Deglobalization? Time for reglobalization

23 May 2024

Contrary to what many believe, the world isn't experiencing a "de-globalization" trend, and reports of globalization's demise are greatly exaggerated. While global trade in goods may have leveled off, it did so at historically high levels, with some moderation inevitable. For example, in 2022, the United States saw exports and imports of goods reach record highs when adjusted for inflation.

Meanwhile, various aspects of globalization—such as service trade, digital trade, cross-border investment and migration, and cultural exchange—continue to grow. Although trade and global supply chain patterns are transforming due to new economic and geopolitical factors, such changes were to be expected.

Rather than witnessing a decline in globalization, multinational corporations are engaged in "re-globalization." They are diversifying their sourcing, upgrading logistics technology, and altering inventory strategies, among other measures. While globalization may look different from a decade ago, cross-border trade, investment, and migration are generally still growing. 

For example, recent World Trade Organization (WTO) data reveals that global trade in intermediate goods—important for downstream product manufacturing and indicative of companies' utilization of global value chains—surpassed pre‐​pandemic levels in 2021 and is poised for further growth in 2022.

Another noteworthy example is the record number of ships—23,583 in total—that traversed the Suez Canal in the past year, surpassing the previous year's record of 20,694. This occurred despite the temporary blockage caused by the Ever Given ship in 2021. To accommodate even more traffic in the coming years, the Suez Canal Authority is expanding the canal. Similarly, the Panama Canal experienced record tonnage in 2022, surpassing the previous year's record, while U.S. ports broke volume records in 2021.

Digital trade is yet another area experiencing considerable growth. This includes cross-border delivery and consumption of information and communication technology products and traditional services facilitated by these technologies, such as legal advice, research and development, and online education.

According to WTO data, global exports of digitally delivered services more than tripled between 2005 and 2021, reaching $3.71 trillion that year. Moreover, information and communication technology services have increased more than five-fold over the same period.

The de-globalization narrative overlooks globalization's core, misinterprets global trade agreement rules, and fails to account for governments' and multinational corporations' responses to recent disruptions. Despite facing two major global shocks in less than three years, there is scant evidence to suggest that globalization, properly understood, is on the decline.

Problems and challenges persist, particularly for institutions like the WTO and those seeking to steer the U.S. government away from its self-defeating protectionist stance. However, these challenges have yet to halt the relentless tide of globalization, driven not by governments but by the actions of billions of private actors eager to engage in peaceful, mutually beneficial commerce, transcending political rhetoric and national borders.

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