The question of the day is — Do the historical use of trade sanctions by the U.S. portend a new world for global commerce? The answer is not clear. A new article in the New York Times today discusses whether or not the use of sanctions is a transformational event for global commerce. It makes a large number of good points but does not come to firm conclusions. I think the answer is still unclear. Here are the major points made by the authors.
- When the Cold War ended, governments and companies believed that stronger global economic ties would lead to greater stability. But the Ukraine war and the pandemic are pushing the world in the opposite direction and upending those ideas.
- Important parts of the integrated economy are unwinding. American and European officials are now using sanctions to sever major parts of the Russian economy.
- The moves reverse core tenets of post-Cold War economic and foreign policies forged by the United States and its allies that were even adopted by rivals like Russia and China.
- “What we’re headed toward is a more divided world economically that will mirror what is clearly a more divided world politically
- Opposition to globalization gained momentum with the Trump administration’s trade policies and “America First” drive. Putin’s invasion of Ukraine has brought into sharp relief the uncertainty of the existing economic order.
- The result of all the disruptions may well be a fracturing of the world into economic blocs, as countries and companies gravitate to ideological corners with distinct markets and pools of labor, as they did in much of the 20th century.
- The economic impact of such a change is highly uncertain. The emergence of new economic blocs could accelerate a massive reorganization in financial flows and supply chains.
- The war has set in motion “deglobalization forces that could have profound and unpredictable effects.”
- “Your interdependence can be weaponized against you,” said Dani Rodrik, a professor of international political economy at Harvard Kennedy School. “That’s a lesson that I imagine many countries are beginning to internalize.”
- The Ukraine war has “probably put a nail in the coffin of hyperglobalization.”
- China and, increasingly, Russia have taken steps to wall off their societies, including erecting strict censorship mechanisms on their internet networks, which have cut off their citizens from foreign perspectives and some commerce. China is on a drive to make critical industries self-sufficient, including for technologies like semiconductors.
- For decades, prominent U.S. officials and strategists asserted that a globalized economy was a pillar of what they call the rules-based international order, and that trade and financial ties would prevent major powers from going to war.
- Mr. Biden has continued many Trump administration policies aimed at delinking parts of the American economy from that of China and punishing Beijing for its commercial practices.
“Sanctions and Impact on the Future of Global Commerce.“ New York Times (March 23, 2022).