The Death of Trade

Political commitment to globalization has weakened in the wake of the global financial crisis and even minor disputes could trigger an unravelling. Against a backdrop of deepening protectionist sentiment, trade disputes could spread rapidly by triggering adverse impacts and retaliatory moves along global value chains. The same pressures fomenting trade disputes would also undermine the already-weakened institutions designed to resolve them, potentially leading to multilateral rules being openly breached.

A breakdown of the global trade system would roil supply chains and reduce overall economic activity. Adverse impacts such as lower output and employment would be unevenly distributed within and between countries, creating new inequalities and frustrations. If this in turn fuelled more aggressive mercantilism, the risk would increase of proliferating trade-related disputes triggering deeper geopolitical tensions and policies of gunboat diplomacy on trade. 

Whatever the settled position on global trade is to be, more deliberation and consensus-building would bolster its legitimacy. A period of de-globalization may be seen by many as a welcome corrective, but rejecting current frameworks in favour of binary nationalistic approaches would cause significant disruption. Securing durable and worldwide support for globalization would be made easier by an increased domestic policy focus on cushioning the impact on individuals and regions affected by transitions in economic activity.