Globalization at the Brink?

This one is really big. It touches every region, every country, every firm. In fact, it is so big, it likely touches every individual on the planet. It has steadily grown into the fabric of everything we do, and to many, almost unnoticed. And now we are talking about undoing it all. It is hard to fully estimate the entire reach and impact of this thing we call globalization. And yet in our frustration with a sluggish post-recession economy that has left many behind, a slim majority seems to believe that globalization is the culprit. This development has rapidly zoomed up the global risk list, and currently occupies top spot. Is globalization over?

So much for immediate costs; what about the logical feasibility of reversing globalization? First off, it’s a whole lot easier to impose trade-inhibiting policies than it is to gear up the domestic investment that replaces the interrupted trade flows. Regular folk might just run out of patience with the policies. Second, global trade connections have been enabled by a technology that is not going to disappear in a more protectionist world. Third, trade restrictions ultimately benefit those they are aimed at. Bent on survival, protectionism’s victims are forced to be ever-leaner and more competitive – far more than those resting behind a tariff wall. As such, trade restrictions are the ultimate enemy of those they purport to protect. Fourth, the voice of the shareholder has been strangely silent. When it starts to speak up, it is likely to cast its increasingly powerful vote for globalization. A fifth and weighty consideration is that a revisit of the architecture isn’t really needed now; ultimately, the dissenting votes are about making the economy great again – and that’s now happening, all on its own.

America is the best example. After a particularly long seven-year wait, key groups sidelined by sluggish growth – both older workers and millennials – are now rushing back into the job market. Industrial capacity is tightening up again, and several industries are bursting at the seams. With confidence riding high, business investment is set for a strong increase. The only thing standing in the way of solid total performance is greenback-inhibited exports.

This is probably the best news emerging markets have seen in years. Tightening U.S. and EU markets can only mean better times on the export front in the emerging world, which will be a help to markets struggling with lack of capacity, over-capacity, softer commodity prices and rising borrowing costs.

Putting all this together, EDC’s Global Export Forecast calls for world growth to rise from 3.5 per cent in 2017 to 3.8 per cent next year. Canada’s exports are projected to increase by six per cent this year thanks to a bump in commodity prices, and by five per cent in 2018 as global growth accelerates.

The bottom line?

Scan current data, and the global economy is serving up what the people say they really want: growth, jobs and a green light for continued expansion. But this isn’t 1983. Freer trade is now firmly embedded into the picture; dismantling that architecture puts today’s growth story at great risk. But if that risk is ultimately unlikely, this could be one of the greatest moments of opportunity in the New Millennium.

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