adam Smith explained that if some other country can make something more cheaply than we can, we're best off buying theirs and redirecting our........
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