The fragmentation of world trade has culminated in the formation of rival blocs, giving impetus to an emerging deglobalisation phenomenon. At the World Chambers Congress 2023, in Geneva, the WTO director-general, Dr Ngozi Okonjo-Iweala, opined that global prosperity is at risk of being curtailed by simmering geopolitical tensions that continue to birth rival trade blocs.
Deglobalisation refers to a shift towards a less-connected world characterised by border controls. Bloc members reach a mutual agreement to eliminate barriers with a view to promoting free trade among them. But despite the immense benefits to members, it can distort the world economy as regards the specialisation of national economies. Countries prefer to trade with their fellow bloc members.
Trade blocs may not catalyse globalisation. The European Union (EU), for instance, has led to notable economic integration among more than 25 countries. Movement of capital and labour, and adoption of single currency and monetary system by most members is evident. But its high tariffs have led to the dumping of surplus food items on world markets.
African economies would be greatly imperilled if deglobalisation escalated. A salient feature of globalisation is the reshoring of value chains that has the risk of curtailing the war against global poverty. The poorer regions will have several lost opportunities in global trade. Europe’s and the US firms, especially manufacturers, are reshoring their value chains, risking pushing more Africans into poverty.
Integration of the global economy is pivotal to development. Finally, African firms can better access capital and technology to diversify and expand. This is vital since small and medium enterprises are the backbone of the continent’s economies. SMEs’ capacity to compete globally is curtailed by high costs. Yet their growth would be pivotal to realising AfCFTA.
Geopolitical rivalries like the China-West one curtail global trade integration, thus the rise in nationalism, hence protectionist policies like US President Donald Trump’s “America First” policy. Hence global trade will be dominated by a few regional blocs.
Mr Onyango is economist. [email protected].