Governing Globalization. The Challenge of Protectionism to Multilateralism

Abstract

It seemed that the world had overcome the storm of the global financial and economic crisis of 2007-2008 without repeating the mistakes of the past, first of all protectionism that, in the inter-war period, brought about the collapse of the volume of world trade and destroyed millions of jobs. Instead, now that the EU and the US have taken a step forward towards economic recovery Mario Draghi has warned that growth is threatened by two factors that can be ascribed to the American government – protectionist policies and the weakening of the dollar – aiming to gain competitiveness on international markets. The memory of the crisis of 1929 has not been a sufficient warning to stop Trump. The globalization process, based on the principles of multilateralism and open markets, as we have known it in the past years, is at risk. From 1948, when the GATT was created, to 1990 the growth of world trade has been close to 7% per year, quicker than in the following years that we are used to consider the golden age of globalization. At the same time, the custom tariffs, that in 1946 amounted to 50% of the value of imported goods, today have dropped to about 3%. The enlargement of market dimension and the expansion of trade relations brought about by globalization has represented a powerful driving force of growth of world economy. It has promoted the industrialization, formerly limited to Western Europe and North America, to the rest of the world. The traditional centreperiphery relations are becoming obsolete and the centre of gravity of world economy has shifted from the Atlantic to the Pacific. The per capita revenue in the emerging countries has increased impetuously. According to the data provided by the World Bank, the percentage of world population living in conditions of extreme poverty (US$ 1.90 per day), which in 1990 amounted to 37.1%, in 2015 has been reduced to 9.6% and is concentrated in SubSaharan Africa and South Asia. At the same time, globalization has had highly asymmetric effects, as the gap between rich and poor people has significantly widened. This is because globalization is not governed, but is abandoned to the free play of market forces. Deregulation has not produced the results expected by the ideology of the selfregulated market. Institutions and rules are necessary to oblige market to behave in a way that benefits all. For this reason, politics returns to take the stage. The alternative is no longer between supporters and opposers of globalization, but between different ways to react to the distortions of globalization. It is not true that everybody benefits from free trade. Protectionism is a policy largely adopted by the developing countries to be prepared to compete in international markets. It was adopted for the first time by the United States at the end of the 18 century to enable the American infant industries to compete with the British industry, then by Germany and Japan at the end of 19 century, lastly by China and India at the end of the 20 century. In the last century, when the centre of the economic and political power shifted from London to Washington and New York, the United States became, like formerly the British Empire, a promoter of international