The enemies of globalisation are circling on
Gideon Rachman
The Financial Times, August 29 2022
Globalisation is not just about trade and technology. It is also about politics. Political change,
above all the collapse of communism, created the conditions for an age of hyperglobalisation. Now
political change, above all rising nationalism, is threatening the dense network of economic ties
built up over the last three decades.
The enemies of globalisation can be found across the political spectrum, from the nationalist right
to the anti-capitalist left, and from the environmental movement to the intelligence services.
It is true that deglobalisation has not yet really shown up in the trade figures. As my colleague, Alan
Beattie pointed out recently, “most standard measures of globalisation — cross-border movements
of goods, services, capital, data and people — (are) doing pretty well.”
One possible conclusion to draw is that global economic connections and supply chains are now
too intricate to be disentangled. While there may be a will to deglobalise, there is no real way.
A sudden retreat into economic autarky by the world’s leading trading nations would certainly
cause chaos and hardship. But for all the upheaval involved, international economic ties can break
down suddenly. Over the past two years, the pandemic and the Ukraine war have demonstrated
how vulnerable international trade is to unexpected shocks. Covid-19 shut down global travel and
disrupted supply chains. The war in Ukraine led to a rupture in the west’s economic ties with
Russia. And the combined political and social forces that are now pushing against globalisation
make it likely that there will be further shocks to come.
A decade ago, protectionism was still a dirty word in US politics. But the Trump administration
started a trade war with China and the Biden administration has kept the tariffs in place. A
bipartisan consensus in the US is now pushing for policies to reduce economic dependence on
China and to repatriate key industries, in particular semiconductors. India has followed the
decoupling trend, banning Chinese tech companies, such as TikTok, as a response to rising
tensions with Beijing.
The Chinese themselves are active participants in this process of decoupling. Arguably, they made
the first significant move, with a drive to promote domestic production of key technologies. Beijing’s
“Made in China 2025” policy was announced in 2015, before Donald Trump’s election.
When economic logic was more powerful than geopolitical rivalry, the dominant question was:
where is it cheapest or most efficient to buy or produce? That led to the construction of intricate
cross-border supply chains. But in a world in which international rivalries are growing, different
questions are asked. Where it is safest to produce or buy? And should we even be trading with
nations that we regard as a threat?
The invasion of Ukraine has not just made it seem imprudent to rely on political rivals for key
economic inputs, it has also allowed the west’s national security establishment to seize the moral
high ground from the free-traders. Jens Stoltenberg, the secretary-general of Nato, says that
“freedom is more important than free trade”. There are not many influential voices making the
counterargument.
The political and strategic arguments for cutting trade ties are increasingly supplemented by
arguments about the environment and social resilience. After the pandemic, governments are
reluctant to go back to a world in which the production of vaccines, say, or even rubber gloves, is
concentrated in just one or two countries. Insisting on domestic production facilities, which once
seemed inefficient, now looks prudent. As one senior industrialist puts it: “We’re moving from just
in time to just in case.”
The potential vulnerability that is preoccupying national security establishments everywhere is
semiconductors — crucial for everything from mobile phones to missiles. According to US
president Joe Biden, some 90 per cent of the world’s most advanced semiconductors are made in
Taiwan by a single producer, TSMC. One senior US official says that a Chinese invasion or blockade
of Taiwan would create a “semiconductor nuclear winter”. Rectifying that situation could take many
years. But the drive to do just that is now under way with the passage of America’s Chips Act.
The US has long had rules that can restrict inward investment on national security grounds. The
Chips Act creates new rules that will restrict outward investment, discouraging US firms from
making semiconductors in China.
National security hawks believe that globalisation meant that the western democracies naively
sponsored the rise of hostile rivals such as Russia or China. Leftwing critics associate the
“neoliberal” era of globalisation with widening inequality and environmental degradation. There are
elements of truth to both of these critiques. But the pressure to cut trade and investment ties is not
simply a product of rising nationalism and economic stress — it also contributes to both processes.
For all the discontents that hyperglobalisation has created, I suspect that, in decades to come, the
period from 1989 to 2022 will come to be seen as a golden age of peace and prosperity. The world
may soon discover that globalisation is the worst possible system — apart from all the alternatives.
