I read an interesting article today, posted in the economic analysis section of the CNN website. The piece was inaccurately titled “Have we reached the end of globalization?” I say inaccurately, because the authors were not suggesting that globalization was doomed, but rather were asking whether we were reaching the end of growth in globalization.
The main point made was that while global trade has been growing at an average annual rate of over 6% for most of the last thirty years — almost twice the rate of GDP growth — the last two years have seen a dramatic change. According to the article, the rate of growth of global trade has now dropped substantially, and is in fact lower than GDP growth. The authors raise the question of whether this is a permanent condition, whether the rate of globalization peaked two years ago, and will henceforth either grow very slowly or perhaps even shrink.
You can read the entire article here, and I won’t rehash it all, but one section is worth quoting. According to the independent group Global Trade Alert, we are in the midst of a wave of increasing protectionism, and the article’s authors point out:
The last time the world saw a consistent period where the growth of global trade lagged behind global growth was in the 1920s, 30s, and 40s. One factor was the rise in protectionist policies – as a response in many cases to the Great Depression and the disruption of the gold standard. At one point, under what was known as the Smoot-Hawley tariff, the United States government began imposing import duties of around 60 percent. The move was aimed at protecting domestic farmers, but instead, it exacerbated the depression. It led to a steep drop in trade, and a wave of counter protectionist measures by other countries.
Food for thought.