Globalization is evolving, not receding

 •  Filed under International economics, China

The loudest voices in the West come from “globalization pessimists”. Some deny that cross-border trade and international engagement and cooperation are beneficial. A separate group believes countries should work together, and trade makes sense for developed and developing countries alike – but gloom permeates this camp as well.

The timidity of the proponents of globalization has several explanations. Even in countries where unemployment is moderate, large numbers of workers have not seen improvements in their living standards. Many workers feel that what was once an income and social ladder they could climb – through higher wages, promotions or better working conditions – today feels more like a slippery velvet rope. Some workers, generally those with a higher education, are able to make the ascent – many fall off and feel excluded.

Instead of explaining that trade is a major ingredient for economic prosperity, various US presidential candidates have sought to blame foreign countries for domestic problems. The uncomfortable truth is that poverty and job insecurity exist in all developed economies, and restricting trade will not resolve any urgent social issues.

Despite profound challenges, there are at least three reasons to hope that globalization can continue, and even thrive. Connections between countries are increasing, if we count activities like international travel and cultural exchanges (including international students), communication flows (transmission of data), scientific collaboration, e-commerce and other types of “digital markets”, as well as the steady expansion of companies from developing countries to other markets. (If one defines globalization narrowly as the exchange of tradeable goods, then it is easy to reach the incorrect conclusion that globalization is slowing down.)

Second, there is finally powerful demand for progress on environmental issues. Just a few years ago, hardly anyone believed a global agreement on fighting climate change would be achievable (the 1997 Kyoto protocol experience was particularly demotivating). Today, most countries agree that a common approach to environmental deterioration is warranted and the 2015 Paris climate accord has been signed by all relevant countries.

The third piece of good news is China’s constructive involvement in international economic policy. Two recent initiatives – the establishment of the Asian Infrastructure Investment Bank, and the Belt and Road Initiative – can contribute to faster economic development and reduction of poverty across Asia.

A longer version of this op-ed was published by People's Daily on June 1, 2016.