For decades after World War Two, and especially in the wake of the collapse of the Soviet Union, first world countries embraced the concept of free trade and reduced tariffs. They welcomed a more egalitarian future between nations, and the term ‘globalisation’ became the buzzword of economic progress.
Then the financial crisis of 2008 hit, followed by the debt crisis in Europe and a significant drop in oil prices worldwide, and globalisation started to lose its shine. Fast-forward to the present, and the ripples of discontent have turned into a wave of anti-globalist sentiment.
Two astonishing political results in 2016 aided the anti-globalisation rhetoric – the UK referendum in June, which saw the (albeit small) majority voting the UK out of the EU, and the US presidential election results in November, which turned businessman Trump into president-elect Trump.
One of Trump’s first presidential orders of business was to take the US out of the Trans-Pacific Partnership (TPP) – a free trade deal between the US and 11 other countries that border the Pacific Ocean. He has also been threatening major reform to the Transatlantic Trade and Investment Partnership (TTIP) that is still under negotiation between the US and the EU.
In 2017 the trend has continued. The annual January meeting of business leaders at the World Economic Forum (WEF) in Switzerland saw panels discussing the negative effect of globalisation on unemployment rates and lowered wages; there was consensus that this rise of populism in the US, the UK and other corners of Europe is a direct result of giving globalisation free rein.
That said, there has been some retaliation to the anti-globalisation backlash. For all its controversies, the Comprehensive Economic and Trade Agreement (CETA) was still approved by the European Union parliament in February 2017.
This is a fair-trade deal that promises the removal of 99 per cent of economic tariffs between Canada and the EU, and a 20 per cent increase in traded goods and services. Opponents and anti-globalisation protestors argue that the deal, among other things, gives too much power to corporations – 3.5 million petitions were signed in Europe against both CETA and TTIP.
Europe is moving ahead with globalisation agenda
Despite this, Europe appears to be moving ahead with its globalisation agenda. More recently, the outline of an EU-Japan free trade deal was also approved, prompting European Council president Donald Tusk to comment that ‘Europe is more and more engaged globally’.
Then there’s China. President Xi Jinping delivered a speech during the WEF in January where he touted the benefits of economic globalisation; and his ‘Belt and Road’ project – which is set to reintroduce ancient trading routes that connect China with Europe and Africa – is arguably the most ambitious standard bearer for globalisation at present.
As world-leading economies including Europe, Japan and China continue to spearhead globalisation in the Trump and Brexit era, the schism between the pros and cons of fair trade and trans-national regulation will only continue to widen.
The defeat of Marie La Pen’s National Front in France dealt populism a blow in Europe, but the social disadvantages of globalisation are still reflected in higher unemployment rates and slow GDP growth across the board, and this is something that cannot be ignored.
Considering recent political maelstroms and the shifting tone in international meetings, it’s clear that the winds of anti-globalisation are strong, and from an investing perspective – as David Prosser writes in his comprehensive breakdown on the subject – big companies will most likely take the biggest hit.
For now, the prevalence of anti-globalisation sentiment will be revealed through the lenses of upcoming events such as the German federal elections in September and the annual meeting between World Bank Group and the International Monetary Fund in October. But as long as people feel major trade deals are negotiated behind closed doors by a handful of politicians and corporate mouthpieces, the trend is only likely to gain momentum.
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