"Amid Russian Sanctions, Globalization Crisis Deepens... Possibility of Trade Bloc Formation"

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] An analysis has emerged that the crisis of globalization, which began with the 2008 global financial crisis, has deepened further through the US-China trade war, the COVID-19 pandemic, and Russia's invasion of Ukraine along with various sanctions announcements. The wave of US-led free trade that has continued for over 30 years since the collapse of the former Soviet Union in 1991 is weakening, and the trend of globalization retreat is gaining momentum.

On the 10th (local time), The Wall Street Journal (WSJ) published an article titled "Economic Blacklisting of Russia is Bringing a New Wind to Globalization," stating that "post-war expectations for harmonious global trade are under pressure." WSJ reported, "The US-led effort to exclude Russia is creating cracks in the US free trade policy that has lasted for over 30 years," and added, "There is a growing atmosphere moving towards engaging with like-minded partners."

According to the report, the US and Western allies announced measures last month to reduce dependence on Russian raw materials such as crude oil, gas, and coal after Russia launched its invasion of Ukraine, including expelling some Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment network.

In the US Congress, a bill was introduced by bipartisan lawmakers requesting the administration to suspend Russia's membership in the World Trade Organization (WTO), a symbol of globalization. Since Russia's accession to the WTO was a symbol of the post-Cold War era, if Russia is expelled from the WTO for the first time in its history, it is expected to have symbolic significance for globalization and free trade.

The crisis of globalization has continued even before the sanctions against Russia. The 2008 financial crisis and the 2018 US-China trade war ignited the issue. Additionally, the COVID-19 pandemic triggered large-scale supply chain problems, highlighting the high dependence of major economies on overseas sources, making securing domestic production bases important and further damaging the globalization trend. This can also be confirmed numerically. At the peak of globalization in 2008, exports accounted for 31% of the global gross domestic product (GDP), but by 2020, this had decreased to 26%.

Jennifer Hillman, a professor of international law at Georgetown University, said, "The trade system based on the WTO and the fundamental principles under which we have all traded is disappearing," and predicted that the future global economy will regionalize into blocks of like-minded countries, such as the United States-Mexico-Canada Agreement (USMCA), a North American economic trade agreement.

Meanwhile, although Russia is receiving attention due to this invasion, WSJ also reported that there is criticism that allowing China's accession to the WTO was a bigger mistake. Derek Scissors, a researcher at the American Enterprise Institute (AEI), a conservative US think tank, evaluated that Russia's economic size is only 10% of China's and that China's state-led economy conflicts greatly with the US-style system.

This content was produced with the assistance of AI translation services.