Over the past decade and a half, financial, health and geopolitical shocks have pummelled world trade. The 2008 global financial crisis devastated the banks that financed much of the world’s commerce, and then triggered a secular decline in economic growth. In 2020, the Covid-19 pandemic closed factories and upended global supply chains. And now Russia’s invasion of Ukraine has disrupted food and energy supplies, threatening to divide the world along geopolitical lines.
Some argue that these three shocks might even lead to the death of globalisation. But the reality is likely to be more complex: The disruptions will probably transform the global trading system rather than shrink it, with the impact varying across countries. Significantly, China will probably lose, while India might even gain.
Starting in the early 1990s, developing countries advanced as a group for almost two decades, rapidly catching up with rich countries’ standards of living. This convergence was facilitated by hyper-globalisation, whereby trade liberalisation and large declines in transport and communication costs swiftly increased opportunities for the developing world. China and India benefitted enormously, leading to the largest reductions in poverty the world has ever seen.