Inside Out | US-China trade war is distracting the world from globalisation’s many obvious benefits

More than a billion people have been lifted out of extreme poverty, according to Ngozi Okonjo-Iweala, director general of the World Trade Organization (WTO). The proportion of the world population living on less than US$1.90 a day fell from 36 per cent in 1990 to 9 per cent in 2018 (although the Covid-19 pandemic has since interrupted the trend).

WTO chief economist Ralph Ossa warned a week ago that if the global economy fragmented into two rival blocs, real incomes worldwide would fall on average by 5.4 per cent. At the same time, Ossa argues that a revival of multilateralism could increase real incomes by 3.2 per cent. His conclusion: “the opportunity cost of foregoing international cooperation and instead moving to geopolitical rivalry is 8.6 per cent”.

If the benefits of globalisation are so clear-cut, why have so many concluded that we need to put the process in reverse – to replace interdependence with independence, with integration limited to a circle of friendly nations?

Okonjo-Iweala says the “deglobalisers” believe globalisation has exposed economies to excessive risks, resulting in a loss of jobs and rising income inequality both within and between countries. They say the long and complex supply chains that kept the globalised economy humming collapsed spectacularly during the Covid-19 pandemic, exposing unacceptable vulnerabilities and putting millions of lives at risk.

They also say that national security is in jeopardy and that the quest for efficiency has put resiliency at risk. Therefore, we must “de-risk” by bringing jobs home, putting up protective barriers, simplifying and shortening supply chains and providing subsidies while these necessary structural changes take effect. Higher costs and higher barriers to other export markets are a price we have to pay.