For many politicians across the world, globalisation is now the enemy. In the USA, President-elect Donald Trump repeatedly attacked the growing links across borders, and in the UK, the Brexit vote is widely seen as a rejection of the European Union’s increasingly close ties.
It now feels like globalisation has reached its peak and we are about to witness an unwinding of the trend that has dominated economics and trade for decades.
Deutsche Bank summed it up pretty well last week, when FX strategist George Saravelos wrote: “If 2008 marked the trigger, this year is likely to be remembered for signalling the persistence of a new mega-trend: the peak, and likely unwind of globalisation.”
“The world has been on a ‘globalising’ trend since the end of World War II. But looking at evidence this year, there is compelling evidence to argue that this is being reversed.”
The rise of anti-globalist sentiment comes at a time when global growth is persistently weak, and the picture in global trade is similarly poor.
With growing criticisms of deals like TTIP and TPP, as well as the near collapse of the EU-Canada deal because of the Belgian region of Wallonia, things have worsened significantly in the last 12 months. As Douglas Lippoldt, a senior trade economist at HSBC says in a note circulated to clients on Tuesday: “The past year has not been kind to international trade.”
Lippoldt continues, saying (emphasis ours):
“The rise in anti-globalisation sentiment is a central feature of the political debate in Europe and the US. The EU is facing resistance to accords like its pending free trade agreement with Canada. Donald Trump’s election in the US marks a break with Obama’s trade policies, signalling a more aggressive US policy stance towards its trade partners.
“Trump has signalled that withdrawing from the Trans-Pacific Partnership (TPP) is a top trade priority. All this threatens to undo a decade of work by trade negotiators around the globe, who have put together a large portfolio of new agreements. Progress has been made at the multilateral level through the World Trade Organisation and at the bilateral, regional and sectoral levels among groups of reform-minded countries. But these accords need to be signed and ratified. As things stand, this looks highly problematic.”
HSBC’s economist then provides examples of 10 different deals, which the bank thinks are at risk with the rise of the anti-globalisation movement. Check them out below:
Should one or more of these agreements fail, Lippoldt says, the consequences could be dire:
“Collectively, these ten agreements represent a significant potential source of economic stimulus. In the face of continued economic weakness and constraints, we believe that a failure to seize upon the liberalisation these agreements embody would leave the world economy worse off, with lower standards in trade, and with fewer resources available to tackle pressing societal needs.”
Global trade is at a crossroads, if it goes the wrong way, it isn’t going to benefit anyone.
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