Deglobalisation: ugly word, scary concept and now painful reality. The World Trade Organisation estimates global trade will drop by 9 per cent this year, its biggest decline since World War II. Given that trade was growing at a 6 per cent clip only 15 months ago, the fall is so abrupt that some now worry about the return of Smoot-Hawley, the US tariffs law that made the 1930s depression Great.
That is alarmist. Much of the recent reversal in the global movement of capital, goods and jobs has been directly due to the financial crisis. It has been the collapse in demand, not protectionism, that has savaged trade flows. A lack of trade credit has also hurt, given that 90 per cent of trade involves some kind of credit, insurance or guarantee.
So, yes, since October, China has banned Belgian chocolate, India forbidden Chinese toys and the US Energy Secretary said he would like to see tariffs on Chinese goods unless Beijing reduces greenhouse emissions – the “green face” of protectionism. There are dozens more such cases around the world. Yet the effects of such incipient protectionism have been small, so far.