It seems the world is going back on its path of global economic integration. Recent events have spurred the process of deglobalization and countries are now turning inward-looking for and this is fanning fears of a slowdown in global growth if not complete derailment of economic recovery. This term has been used by economic and market analysts to highlight the trend of several countries wanting to go back to economic and trade policies that put their own national interests first. Politicians across the political spectrum have proposed barriers to immigration and trade. A clamor for deglobalization seems to have begun and the world is becoming less open.

A look at the following economic and geopolitical developments over the past couple of years are testaments to this new zeitgeist and how countries are taking hardline approaches to foreign trade.


The US and China trade war started in 2018 after USA’s growing trade deficit with China became a major political issue in the 2016 presidential campaign. A long timeline of trade and retaliatory tariff wars ensued, each country accusing the other of unfair market practices or delimiting the emergence of the other. It created a paradigm for increasing protectionism and trade barriers for other major economies. Relations with other trading partner countries were also being called into question as they had been given an ultimatum to confirm their alignment with US or China over the other in foreign trade.


The phase 1 deal in January resulted in US suspending/halving tariffs on goods worth $272 Bn. China also suspended retaliatory tariffs and agreed to buy an additional US$200 billion of American goods and services over the following two years.  But the outbreak of coronavirus outbreak may mean that China would have to invoke a force majeure clause with regard to its planned purchases. Negotiations for the 2nd phase have been postponed indefinitely. US has so far resisted pressure to ease the trade tariffs to offset the damage the coronavirus pandemic is doing to the global economy. It is thus unclear how long the trade war will last. And this might affect the chances of freer trade going forward.


India’s tryst with deglobalization was apparently waning when in 2018, PM Modi in Davos highlighted the fact that the world is turning more inward looking. Since then, his government has increased tariffs on several items to shield India’s farmers, shopkeepers, digital companies and many others from international competition. Also, India has always aggressively vied for FDI in major sectors in order to propel growth. But In January, with India’s economy slowing badly, Jeff Bezos announced a $1 billion investment in the country. But the Ministry of Commerce decried the move, citing that Amazon was not doing India any favors and in turn accused it of anti-competitive practices and predatory pricing.

Another decision of India that echoes its inward looking policies is its withdrawal from RCEP. The trade agreement would have broadened India’s markets and opened doors for free trade with 10 members of ASEAN countries. But India cited protection of regional industries from foreign competition as a reason not to take part in this trade bloc. It also was apprehensive of China dumping exports in India and flooding our domestic markets, which would also have endangered India’s small industries.


Another symptom of deglobalization is Brexit. By being a part of the EU since its inception, it enjoyed unfettered access to an entire continent as a market and eliminated national borders. This association broke with the referendum in 2016 and after a several instances of political turmoil, a deal was finalized and pushed through. Thus, in response to populist anger of the uneven share of the gains of globalization and backlash from rising migration, Britain chose to go it alone and unpacked decades of global economic integration.


Appointments to the WTO Appellate Tribunal were halted by the US citing concerns of judicial overreach. With the dispute redressal system coming to a standstill, the ongoing trade disputes are feared to be left pending indefinitely and the free trade agreements administered by it will be subject to complete overhaul. It also raises questions regarding the relevance of multilateral institutionsand spirit of international economic cooperationin the current geopolitical environment.


With the outbreak of the pandemic, multinational organizations have come to realize the fragility of global supply chains and the dependence on other countries for outsourced functions. Since exports from china dipped after the outbreak of the pandemic, Businesses are reassessing China’s role in global supply chains, and by the time this virus burns out, many of them will have started planning to relocate at least some of their production elsewhere. (See below dependency map of countries on China for supply chain support)


Also, after India was plunged into a lockdown state and all businesses were forced to be halted for its duration, many multinational financial Institutions like Wells Fargo and Bank of America had to rethink their strategy of outsourcing their call center activities to India. Data shows how digital banking and payment facilities in USA had suffered when the call center executives had to comply with the lockdown directives. It might lead to profound change in how companies strategize their operations after learning about their own vulnerabilities.


Globalization and deglobalization are recurring phases of the economic system. At higher levels of globalization, it becomes increasingly difficult to redistribute the gains derived from it and leads to a retreat like the developments seen above.

Though global recession is looming and there is slowing down (and even reversal) of global trade and travel, it is possible that globalization might pick up. There could be more digital flows across national borders. Countries in South East Asia are likely to be bright spots in a post pandemic world will attract increasing investment and drive the global economy in the coming years. There could be greater exchange of ideas, knowledge and knowhow and global cooperation to fight future global pandemics. But the benefits derived must trickle down to the lower levels of society and not widen the chasm of income inequality.

The focus must shift from aggregate growth to inclusive growth. The gains from growth must accrue not just to those at the top, but to those at all income levels and small and medium-size enterprises as well. We need to ensure greater inclusion that allow individuals across all sections of society to achieve financial security and pursue opportunities for their own betterment.

READ MORE:- Recession proof Businesses: Global march towards Recession