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10. DEGLOBALISATION—THE AFTEREFFECTS
Countries moved on the path of globalisation under a highly legitimate global body, the World Trade Organisation (WTO) in 1995. The apprehensions of the developing nations soon diluted as they started reaping economic benefits out of it. Though the course of globalisation remained a bit chequered, it has proved to be better for the emerging economies to a large extent, the reason they are still the staunchest supporters of the process. But suddenly the world looks going in the reverse gear and the process of reverse globalisation (deglobalisation)11 looked certain by early 2017. This course will have differentiated effects on the developed and developing economies in short- and long-term. Meanwhile, the emerging market economies will have to face their own set of challenges due to it.
The seeds of deglobalisation process can be found in the global financial crisis of 2007-08 and the failure of the developed economies to recover from it. Recovery from the Great Recession among these economies are getting tough. Even unconventional monetary policies have been tried (pursuing for negative interest rate regime) without much results. In the wake of this several of these economies have signalled ‘protectionist’ rhetoric. Right from the Brexit to the rise of protectionist US (in post-Trump period) are the major signals of reversal from the process of globalisation.
The other reason for reverse globalisation is rooted in the aftereffects of the globalisation since 1995. The experiences of globalisation have not been uniform and singular for the different member nations. Some have reaped high dividends while some other have gone into huge negative trade with their trading partners. Other than the contentious issues related to agriculture, public stockholding of food, drugs patenting and climate, in past one decade,
the world has increasingly debated the ‘negatives’ of globalisation in a very vigorous way—increasing income inequality, adverse impact on environment and climate, etc. being the major ones. Due to this, negative sentiments have been growing among the developed economies towards the process of globalisation (interestingly, these were the apprehensions of the developing countries while the WTO was under the process of negotiation, between 1985 to 1994 and even after it!).
At the G20 Summit (Baden-Baden, Germany, mid-March 2017) loud voices against globalisation were heard. The US put its concerns regarding its huge trade deficits with key G20 members, such as Germany and China. Though the country denied its desire to get into trade wars but emphatically called for a farer trade with it. Not only this, on the margins of the Summit the US clearly expressed its desire towards re-negotiating not only with the NAFTA but the WTO, too. The rise of protectionist US has virtually failed not only the G20 Summit put it has put the course of globalisation in reverse gear. The course of globalisation looks completely uncertain.
The above-given events show as if the world (or at least the economies which matter most) has started to move slowly away from the much- celebrated idea of globalisation—de-globalisation taking over the world— shrinking scope for multilateral trade and economic inter-dependence. But all does not look lost—the lack of willingness towards globalisation among different economies is not of the same degree nor universal to every economy
—better say it looks selective.
Impact of Regional Trade Agreements
The much-celebrated regional trade agreements look getting irrelevant given the rise of protectionist moves among the nations particularly among the developed economies. The most ambitious such agreement—Trans-Atlantic Partnership—has been derailed as the biggest force behind it, the USA, has backed out of it. How will it come without US is still not clear or whether it will die before coming into being is just anybody’s guess today. Most of the regional trade agreements (for example, the NAFTA, SAFTA, etc.) involving USA and UK are in the process of transition.
Meanwhile, the situation regarding such agreements involving the
developing nations are different or better say just opposite. As the course of globalisation has been proving socio-economically correct for them to a large extent they are eager to promote inter-regional and multi-lateral trades. In case of India and the BRICS it is imperative to strengthen the course of globalisation. Particularly in case of India the course of socio-economic transformation depends heavily on the success of globalisation.
Experts believe that the future course of multilateralism now will depend on the actions and steps of the emerging market economies. Another school of thinking feels history repeating itself—the world looks taking the same old course which caused the demise of the General Agreement on Trade and Tariff (GAAT) by the later part of 1970s. It is still not possible to give the verdict on the fate of globalisation but things look very weak in its favour.
As per the views of the experts and the Economic Survey 2016-17, India necessarily needs a vibrant multilateral trading world to pursue its socio- economic aspirations of alleviating poverty, enhancing growth rate and joining the club of developed world. For that matter, the country needs to keep pushing in favour of a multilateral world. It needs to negotiate with the countries having higher appetite for globalisation on the priority basis— sketching out some more lucrative regional and preferential trade agreements. To scale up its growth to the level of 10 per cent, India needs an active support of exports.
If developed nations are apprehensive of trading with China, it does not mean they will have same concerns towards India, too. India might help the developed nations to grow with it. While China is busy re-balancing its economy and trade (finding it difficult, too), India must not miss the opportunity to clear its intentions and prioritise its actions in this regard. India cannot afford (so the emerging market economies) deglobalisation. Rather, it should support globalisation vigorously. There are high chances of finding viable partners in the developed world itself.
Everything is not lost about globalisation yet. There is no clarity yet about the benefits which the US or the UK will have out of being protectionist. May be after testing the waters of protectionism they get back to the course of globalisation. As the developed nations miscalculated the impact of WTO- promoted globalisation, chances are there that they may fail in calculating the positives and negatives of being protectionist, too. It means, the verdict on the course of globalisation is yet not out.
1. The write-up is based on the Economic Survey 2016-17, documents of the RBI and other Government sources.
2. The write-up is based on the analyses presented in the Economic Survey 2016-17; 2015-16 and 2012-13.
3. The write-up is based primarily on the Economic Survey 2016-17; articles and interviews of Arvind Subramanian, Chief Economic Advisor, Government of India and other official releases.
4. The write-up is based on the Economic Survey 2016-17, press release from the
Government of India and other Government sources (till March 2017).
5. The write-up is primarily based on the Economic Survey 2016-17 and the primary sources of the Government of India released till March 2017.
6. In 1970, a Committee headed by former Chief Justice K.N. Wanchoo, in its interim report, recommended demonetisation of the 10, 100, and higher denomination notes to combat the scourge of black money. These denominations accounted for 86.6 percent of the then money stock.
7. The write-up is based on several contemporary reports and Government releases such as–the Economic Survey 2016-17, Union Budget 2017-18, World Economic Forum, Oxfam reports, Credit Suisse, etc.
8. The write-up is based on primary sources such as the Economic Survey 2016-17, releases of the Union Ministry of Finance, the NITI Aayog and few issues of the journal The Economist, mainly.
9. The write-up is primarily based on the Economic Survey 2016-17 and 2015-16 together with the Union Budget 2017-18 and other releases of the Government of India.
10. The write-up is primarily based on the Economic Survey 2016-17 and 2015-16
together with the latest NCRB report (2015), the latest NSSO report (2014) and
other releases of the Government of India.
11. The write-up is based on the Economic Survey 2016-17, various issues of The Economist and other media sources.