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Globalisation is alive and well, don't panic

October 06, 2016 15:31 IST

We are witnessing a new phase where business leaders are realising globalisation has to take into account national identities and cultures, says Claude Smadja.

One fashionable idea these days is that globalisation is in retreat, that we are witnessing a de-globalisation process. The proponents of this school of thought would see evidence of that everywhere: The rise of populist parties in Europe and the US, the UK vote on Brexit, the slowdown in the volume of global trade or the difficulty to get the Trans-Pacific Partnership Agreement (TPP) or the Transatlantic Trade and Investment Partnership (TTIP) moving forward.

It was also interesting to hear, at the China Global Enterprises Forum that we co-organised last weekend in Ningbo, some Chinese speakers fretting about the risk of globalisation having reached a standstill and how this would impact negatively on their country’s prospects.

In fact, there is a lot of misunderstanding about what we see today when it comes to globalisation. While it keeps moving ahead, driven by irreversible factors such as the information technology and communication revolution, the explosion of travel around the world, or the growing interconnection among economies and major currencies, we are witnessing a major course correction at play: This might be the end of arrogant globalisation and the beginning of a painful learning of humility by the business and other establishment elites that had considered over the last 15 years that globalisation meant a blank check for them.

Of course, there is a strong anti-European Union, anti-European integration, feeling in many parts of Europe. But did European integration - as part of the globalisation process - have to mean that bureaucrats in their Brussels bubble would have to regulate anything and everything in the lives of the people of the 28 member countries? Certainly not.

What most people in Europe want is not the end of the European Union, but the reining in of a process gone berserk and completely oblivious to the voices of the people.

It is a pity that it has taken crisis after crisis for European leaders to just begin to realise that something is wrong with the way integration has been implemented, and that an “integration” that fails provide a great portion of the people growth and jobs cannot but be perceived as a process schemed by big business and the elites for their sole benefit.

Regarding the opposition to the TPP or the TTIP some observations are also worth making: Trade pacts have always generated opposition by different groups defending their vested interests or afraid of the new competition this would create for them.

This is the case with respect to these two trade deals. However, one specific element about the TTIP is creating a very strong rejection in Europe: Basically, the TTIP is not about reducing tariffs or trade barriers but about creating a single trans-Atlantic regulatory space. This is something that people in Europe don’t want.

They realise that a single regulatory space would mean that, for instance, GMOs would be imposed on them in the name of free trade and most of them are viscerally, culturally, against GMOs; in the same way, the European notion of privacy is much stronger than the American one and most European people don’t want this notion of privacy being diluted for the benefits of MNCs having more leeway to operate on both sides of the Atlantic.

Another bone of contention is the way investment protection is envisaged in the TTIP. The proposed Investor-State Dispute Settlement (ISDS) process would bypass/negate the legal authority of national courts. Although this ISDS system exists already in many investment treaties, the way the US would like to enforce it in the case of the TTIP is seen as a way for big business to trample national legal systems.

So what we truly have behind the rising opposition to the TTIP is a real clash of cultures and identities - a reaction which goes way beyond and is more significant that the protection of vested interests.

In the case of the mounting opposition to the TPP treaty in the US, this is much less a case of globalisation backtracking than segments of the US public having the increasing perception that many trade pacts are either for the sole benefit of big business or are mostly set for geopolitical purposes which are either illusory and/or transitory and/or badly explained to the public.

President Barack Obama has promoted the agreement as a key element of the pivot to Asia strategy, as “strengthening US national security” and as a way for the US - and not China - “writing the rules of the road for trade in the 21st century”.

This sounds beautiful, but quite fuzzy for people concerned by job security and stagnant - if not declining - standards of living. Promises that the deal will mean “supporting more higher paying jobs” sound a little hollow as the US has already trade agreements with six of the 12 TPP countries and a more convincing argument would be to demonstrate how these existing deals have actually benefited US workers and how TPP would add more tangible benefits.

This is even more necessary as Democratic presidential nominee, Hillary Clinton, once a strong proponent of TPP, has now vowed to throw it to the bin as it would “kill” US jobs.

Coming to the slowdown of global trade growth, which some analysts see as evidence of globalisation now on neutral gear - if not in reverse - a more pertinent explanation might be that the previous double-digit growth was not sustainable because of structural factors: One is the slowdown of the Chinese economy, with the subsequent reduction of the growth of the country’s overall trade; the other is the development of China’s internal supply chains which means less imports from other Asian countries for the products it consumes and/or exports.

A third factor is the way MNCs are streamlining their global supply chains to reduce risks and costs as well as their environmental footprint. So, annual increases of global trade are not likely to get back to the previous era when global trade growth was driving global economic growth. However, this is definitely not a sign, or evidence that globalisation is now in reverse.

What we are witnessing today is a new phase where business leaders and the global elites are painfully beginning to learn that globalisation has to be managed in a way that will really take into account national identities and cultures, that the pendulum cannot always swing towards more ease for doing business at the expenses of national sensitivities; that cultures clashes exist and can become truly explosive if allowed to develop because blind business “logic” is allowed to be the sole driving element. Globalisation has increased - not reduced - the longing for the preservation of identity.

This is the crucial moment for the powers that be to come to the full realisation of this reality and start adjusting policies and attitudes to it.

Photograph: Alessandro Bianchi/Reuters

Claude Smadja is the president of Smadja & Smadja, a strategic advisory firm.

Claude Smadja