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Free Trade Does Not Equal Free Peace

Some hands shaking next to a port

Over the last half-century, globalization has proceeded at a fierce pace. Nearly every nation is engaged in the exchange of goods and relies on this exchange for its welfare. Many assumed the impact of globalization would foster positive relationships, and perhaps even support democratic change. After all, by having countries negotiate trade arrangements, wouldn’t harmony be encouraged? In theory, by allowing companies to invest and develop operations abroad, integrated trade and economic systems would bring peace. But as recent events have proven, the direct path from globalization to global peace has not materialized at all. Instead, it actually appears to be contributing to escalating conflicts that could reverse globalization progress made.

From a historical perspective, political philosophers and economists alike have long suggested free international trade might lead to peace. Such beliefs have even persisted in the aftermath of war, and thus, this remains an idealized view of trade. However, today paints a different picture than the one they predicted. The impact of globalization looks to be moving in a different direction. Russia has invaded the Ukraine, resulting in globalized economic warfare. China and the U.S. are actively engaged in trade wars and tariff escalations. And geopolitical conflicts over Taiwan, Hong Kong and the South China Sea involving trade persist. The transition from globalization to global peace has certainly not occurred. Given this, it might be that the globalization of free trade is on the decline. And it’s worth exploring what this might mean for the future.

(Dive deeper into how China has waged war on the West in this Bold review of an important book on the subject!)

“After the fall of the Berlin Wall in 1989, a near-consensus prevailed among [Western leaders] that peace was the natural condition of the developed world and that globalization was immune from geopolitical risk.” – Bill Butcher, Financial Times

A Historical Perspective of Trade Globalization

The current wave of globalization is certainly not the first. Most notably, industrial globalization of commerce and trade developed strongly at the beginning of the 20th century. Proponents of these developments believed the impacts of globalization would inherently create a lasting peace among nations. But these visions were shattered as the world suffered two world wars. Nationalism and strategic interests trumped economic trade agreements. This seemingly proved that a transition from globalization to global peace wasn’t a given. But this didn’t stop liberal idealistic sentiments to fade. In fact, they grew even stronger in the aftermath of World War II.

After the second world war, the U.S. and the Allies paved the way for globalization 2.0. While organizations like NATO were created to better ensure national securities, many still believed free trade could bring global peace. These globalization to global peace perspectives is what led to the World Trade Organization and the internationalization of finance. They also resulted in the formation of the European Union. And these views convinced Western leaders to invite China to participate in globalized trade. Their hopes (and beliefs) were that China’s involvement would push China toward more liberal and democratic practices. But the impacts of globalization failed to achieve this goal, and today, China represents one of the greatest economic powers. Once again, the belief that free trade on an international scale creates world peace has not been supported.

“What was striking about the second great period of globalization was its much greater intensity …This was reflected in the larger number of countries participating in the global trading system, very complex cross-border industrial supply chains and the frenetic internationalization of finance.” – Bill Butcher, Financial Times

Globalization 2.0

There’s little question that the impacts of globalization the second time around haven’t been beneficial. Globalization 2.0 has markedly improved the standards of living across the world. According to financial reports, international trade has lifted about 1.3 billion people out of poverty. It has been particularly helpful to lower-income nations who have been able to access goods and technologies. It has also created efficiencies as multinational corporations are able to access less costly resources of production. But at the same time, it has also led to some undesirable consequences. For one, it has led to a widening of inequality within and among nations. Those with stronger economies and resource access have a natural advantage. This is one factor undermining the ability to go from globalization to global peace.

A bunch of shipping containers stacked
The impact of globalization was supposed to be peace–where is that peace, though?

There are other negative impacts of globalization 2.0 as well. The internationalization of trade has made it easier for nations to gain advantage without going to war. Cybersecurity breaches and intellectual property theft are prime examples of this. It has also encouraged the weaponization of economic tools when international conflicts occur. This has certainly been the case against Russia in response to Ukraine’s invasion. And it is also evident in the ongoing trade war between the U.S. and China. Globalization to global peace philosophies are not supported by these developments and suggest just the opposite.

“While in the short term, close economic relationships may have a moderating effect on a state’s behavior in the long run strategic interests prevail.” – Rafał Ulatowski, Foreign Policy Specialist at the University of Warsaw

Is the Globalization Party Over?

Recent circumstances strongly bring into question globalization to global peace philosophies. Increasingly, nations are in conflict over issues that are no longer necessarily territorial in nature. The battleground has shifted to an economic one where geopolitical disagreements are fought differently. Notably, the pandemic has accelerated some of these conflicts. Interdependencies among nations as a result of the impacts of globalization crippled some economies as supply chains were affected. Today, many companies are looking to diversify their reliance on countries like China because risks are increasing. All of this suggests that the peak of globalization may have well passed. And in its place may come a sort of globalization recession in its wake.

According to some economic experts, the world is entering into a phase of geoeconomic fragmentation. Many countries have already imposed trade restrictions and cutbacks as they realize the risks of interdependence. In fact, more than 30 countries have done so involving food, energy, and other commodities. This includes the U.S., which is seeking to boost domestic manufacturing through its Inflation Reduction Act. These are the current impacts of globalization, and they are clearly not promoting harmonic collaboration among nations. International free trade is good in many ways. But a globalization to global peace pipeline based solely on trade simply doesn’t exist.

 

The government wants your whipped cream–can you believe it?

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