Historical challenges have recently arisen attacking “globalization.” These challenges to traditional U.S. trade policy come from the liberal, conservative, protectionist and national security communities in the U.S. This development has been supercharged by the global pandemic and Russia’s invasion of the Ukraine, with China looming over this debate. A recent article in the Financial Times raises similar concerns worldwide. This is now a critical new development in U.S. politics, where trade has become a toxic topic and there has been, in fact, a convergence of views of the two major political parties. We’ll see how this develops. To me, this definitely represents a major change in the political ecosystem as to all issues of trade and investment in this decade. Clearly the era of post-War and post-Cold War globalization is changing. Here are some excerpts from the Financial Times article:
- Rising nationalism, is threatening the dense network of economic ties built up over the last three decades. The enemies of globalization can be found across the political spectrum, from the nationalist right to the anti-capitalist left. Over the past two years, the pandemic and the Ukraine war have demonstrated how vulnerable international trade is to unexpected shocks.
- 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.
- 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.
- 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 globalization meant that the western democracies naively sponsored the rise of hostile rivals such as Russia or China. Leftwing critics associate the “neoliberal” era of globalization with widening inequality and environmental degradation.