Does International Trade Weaken or Strengthen Countries’ Resilience?
Four significant problems currently afflicting leading economies serve as examples of how trade barriers erected by governments have reduced resilience. In each case, liberalization could help to remedy the problem.
ATHENS – Leading economies have been afflicted with new problems over the past year. The United States is struggling with both supply-chain blockages and a critical shortage of baby formula. The European Union faces the threat of scarce energy supplies, owing to sanctions on Russian fossil-fuel exports. And almost all countries are experiencing high inflation.
Some have blamed these problems on excessive dependence on international trade, that is, globalization. Deglobalization, fragmentation, reshoring, friend-shoring, decoupling, and resilience have become now-familiar buzzwords. There is a widespread sentiment that individual countries would have been less exposed to recent shocks had they been more self-sufficient.
The argument goes beyond observing that supply chains generate diminishing returns for private firms. Government policies that economists label as protectionist have gained political support – beginning, notably, with then-US President Donald Trump’s trade war in 2018. The impression is that trade barriers could help protect us all.