Hyperglobalization

“Global System on the Brink: Pathways toward a New Normal” is a joint study by the Atlantic Council’s Strategic Foresight Initiative and the Primakov Institute of World Economy and International Relations (IMEMO). Work on this joint assessment of global trends began before the onset of the recent crisis in US-Russian relations, but is more relevant than ever today as we seek to avoid a greater conflict and achieve a new normal of cooperation between Russia and the West. In keeping with previous forecasting works published by the Atlantic Council and the IMEMO, the study examines current trends and potential scenarios for global developments over the next twenty years.

Despite the rapid globalization of the past few decades, which promised cooperation and integration, the potential for major state conflict is on the rise due to deep fragmentation within and between societies. The old confrontation between capitalism and communism has given way to conflicts of moral values with nationalist, religious, and historical-psychological overtones. The worst outcome would be the emergence of a new bipolarity, pitting a group of states centered around China and Russia against the United States and some European and Asian allies. However serious the current situation, the study emphasizes the opportunities for narrowing differences.

This paper describes seven salient features of trade integration in the 21st century: Trade integration has been more rapid than ever (hyperglobalization); it is dematerialized, with the growing importance of services trade; it is democratic, because openness has been embraced widely; it is criss-crossing because similar goods and investment flows now go from South to North as well as the reverse; it has witnessed the emergence of a mega-trader (China), the first since Imperial Britain; it has involved the proliferation of regional and preferential trade agreements and is on the cusp of mega-regionalism as the world's largest traders pursue such agreements with each other; and it is impeded by the continued existence of high barriers to trade in services. Going forward, the trading system will have to tackle three fundamental challenges: In developed countries, the domestic support for globalization needs to be sustained in the face of economic weakness and the reduced ability to maintain social insurance mechanisms. Second, China has become the world’s largest trader and a major beneficiary of the current rules of the game. It will be called upon to shoulder more of the responsibilities of maintaining an open system. The third challenge will be to prevent the rise of mega-regionalism from leading to discrimination and becoming a source of trade conflicts. This paper suggests a way forward — including new areas of cooperation such as taxes — to maintain the open multilateral trading system and ensure that it benefits all countries.