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Is the pendulum of globalization swinging to the east?
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Efficient cargo handling -- A heavy vehicle passes a cargo terminal at Kalibaru Port, Tanjung Priok, North Jakarta, on Sept.13, 2016. (Antara/Widodo S. Jusuf)
G
lobalization is facing a major test of sustainability in the west with trade protectionism and populism mushrooming, but the trend is unlikely to spread to East Asia, nor hamper the region’s steady trajectory toward deeper integration.
The protectionist sentiment taking over in major economies hit Britain firmly in June 2016, when the country voted to exit the European Union. Brexit campaigning in the run-up to the referendum played to some voters’ feelings of economic and social marginalization by focusing on a perceived crowding out of the job market by immigrants.
In the United States, Donald Trump’s populist “America first” rhetoric propelled him to election victory. He focused on widening inequality and stagnant or deteriorating middle-class income and stressed his intention to bring industry back to the US, threatening trade wars with China and Mexico.
Right-wing or populist parties are also flourishing across the developed world. In France, the EU’s second-largest economy, Marine Le Pen, leader of the far-right Front National, is ahead in polling for the first round of the presidential election. And in Italy, the rise of the populist Five Star Movement has exposed growing EU-skepticism.
For decades, the liberalization of trade through bilateral or multilateral deals has eased the movement of goods across national boundaries. Exporters gain access to larger markets and domestic producers to cheaper imported raw materials and components. Multinationals also benefit from liberalization as they have the flexibility to move production to more competitive economies.
These flexible global production networks have spread wealth globally, reducing poverty and narrowing inequality in the developing world. China’s achievements stand out in particular. China’s export-oriented industrialization created tens of millions of better-paid urban manufacturing jobs, but at the expense of middle-income workers in developed countries who lost their jobs as manufacturing moved abroad. The 2007/2008 global financial crisis compounded this increase in unemployment and paved the way for the emergence of protectionism in developed nations.
In direct contrast, in East Asia a certain level of integration already exists and the trend is continuing. There is no need to fear that the wave of protectionism in the west will hamper further economic integration in the region.
