Globalisation in reverse gear: The threatened re-emergence of Protectionism

Globalization in reverse gear and global trade protectionism are the result of various kinds of problems regarding social distribution, justice, and uneven development in the process of globalization.  Unequal social distribution is a weakness inherent in a market economy, but economic globalization further aggravates the problem. In a market economy, the profit of different economic factors varies significantly, among which the difference between capital and other factors of production is most outstanding.

While globalization has undoubtedly ushered in new opportunities, there remain significant unmet demands for fundamental services like water, sanitation, energy, and healthcare. Regardless of substantial progress, India’s evolution into a global economic powerhouse has not yet translated into comprehensive benefits for all its citizens. The trend of globalization in reverse is a hot issue not only in India, the issue is prominent in the international landscape, particularly in Western developed countries. The UK voted to leave the EU in 2016 and officially left the trading bloc – its nearest and biggest trading partner officially on 31 January 2020. While the UK was in the EU, companies could buy and sell goods across EU borders without paying taxes and there were no limits on the amount of things that could be traded. Freedom to work and live between the UK and the EU also comes to an end, and UK nationals now need a visa if they want to stay in the EU more than 90 days in 180 days. Similarly, the US, Australia, and New Zealand currently don’t have free trade deals with the EU. Switzerland rejected joining the European Economic Area by 50.3% of voters. This vote strongly highlighted the cultural divide between the German- and the French-speaking cantons, the Röstigraben.  The tremendous impact of far-right forces on the political ecology of France, Germany, Italy, and other major European countries, has reflected the rampant backlash against globalization in Western countries from different angles. In many developing countries, protectionism and nationalism have also emerged to different degrees, which shows the trends of reverse globalization, anti-globalization, and deglobalization are not limited to the developed world, but a worldwide phenomenon with varying forms and momentum in different countries and regions. The trade war between China and the United States has been ongoing since January 2018, when former U.S. President Donald Trump began setting tariffs and other trade barriers on China to force it to make changes to what the U.S. says are longstanding unfair trade practices and intellectual property theft. The present President Joe Biden continues with US tariffs on Chinese goods.  In response, China accused the USA of engaging in nationalist protectionism and took retaliatory action. In early 2024; the Trump presidential campaign was mulling a 60 percent tariff on Chinese goods. Today, protectionist measures are on the rise. Trade tensions and geopolitical challenges are raising concerns about the trajectory of globalization. The Indian budget in February 2018 raised import duties on more than 40 items, ranging from auto parts and toys to candles and furniture, to protect uncompetitive small businesses and create jobs in labour-intensive industries. Earlier, India had raised import duties on several electronic items, from phone components to TVs and microwave ovens. This was in pursuance of a Phased Manufacturing Program aiming to check massive imports from China and ensure that cellphone assembly and the manufacture of components are done mostly in India. An official task force has been appointed to look into ways of reducing import dependence. As a result, deglobalization—the process of reducing global economic interdependence—has been at the forefront of current policy discussions.

Under the guise of globalisation, when free accesses are allowed MNCs who have resources and infrastructure to operate supply chains or distribution in many different countries can hedge out small local businesses. Many small-scale producers in developing countries have been hit hard due to the advent of globalization. Imported goods are much cheaper compared to domestic products. This necessitated prohibition or restriction on the import of certain types of manufactured goods from a foreign country to protect domestic industries. Trade barriers like import quotas and taxes on imports are the barriers or the restrictions being enforced by many governments to stop any of the trade entering the country from the countries outside. The purpose of enforcing trade barriers is nothing but to increase the prices of imports so that only those who can afford them purchase them from outside the country and save the foreign exchange reserve.  Prohibitions and restrictions in one country may lead the authorities in other exporting countries to feel compelled to adopt similar measures.  the trading partners hit by the tariffs retaliate – as is often the case – any potential benefit could be reversed. Domestic firms lose competitiveness in foreign markets, and exports and activity fall as a result. As such, rising trade distortions imply higher trade costs for all countries involved, which may hinder the optimal allocation of resources. All economies involved are, in the end, worse off. The stockpile of G20 import restrictions in force shows no sign of any meaningful roll-back of existing measures. By the middle of October 2023, USD 2,287 billion, or 11.8% of G20 imports were affected by import restrictions implemented by G20 economies since 2009. The introduction of export restrictions has increased since 2020, first in the context of the pandemic and more recently of the war in Ukraine and the food security crisis.

Globalization offers greater profit margins for capital, particularly the big capital of multinationals, as the advantage of capital in liquidity has been further strengthened compared to labour, and capital owners can make greater use of the benefits of globalized markets than owners of other factors, widening the gap between return on capital and the economic growth rate. Although it is commonly believed that globalization and trade liberalization result in higher GDP, little is known about its effects on poverty and inequality. Globalization has made social justice a more daunting task, which is a universal problem around the world. “The richest one percent of the world’s population owns more wealth than the remaining 99 percent. All these things created a backlash against proponents of globalization. Proponents and opponents of globalization have divergent views on the above-mentioned issues. The proponents are optimistic about the prospects of globalization take the tide of reverse globalization as a counter-current to the opponent of historical development and condemn it, whereas the opponents of globalization emphasize the harm of globalization to countries and are pessimistic about its prospects. As a result, deglobalization—the process of reducing global economic interdependence—has been at the forefront of current policy discussions.

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