Will the Iraq War Kill Globalization?

The UN and NATO are widely perceived as damaged, if not broken, by their failure to agree on what to do about Iraq. Will these cracks in the international political system now wound the world's economic architecture, and with it globalization, as well?

International economic agreements have never been easy to make. Reaching consensus among the World Trade Organization's 145 members, where one dissent can cause utter disarray, was difficult even before the world's governments divided into pro- and anti-American camps. Indeed, multilateral trade agreements were being eclipsed by bilateral deals, such as between the EU and various developing countries, long before the divisions over Iraq appeared.

Of course, the problem goes deeper and not everything that touches globalization has turned dark. Immigration controls, for example, have been relaxed in several European countries (notably Germany) due to declining populations and educational shortcomings. But bad economic times are rarely moments when governments push bold international economic proposals.

Economic fragility among the world's leading economies is the biggest stumbling block. The US and the EU have few fiscal and monetary levers left to combat weak performance. Short-term interest rates in the US, at 1.25%, are at a 40-year low. Congress has pared $100 billion from the Bush administration's 10-year $726 billion tax cut plan, and the US's projected 10-year $2 trillion budget deficit will grow as the Iraq war's costs mount, with President Bush submitting a supplemental request for $80bn (0.8% of GDP) in extra military spending this year.