The End of "Second Globalization" and Implications for the Korean Economy

Insofar as we define globalization as the consistent growth in the volume of global trade relative to world GDP, we reasonably conclude that the second phase of globalization, which lasted for five decades since the signing of the General Agreement on Trade and Tariffs (GATT) in 1947, effectively ended with the global financial crisis of 2007-2008. Anti-globalization sentiment has taken root in many advanced countries since the global financial crisis and has conspired with an intensifying US-China rivalry to stem the erstwhile growth in trade relative to world GDP. The United States, the onetime champion of postwar globalization, has recently embraced a New Washington Consensus that represents a sharp departure from the original of the 1990s, effectively putting an end to globalization. The end of globalization means an end to a chapter in the history of global trade. It remains to be seen how the post-globalization trade environment will evolve. The actions of various countries over the next decade will ultimately shape this landscape. The United States and China will play significantly greater roles than other countries in the process, but the fact that no single country can claim unchallenged hegemony over the global economy also leaves room for concerted actions from smaller countries. The end of globalization is particularly significant to Korea, which has achieved a remarkable economic transformation thanks to the success of an export-led growth strategy. Several studies show in common that the US-China decoupling will have a significant negative impact on the global economy, and that Korea will be one of the countries hit the hardest. As a chief beneficiary of free trade and the world’s eighth-largest trading country, Korea has practical interests, a moral obligation, and the potential to help ameliorate worsening global trade conditions. By making it known that the fragmentation of the global economy is not in its interest, Korea ought to partner with countries that share the same perspective and mobilize international support toward maintaining an open, non-discriminatory, and free trade order against protectionist and fragmenting forces.