Call for re-globalisation in uncertain times

Countries across the world now appear less interested in extending cooperation with each other. As it is also impossible to entirely delink one from another, the nations are now concentrating more on limited and selective collaboration. Most countries have lost enthusiasm for wider or further openness of their economies. Instead, they are trying to revive the autarky approach, which is not feasible nowadays. Thus, many have adopted trade and investment restrictions, partially delinking from multiple supply chains. In this process, some countries have renewed conservative economic and trade policies that they earlier abandoned. In other words, they are now on the path of reversing the course of globalisation, which is also known as fragmentation.
The term 'fragmentation' has been widely used by various international bodies and agencies, especially for the last few years, to describe the less-cooperation, if not non-cooperation, in the geo-economic context. However, it is not a new concept and indicates the opposite of global integration through expanded trade, investment and migration. In May last, the International Monetary Fund (IMF) organised an international conference on geo-economic fragmentation. It said that the world is now facing the risk of policy-driven geo-economic fragmentation as scepticism about the benefit of globalisation is on the rise. The meeting mentioned that some major events in the last decade are responsible for the move towards fragmentation. These are uneven recovery from the global financial crisis (GFC), Brexit, US-China trade tensions, the Covid-19 pandemic and Russia's invasion of Ukraine. The series of international events have two broad negative consequences: (a) deterioration of the conditions of many workers and communities, especially those in the lower-income bracket; and (b) the intensification of geopolitical rivalry enhancing concerns about national security. The result is stalling the momentum for traditional trade reforms and spreading the trade restrictions and other distortive policy measures.
To put it in another way, countries have become more apprehensive about their trading partners and powerful neighbours. They have also questioned the necessity of global integration by further opening their countries for trade, investment and migration. Instead, they think it is better to curb the openness of the economy and maintain a narrow grouping with only a few 'friendly' countries to trade. Discouraging imports of workforce from other countries are also on the rise.
The issue of fragmentation is highlighted further in the World Trade Report 2023, released by the World Trade Organization (WTO) in the second week of this month. Sub-titled 'Re-Globalisation for a Secure, Inclusive and Sustainable Future,' the annual flagship report of the WTO underscored the necessity to emerge from the fragmentation and adopt the course of re-globalisation.
The multilateral agency responsible for making global trade rules defined the fragmentation as the 'turning away from the cooperative approach embedded in the current multilateral trading system towards more local and bloc-based trade and unilateral policies.' According to the report, increased trade restrictions coupled with deviations from commitments to international agreements are the core characteristics of the fragmentation.
It is to be noted that between 2010 and 2014, the number of annual average trade restrictions was below 500. The number stood around 75 between 2015 and 2019. Then, in the next three years, the number jumped significantly -- above 1,500 in 2020, nearly 2,500 trade-restrictive measures in 2021 and above 2,500 in 2022.
WTO was of the view that fragmentation would not be beneficial for the countries, especially those who are developing ones. Instead, countries like Bangladesh have already been facing increased barriers to reducing poverty and fighting the negative consequences of climate change.
Trade restrictions in advanced countries would make the exports of goods and services from these countries costlier. Again, restrictions imposed by the developing nations would also make their imports expensive.
To reverse the course of fragmentation, the WTO report stressed re-globalisation, which is 'an approach that extends trade integration to more people, more economies and more issues.' The concept places international cooperation at its centre and underscores that global problems require global solutions, not regional or patchy approaches.
Re-globalisation, however, does not mean further globalisation but rather a reform of the multilateral trading system so that international trade can be more inclusive and sustainable. The core thing of the process is the 'reduction of trade barriers for those that have remained at the margins of the trading system, from least-developed economies to workers in the industrial heartlands of advanced economies.' Thus, the countries need to cut down tariff and non-tariff barriers (NTBs), ease regulations for foreign investment and allow more migrant people to enter and work.
There is no denying that the gradual openness of trade has contributed significantly to reducing poverty and improving living standards in many countries. Despite some negative outcomes, integration with the global economy has brought about many positive results for countries like Bangladesh. The country is much more globalised now, having a higher trade-GDP ratio of 33 per cent than three decades ago when the trade-GDP ratio was 23 per cent. During the period, the rank of Bangladesh by current GDP notched up to 34th position globally from 53rd position. More statistics can also be provided to show the positive correlation between global integration and the economic advancement of Bangladesh as well as other countries.
The big question is how the countries will respond to the concerns and recommendations placed in the latest World Trade Report on fragmentation and re-globalisation. Some countries will find it a better option, while some will label it as an unrealistic proposition. The difference will continue, and the chance of narrowing the gap is slight.
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