Since the Russian invasion began, everyone from newspaper columnists to Wall Street luminaries have decided that the era of expanding global trade and financial ties has ended. Yet such claims don’t match the empirical reality many of us see, especially in Asia.
On the contrary, it seems that our world is only becoming more interconnected. Last year, global trade hit a record $28.5 trillion, up 25% year-on-year and 13% higher than in 2019, before the pandemic struck. For all the talk of decoupling, U.S.-China trade swelled more than 20% last year, to $687.2 billion. Even with war in Ukraine, global trade is forecast to grow in 2022, but at a slower pace.
China, in particular, is more integrated into the global economy than ever. In 2021, its foreign direct investment inflows rose by a third to an all-time high of $334 billion. In the first quarter of this year, they grew by more than 25% year-on-year.
Travel has been slower to recover and international trade as a proportion of global GDP has fallen since its peak in 2008. At the same time, globalization is evolving and surging in other, non-physical dimensions as well.
Monthly global data traffic soared during the pandemic and is forecast to reach 780 exabytes by 2026, up more than three-fold compared to 2020. Half a million new people connect to the Internet each day.
One central belief is convergence globalization. The idea that as countries became more globalized and developed, they would become more like us in the West. But in reality, over the last half century, nation-states in the global system have not evolved significantly closer (or more similar) to one another along a number of dimensions. Globalization has not led to Americanization.
To the contrary, globalization is becoming less American and more, well, global. While the U.S. was at the helm of global trade before 2000, today two-thirds of countries trade more with China. Since Trump turned his back on the Trans-Pacific Partnership free-trade pact and the World Trade Organization, the locus of multilateral trade liberalization has shifted to Asia.
In global finance, while the dollar still reigns supreme, its share in global currency reserves fell from 70% in 2000 to 59% in 2020. Sanctions are accelerating efforts by Russia and other countries to develop alternatives to the U.S. dollar and the SWIFT interbank messaging system.
The second neoliberal assumption about globalization shattered by the war in Ukraine is the belief that market liberalization would launch a virtuous circle of peace, prosperity and openness, entwining the economic interests of states until conflict between them became unthinkable.
Around the world, governments are paying more attention to how globalization can threaten national security, citizens’ interests and the environment. To mitigate these risks and make globalization more palatable, many are shifting away from Washington-style laissez-faire policies to a more hands-on approach of “managed globalization.”
