Reports of the death of globalization are greatly exaggerated

“CompLab” is the blog on competitiveness and growth coordinated by Carlo Altomonte

In 2023, the American economist Barry Eichengreen wrote that globalization “has been declared dead more times than one can count.” From the Financial Times to The Economist, up to the International Monetary Fund, the topic has become a classic: with every crisis — from 2008 to Covid, from the war in Ukraine to Trump’s election — the debate reignites over the supposed retreat of global economic integration.

Yet reality tells a different story. The tumultuous growth of globalization experienced from the late 1990s to 2008 , when the ratio of exports to production essentially doubled, from about 15% to 30% of global GDP, has certainly come to an end. But since 2008, this indicator has never fallen below 26%, and by the end of 2024 it is near its historical peak, despite the financial crisis, the pandemic, and the war in Ukraine.

That is why serious economic analysis prefers to speak of a slowdown in globalization (or slow-balization) rather than of deglobalization (see, for instance, this paper by Italo Colantone).

Of course, this does not mean that behind the aggregate data there is no reconfiguration of international trade flows — especially due to geopolitical fragmentation, a phenomenon that has indeed been growing in recent years.

The International Monetary Fund, in a recent study by Gita Gopinath and colleagues (Changing Global Linkages: A New Cold War?, 2024), shows that after Russia’s invasion of Ukraine there has been a 12% reduction in trade flows and a 20% drop in foreign direct investment (FDI) between countries belonging to geopolitically distant blocs, compared with exchanges within the same bloc.

However, the same study points out that this fragmentation remains modest compared with the Cold War, and that global trade as a whole has not contracted. This is because, while flows between blocs (U.S.–China on one side and EU–Russia on the other) have shrunk, trade has been reconfigured within blocs and, above all, toward a new category of countries, the so-called “connector countries.”

During the Cold War, these “non-aligned” economies were marginal to international production systems. Today, by contrast, they form the connective tissue of the new globalization, which is being reshaped by current geopolitical shifts. As Gopinath and colleagues show, trade and investment flows that once moved directly between the United States and China are increasingly being rerouted through third countries, particularly Vietnam, Mexico, Thailand, and Indonesia. Between 2018 and 2023, China has expanded its exports to these countries (and in some cases its investments), while the U.S. has simultaneously increased imports from them.

These “bridge” countries benefit from geopolitical competition: they attract investment both from Western firms and from Chinese companies seeking to bypass trade barriers. The result? A value chain that is longer, more complex, and less transparent, but not necessarily more fragile. In fact, it is precisely this reconfiguration of flows that has preserved the overall resilience of global trade, even amid political tensions and regulatory restrictions.

Another interesting aspect concerns the impact on globalization of the growing decoupling between China and the United States, the two countries responsible for one of the world’s largest bilateral trade volumes, at least until 2024 (around 600 billion dollars between the two flows). If, for various reasons, these two countries are pursuing mutual decoupling and more autonomous policies with respect to global value chain integration, it is reasonable to ask what happens to globalization if we exclude them from the data. This exercise is illustrated in the graph below, where the solid black line shows the previously discussed global measure of globalization. The dashed line immediately above shows the same measure excluding China: as can be seen, the gap between the two lines has widened in recent years, indicating that China is progressively turning inward with respect to international trade.

Finally, the dashed blue line at the top of the chart excludes both China and the United States from the exports-to-GDP ratio, and it shows no slowdown. In other words, what emerges is that outside the Sino-American dynamic, international trade among other countries has continued to grow with surprising regularity — and could keep doing so, barring further geopolitical ruptures between states, which for now are not on the horizon.