This is an audio transcript of the FT News Briefing podcast episode: ‘The geopolitical threat to globalisation’

Marc Filippino
Good morning from the Financial Times. Today is Thursday, November 24th, and this is your FT News Briefing.

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We’re doing something a little different for this episode. In today’s show, we’re going to be focusing on one big topic: the state of deglobalisation and how geopolitics is contributing to this process. The FT’s Martin Wolf will give us the breakdown. I’m Marc Filippino and this is a special episode of the FT News Briefing.

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There are concerns that the world is becoming a less global place. And what I mean by that is that more and more countries are pulling back on global trade. And there are a lot of examples that back up that theory. Donald Trump started a trade war with China. The Covid-19 pandemic put supply chains to the test. And the war in Ukraine has gotten a lot of countries reconsidering how dependent they should be on Russian energy. This all points to a deglobalisation movement, one where power is fractured and countries turn within for their needs, rather than relying on other countries. The FT’s chief economics commentator, Martin Wolf, recently wrote about the state of globalisation and he joins me now.

Hi, Martin.

Martin Wolf
Hi. Good to be with you.

Marc Filippino
So the column you wrote is specifically about the politics behind globalisation. What’s your core thesis here?

Martin Wolf
Well, there are two ways of thinking about the politics. There’s what I call small-bore protectionism. Some of it can be quite big — namely, there are domestic interests, which have been very adversely affected or feel they’ve been very adversely affected by trade, and they want action to do something about it. The biggest example was Donald Trump’s trade policy, which was not actually addressed at anything big strategically. It was addressed to rectify trade imbalances. But there’s something much bigger, I think, now happening, which is a fundamental conflict for power in the world, in which trade becomes essentially an instrument of and a consequence of bigger conflicts, possibly even war. And we’ve seen that most dramatically, as you’ve mentioned, with the Ukraine war, which has had an immense effect on energy trade. It’s not because of it was a trade policy war. It was a consequence of war.

Marc Filippino
So in your column, you note that there have been periods of globalisation and periods of decoupling. They come in cycles and it sounds like this deglobalisation period that we’re in could rebound at some point. Is there any chance that we could vary from the path that we’re on?

Martin Wolf
Well, there always is. If we look at it historically, which I did in the column you referred to, I went back to about 1870. And over that period there has been two big upswings in globalisation: 1870 to 1940, and one big one, which started really in 1950, but accelerated after 1980. And this last one is the biggest globalisation in every dimension in the history of the world. In between, there was a collapse, two world wars and a Great Depression, does that. So what that tells you is geopolitics can play a very big role. And nonetheless, when stability is returned and restored after the second world war, 1945, trade restarts.

Marc Filippino
So, Martin, I’m curious, is there an argument for deglobalisation? I think about the war in Ukraine and Russia using energy resources as leverage and countries that have just gotten too dependent on Russia for those energy resources. Would it make sense to be less global in that sense?

Martin Wolf
Yeah, I think security is a perfectly good reason. There is a risk that if you become too dependent on trade that you may hit some very big and dangerous downturns because of this. But you have to recognise this can also happen domestically. Things can, you can have an earthquake, something like that, which also disrupts trade. So the answer is yes, there are real issues and you have to avoid becoming too dependent. But if you’re a small to medium-sized country, dependence on others is inevitable. You just can’t be self-sufficient.

Marc Filippino
So what does that mean, then, for a huge economy like the US? Does it mean that America doesn’t need international trade?

Martin Wolf
Well, what’s important about the US is it’s obviously the world’s biggest economy, so it affects everybody else dramatically, but it actually trades relatively little — in fact, very little relative to its output. It’s a huge economic fortress. So the American perspective tends to be, trade is sort of a nice-to-have, but it’s not a have-to-have. And in the end, well, if imports are causing us trouble, we should just close them off. I mean, self-sufficiency is seen as feasible. Nobody else thinks that way, not even China — it’s the closest — because they’re just so trade-dependent. So there are options that the Americans think of which to pretty, well, every other country in the world, just aren’t realistic.

Marc Filippino
How much of this is the fear of deglobalisation versus actual retreat?

Martin Wolf
I think that’s a really important question. And so far it looks more like fear than actual retreat. What’s happened can be described very quickly. Between, say, 1980 and 2008, the financial crisis, trade grew twice as fast as world GDP. That was a real period of globalisation. Since then, it’s basically grown — it’s been volatile — about the same pace as world GDP. It hasn’t increased, but it hasn’t reversed either. But there is a fear that it will reverse because there is now a lot of political pressure to reduce dependence on trade. And I think that’s particularly significant in the US.

Marc Filippino
Martin, what do you think the next few years look like, both in terms of deglobalisation and the effort to continue globalising?

Martin Wolf
Well, I think there’s one really big question, which is, can relations between the US and China remain peaceful, ie avoid war? We’ve seen what war does. It’s dramatic. Provided peace is preserved, and the awareness that you need to co-operate, which is, I think, shown by the Biden-Xi meeting, that they understand this . . . 

Marc Filippino
At the G20 conference.

Martin Wolf
At the G20, exactly. They recognise that they have interests which depend on each other. There will be some areas where trade will be reduced significantly. There will be some offshoring that will be reshored or moved to other countries — this is the sort of “China plus one” strategy. There will be frictions and difficulties, but it won’t implode. If you get to a war-type situation or, of course, an economic depression, then all bets are off. You’re in a different world.

Marc Filippino
Does the US, does Russia, does China actually want a more globalised world or are they just more concerned about being the dominant power?

Marc Filippino
I think it’s more a byproduct of the political and geopolitical process, the domestic politics, which then interacts with geopolitics and back again. The current US administration, which is, I think, more seriously protectionist in some way than the Trump administration, doesn’t indicate a desire to cut the US, certainly not from most of its allies and friends, but from all the other emerging countries which are in between and don’t want to choose. And even from China, there’s huge economic and business interests in China. Very important corporations are investing in it. I think they’re a long way from really pulling the plug on it. It’s a sensitive and complicated relationship, but we haven’t yet moved into the complete breakdown phase, which we clearly have done with Russia. And I think that’s very difficult to see reversing.

Marc Filippino
What do we lose if deglobalisation becomes a reality?

Marc Filippino
The big point I’m making is that this is a geopolitical process. Suppose we reduce trade. That has economic costs. That’s obvious. We’ve discussed that. But there are also bigger political costs. If we can’t deal with each other on trade, if we’re not comfortable with commercial relationships, will we be able to do with the other challenges we have to deal with together? Are we gonna be able to reach sensible deals on things like this? And there are other issues. Dealing with pandemics — very problematic, it’s turned out. Can we deal with these issues if we really, just to put it bluntly, hate one another? It becomes emotional. And emotions affect politics in democracies and actually in autocracies. And if we can’t deal with one another in trade and other economic affairs, I think it will affect everything.

Marc Filippino
Martin Wolf is the FT’s chief economics commentator. Thank you, Martin.

Marc Filippino
Pleasure.

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Marc Filippino
You can read Martin’s column and more on globalisation at FT.com. This has been your daily FT News Briefing. We’re taking tomorrow off because today is Thanksgiving here in the States. Make sure you check back next week for the latest business news.

The FT News Briefing is produced by Sonja Hutson, Fiona Symon and me, Marc Filippino. Our editor is Jess Smith. We had help this week from David da Silva, Michael Lello and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio. And our theme song is by Metaphor Music.

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