Trade's share of the global gross domestic product peaked at 28 percent in 2008 and has been declining ever since. (Antara Photo/Aswaddy Hamid)

Onus on Asia to Advance Conversation on Globalization

BY :DION BISARA

FEBRUARY 14, 2019

Jakarta. A trade war between the world's largest economies and nationalistic pushback around the globe force one to wonder whether globalization has finally reached its limit and if it is starting to unwind.

Trade's share of the global gross domestic product peaked at 28 percent in 2008 and has been declining ever since. The West, which long championed free trade and globalization, now seems to feel that competition from the East is a little too intense to its liking. 

Narratives of lost jobs, delipidating industry and increasing economic inequalities now abound in advanced economies, giving way to surprise democratic votes like Donald Trump and Brexit. 

But for Danny Quah, dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, the root cause for the pushback runs deeper. 

"What we are going through now seems to stem from, according to one interpretation, the fact that the dominant power in the world, the United States, is feeling challenged," Quah said in an interview with the Jakarta Globe.

"It is challenged for world leadership; is challenged for economic domination; is challenged for technological supremacy." 

After all, this is not for the first time globalization met an unfavorable fate. The world wars brought an abrupt end to the first wave of globalization of the 19th century. Steamboats that allowed trade between countries and colonies to commence, irrespective of wind patterns, gave way to U-boats and destroyers that preyed on rival trade routes. 

After World War II, a new world order emerged. Colonies became new sovereign countries. Instead of coercion by imperialist forces, countries now trade under agreed global rules. 

Asian countries, which at first were suspicious of globalization, piggybacked on globalization to rise from a lower-income status by integrating their economies into the global value chain, lifting 600 million people out of poverty in the process.

These countries now find themselves in a reversed position, having become the strongest proponents of globalization.

"We in Asia, if we want to continue to draw the benefit of globalization, need to engage in serious conversation with the advanced nations, the same way as 50 years ago, when the West convinced the East that globalization was a good thing," Quah said. 

"It's not business as usual anymore, it is disruptions to the international order. That world order needs to short itself out and be recalibrated. We need to be part of the story that helps that recalibration," he said. 

In a more pessimistic scenario, Quah said, advanced economies, which make up half of the world economy, may opt to become autarkies and bring down the global rule-based system that adjudicates trade disputes.

"That is already happening. America, in its suspicions of the World Trade Organization, is actually not allowing the organization to do its job," Quah said. 

"That undermining is extremely dangerous. It leads to a world where it might be an arbitrary exercise of power. We need to watch out for that," he added. 

In an optimistic scenario, countries would end their attacks on globalization as they realize that protectionism would just tax their own citizens.

"Every nation would come to realize that protectionism hurts their own people. It raises prices, it makes the goods and services people want more expensive. It would divert trade away from our most natural trading partner to other trading partners that are unable to operate as efficiently," Quah said. 

"What we do in becoming protectionists, is that we impose a tax on our people and that tax damages the poorest, the most exposed people in our society," he said. 

Crucial to the optimistic scenario is for countries to find ways to protect their displaced workers. 

"The role of public policy is not to protect jobs, but to protect workers. If we have to let go of jobs, we let go of jobs. We retrained our workers and find new jobs for them," Quah said. 

In the medium term, Quah said the most likely scenario is that globalization would evolve to a point between the two extremes. Emerging economies such as Indonesia have an important voice in determining how the new global trading system can function and build upon its previous mistakes, he said.

"It is appropriate for all of us, who are outside the traditional centers of power, to make our voices heard more," Quah said.

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