The previous 12 months have been the epoch of the neo-protectionists. These movements have capitalised on growing inequality, trade deficits and economic malaise, all to paint globalisation as the cause for the world's financial ills. Their victories have seen the US withdraw from the Trans-Pacific Partnership, and Britain set a course for its divorce from the EU.
The categorical victory of the centre, pro-business, pro-EU, pro-globalisation En Marche party in France has produced an almost audible exhale from globalists around the world. The rise in protectionism seems to have, for now, stalled.
The Bank for International Settlements (BIS), an international organisation designed to serve central banks to obtain monetary and financial stability, has used this momentum to produce a strident annual report that unapologetically asserts the merits of globalisation. The report stressed that ‘globalisation has had a profoundly positive impact on people's lives over the past half-century’. This report comes on the back of similar reports by the OECD and IMF that have all rallied in defence of globalisation.
The report is seen as a direct counter-attack on protectionist measures taken by President Trump. The Swiss-based BIS seldom engages in criticism of the US, especially such lightly veiled critiques suggesting that current US economic policy is 'greatly detrimental to living standards'.
The report concedes that growth and gains in global trade have not been evenly disseminated throughout national economies. However, it places this blame not on globalisation, but rather on technological innovation and an inability of states to manage their domestic financial regulations. It highlights research that illustrates 'trade and financial openness appear to have made only a fairly small contribution to the increase in income inequality'. Thus, the BIS has stressed that governments do all that they can to implement reasonable financial regulations, particularly regarding derivatives and Liquidity Coverage Ratios of domestic banks. Additionally, the report calls for 'governments to make their labour markets flexible enough to help people whose jobs are displaced to retrain and to benefit from regional employment drives'.
Importantly, the BIS has taken this opportunity to also rebut popular claims perpetuated in the media about "Peak Finance". This is a hypothesis that asserts that the world has seen the peak of global finance, and that financial deglobalisation has begun. BIS research shows that this inference is faulty, as while there has been some decline since the Global Financial Crisis in cross border banking, 'any shrinkage of international banking is largely confined to European banks'.
The report goes on to stress that globalisation is responsible for higher living standards worldwide and has boosted global income growth. Since 1980, 'globalisation has been an important factor driving the large decline of the share of the world population living in significant poverty, and of income inequality across countries'. The BIS stresses that, in order to continue this economic miracle, world governments must deepen financial and trade integration rather than retreat from it.
International organisations usually produce reports that are politically passive. However, the BIS has produced an evidence-based tour de force report that is clearly aimed at Western states playing politics with globalisation.
Chris Arnel is the International Trade and Economy Fellow at Young Australians in International Affairs.