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Opinion | As trade barriers go up in the West, the rest are ‘reglobalising’
- The West is dismantling the free trade order it created and propounded, even as the rest of the world pushes for more trade and opening up
- Trade will emerge profoundly different, more complex and diffused. Chest-beating isolationism can’t change how the world is growing more interdependent
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Back in 2021, amid a raging pandemic, the US National Intelligence Council warned of a more contested world in its Global Trends 2040 report. It highlighted the themes of global challenges, fragmentation, disequilibrium, contestation and adaptation.
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Post-Covid, a world that has experienced vaccine and digital divides between the West and rest does appear to be fragmenting into blocs reinforced by nationalism and polarisation and which feature deepening inequalities, failed international cooperation on issues such as climate change, and the rise of non-state actors such as terrorists, drug lords and rich foundations.
As decoupling and “de-risking” dismantles global supply chains, the fragmentation of globalisation is looking more likely. Is Asia prepared for such a deglobalisation scenario?
The reality is that the rich West is turning inward, building up fences along trade, finance, digital, migration and military lines. The EU Carbon Border Adjustment Mechanism, to be implemented by 2026, is an example of new barriers being erected, even though the idea of putting a fair price on the carbon emitted by producers exporting to Europe is laudable.
Another example is the sixfold jump in US tariffs on Chinese imports since 2018, which have, ironically, reduced US jobs and output. US imports from China have fallen but imports with substantial Chinese inputs from countries such as Mexico and Vietnam appear to be taking up the slack. Nevertheless, the onshoring of essential production vital to national security, such as semiconductors and defence equipment, will not be reversed.
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The irony is that the West is dismantling the free trade order it created and propounded, even as the rest of the world pushes for more trade and opening up.
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