As trade barriers go up in the West, the rest are ‘reglobalising’

Back in 2021, amid a raging pandemic, the US National Intelligence Council warned of a more contested world in its Global Trends 2040 report. It highlighted the themes of global challenges, fragmentation, disequilibrium, contestation and adaptation.

The irony is that the West is dismantling the free trade order it created and propounded, even as the rest of the world pushes for more trade and opening up.

Why are we in such systemic gridlock? Robert Lighthizer, the Trump administration’s trade negotiator, laid it out: “I believe trade policy should help working-class Americans find and maintain good-paying jobs. But for decades, it has instead centred on price optimisation, efficiency and corporate profits. The result has been the loss of millions of jobs, the destruction of thousands of communities, and the accumulation of trillions of dollars of trade deficits. This policy has made the country weaker and poorer.”

The blame for the working-class impoverishment has been laid at China’s door, but China and the rest of the world cannot influence US domestic tax and labour policies on how to narrow the gap between its rich and poor. The real barrier to change is the political gridlock whereby domestic politics and vested interests are unable or unwilling to break the bureaucratic silos that protect their own turf.

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At the same time, the nature of trade has changed profoundly. Trade thought leader Richard Baldwin argues that the future of global trade is in digital services, not physical goods.

Even if the supply chain reconfiguration is distributing production out of China, there is growing trade among the rest of the world while