In recent years, the global economy has been grappling with significant challenges, prompting many to question the impact of rising protectionism. However, a closer examination reveals that geopolitics, rather than protectionism, poses a more profound threat to economic stability worldwide.
The traditional distinction between free trade and protectionism often falls short in explaining the complexities of the modern global economy. The notion of “free trade” suggests that governments step back to allow markets to operate independently. Yet, any functioning market economy relies on a framework of rules and regulations—ranging from product standards and anti-competitive controls to environmental safeguards and financial stability mechanisms—typically established and enforced by governments.
With the advent of globalization, national jurisdictions became interconnected through international trade and finance. This interconnectedness raised critical questions: Whose regulations should prevail when businesses compete globally? Should there be new international standards established through treaties or global organizations?
During the era of hyper-globalization—from the early 1990s until the onset of the COVID-19 pandemic—trade agreements went beyond mere removal of cross-border restrictions. They delved into domestic policies, covering areas such as regulatory standards, health and safety rules, investment, banking, finance, intellectual property, labor, and environmental regulations.
These agreements often prioritized the interests of large multinational corporations, providing them with greater access to global markets and mechanisms to challenge government regulations that affected their profits. Intellectual property rules were tightened, benefiting pharmaceutical and technology companies, while capital flows were liberalized, sometimes at the expense of labor and environmental considerations.
The consequences of these policies have led to social and environmental challenges, including labor displacement and neglected public goods like climate change mitigation and public health. The current backlash against globalization reflects a rebalancing effort to address these national issues.
What some perceive as protectionism or mercantilism is, in fact, a necessary shift towards policies that prioritize domestic well-being. Nations are focusing on healing social and environmental damages by addressing labor concerns, regional inequalities, and investing in sustainable practices.
Understanding that geopolitics—specifically, the strategic interactions between nations—is the real challenge allows for more effective solutions. By acknowledging and addressing geopolitical tensions, the global community can work towards establishing a healthier form of globalization that benefits a broader spectrum of society.
Moving forward, it’s crucial for policymakers, business leaders, and international organizations to collaborate in creating a global economic framework that balances international cooperation with domestic priorities. This approach can lead to sustainable economic growth and a more stable global economy that is resilient to geopolitical disruptions.
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The global economy's real enemy is geopolitics, not protectionism
cgtn.com
