Globalization’s Last Gasp

World trade was slowing and protectionist tendencies were apparent years before the British vote to leave the European Union and Donald Trump’s winning the US presidential election. “It means that the benefits of openness and specialization are being squandered,” suggests Barry Eichengreen, a professor of economics, for Project Syndicate. “So far, slower trade growth has been the result of slower GDP growth, not the other way around.” The slowdown reflects reduced investment spending, growth in China and cross-border financial capital flows along with diminishing returns on efficiency of global supply chains. Foreign direct investment continues to be strong. One good sign is that regulations, including the Dodd-Frank Act, have deterred the riskiest kinds of international finance, concludes Eichengreen, without disruptions to more productive types of foreign investment. Reducing financial regulations could add risk, uncertainty and threats for global markets. – YaleGlobal