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Geopolitics

The Backlash To Globalization Did Not Begin With Trump

President Trump is not curbing global trade alone, but is part of a trend traced back to the crash of 2008. And the legislation actually dates back to the 1950s.

Protest at Germany's Leifeld Metal factory
Protest at Germany's Leifeld Metal factory
Farid Kahhat

-Analysis-

LIMA — Not everything in this world is Donald Trump"s fault. His administration's protectionist tendencies are usually blamed for impeding the further integration of the global economy (or "globalization" we hear less and less about). In fact Trump is just riding a trend that has become increasingly evident since the global recession that began in December 2007.

In a recent edition, The Economist weekly found that out of 12 indicators of global economic integration, eight had declined or were stagnant since the recent, Great Recession. For example the share of the world economy of intermediate imports (those capital goods at the source of international value chains) fell from 19% in 2008 to 17% in 2018. Direct foreign investment dropped from 3.5% of the world economy in 2007 to 1.3% in 2018. Meanwhile those indices of economic integration that have risen since 2008 (like the proportion of migrants permanently moving to developed economies) are themselves part of what explains the resistance this integration is generating today.

It's true that Trump, himself, is a factor the world could not have anticipated.

Secondly the tendency to restrict foreign investment (especially from China) in firms making "critical technologies' for national security concerns, is supported by Democrats and Republicans in the U.S. Congress (which has duly approved parts of the law in this regard). Certain member states of the European Union (EU) are also restricting foreign investment and the EU is considering adopting similar norms. I wrote months ago about the German government's pioneering decision to block a Chinese company acquiring the firm Leifeld Metal, for security reasons.

Thirdly, norms allowing the U.S. administration to take protectionist measures citing national security were approved in 1950 and 1962 respectively. The reason we hadn't heard before Trump of the Trade Expansion Act of 1962 is that only 26 inquiries were launched on its back, with only two leading to trade-related measures. The last investigation was in 2001.

But not invoking its provisions did not mean these laws had lapsed. And the 1950 and 1962 acts gave the executive branch ample room for finding good reasons why these might be invoked.

These laws did not set down precise, quantitative standards for a start. The 1950 Defense Production Act cites excessive importation, but not how much that would be. Nor do they state exactly how economic factors could harm national security. The 1950 act includes for example, unspecified "other factors' the president and an advisory Committee could cite to enact its restrictive provisions.

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Women protest on International Women's Day in London in 2022

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