Checking the temperature of anti-globalisation

For decades after World War Two, and especially in the wake of the collapse of the Soviet Union, First World countries embraced the concept of free trade and reduced tariffs.

They welcomed a more egalitarian future between nations and the term 'globalisation' became the buzz word of economic progress.

Then the financial crisis of 2008 hit - followed by the debt crisis in Europe and a significant drop in oil prices worldwide - and globalisation started to lose its shine.

To some, such as erstwhile businessman and current president of the United States Donald Trump, it became a dirty word, and the opposition to globalisation began. Fast forward to the present and the ripples of discontent have turned into a wave of anti-globalist sentiment.

Two astonishing political results in 2016 - the UK referendum in June, which saw the (albeit small) majority voting the UK out of the EU; and the US presidential election results in November, which turned businessman Trump into President-elect Trump - both aided the anti-globalisation rhetoric.

In a short space of time, protectionism gained traction as more and more people voted for parties and campaigns that promised economic isolation.

One of Trump's first presidential orders of business was to take the US out of the Trans-Pacific Partnership - a free trade deal between the US and 11 other countries that border the Pacific Ocean.

He's also been threatening major reform to the Transatlantic Trade and Investment Partnership (TTIP) that's still under negotiations between the US and the EU.

In 2017, the trend continued. The annual January meeting of business leaders at the World Economic Forum (WEF) in Switzerland saw panels discussing the negative effect of globalisation on unemployment rates and lowered wages, and there was a consensus that this rise of populism in the US, the UK and other corners of Europe such as Italy and France, is a direct result of giving globalisation free rein.

A few months later, at the G20 summit in Baden-Baden, the air was thick with intransigence as the 20 world leaders struggled to find a viable solution that included the same spirit of free trade and open borders they're known for.

That said, there is retaliation to the anti-globalisation backlash. For all of its controversies, the Comprehensive Economic and Trade Agreement (CETA) was still approved by the European Union parliament in February 2017.

It's a fair-trade deal that promises the removal of 99% of economic tariffs between Canada and the EU, and a 20% increase in traded goods and services.

Opponents and anti-globalisation protestors argue that the deal, among other things, gives too much power to corporations - 3.5 million petitions were signed in Europe against both CETA and TTIP. Despite this, Europe appears to be moving ahead with its globalisation agenda.

More recently, the outline of an EU-Japan free trade deal was also approved, prompting European Council president Donald Tusk to exclaim that "Europe is more and more engaged globally".

Then there's China. President Xi Jinping delivered a speech during the WEF in January where he touted the benefits of economic globalisation, and his "Belt and Road" project, which is set to reintroduce ancient trading routes that connect China with Europe and Africa. It is arguably the most ambitious standard bearer for globalisation at present.

"This initiative is in alignment with China's ongoing bid for internationalisation and to get its currency on a par with the heavy hitters in the SDR basket," comments Jameel Ahmad, vice president of corporate development and market research at FXTM.

"Forex traders will no doubt be watching the RMB with interest as the Chinese economy reaches the milestones it has set for itself."

As world-leading economies like Europe, Japan and China continue to spearhead globalisation in the Trump and Brexit era, the schism between the pros and cons of fair trade and transnational regulation will only continue to widen.

The defeat of Marie La Pen's National Front in France dealt populism a blow in Europe, but the social disadvantages of globalisation are still reflected in higher unemployment rates and slow GDP growth across the board and this is something that cannot be ignored.

Considering recent political maelstroms and the shifting tone in international meetings, it's clear that the winds of anti-globalisation are strong, and from an investing perspective big companies will most likely take the biggest hit.

Time will tell what the future will look like as the anti-globalisation atmosphere takes hold. For now, the prevalence of anti-globalisation sentiment will be revealed through the lenses of upcoming events.

These include the German federal elections in September and the annual meeting between World Bank Group and the International Monetary Fund in October.

But, as long as people feel like major trade deals are negotiated behind closed doors by a handful of politicians and corporate mouthpieces, the trend is only likely to gain momentum, especially with the emergence of world leaders like Donald Trump and their populist agendas.

Nikola Grozdanovic is senior staff writer at forex broker FXTM.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.