Globalization Revisited: Is Every Country on its Own Now?

02.06.2017

Despite calls for protectionism, which are heard in a number of countries, the principles of openness and integration remain keys to the successful development of both national economies and the world economic system. This is the main message of the Valdai Discussion Club session, titled "Globalization Revisited: Is Every Country on its Own Now?" which took place on June 1 within the framework of the St. Petersburg International Economic Forum.

Prior to the discussion, the moderator of the meeting John Defterios outlined the challenges facing the world economy. This is the crisis of the EU, protectionist sentiments of the US administration, and a departure from the principles of free trade, adopted in the WTO. His first question, addressed to Russia's First Deputy Prime Minister Igor Shuvalov, was devoted to the evaluation of the success of Russia's membership in the WTO.

Shuvalov said that the WTO is a good and interesting project for Russia and joining the organization in 2012 was the right choice. But in order to fully appreciate the benefits of WTO membership, too little time has passed. For example, China first made this assessment 10 years after its accession.

However, the situation in the WTO is developing not in the best way. The United States, who most loudly declared the need for an open economy, is now pursuing a completely different policy. "The APEC ministerial meeting in Vietnam in May showed that the American delegation had very strict instructions," Shuvalov said. "And any mention that we are committed to the principles of the WTO and will develop the WTO [...] - all these messages were removed from the document - and the American delegation was leading in this new track for itself."

Nevertheless, Russia continues to adhere to the principles of the WTO, considering the organization as a real workplace for the development of free trade, Shuvalov stressed. The integration within the framework of the Eurasian Economic Union takes place just on these principles. According to the First Deputy Prime Minister, Russia is interested in the openness of trade policy. "Nothing can be an excuse for protectionism," he said.

Meanwhile, despite the US President's "America First" course, the US may eventually move to a more pragmatic trade policy, Daniel Russell, CEO of the US–Russia Business Council (USRBC), said during the session. "I think that the real policy will be more rational, as the administration will continue to work. I think that it will work out a more pragmatic trade policy," he said. "We see many people in the cabinet, who have considerable experience in the economy and in the banking sector."

Speaking about the economic policy of the US administration, Lord Malloch-Brown, former UN Under-Secretary General, noted that Donald Trump with his loud statements raises uncomfortable questions that were not asked or were unaccepted in the 1990s and 2000s, when globalization was gaining momentum. Growing isolationist sentiments, especially in such a key country as the US, create new challenges for international organizations, including the UN and the World Bank.

Ksenia Yudaeva, First Deputy Chairman of the Central Bank of the Russian Federation, noted in her speech, that the signals of the US administration about possible revision of US participation in the regulatory mechanisms of the global financial sector cause an increase of uncertainty. She stressed, that after the 2008 crisis a broad program of reforms in the banking sector was undertaken, and monitoring of the implementation of reforms is under way. Russia participates in such structures as the Basel Committee on Banking Supervision and the Financial Stability Board and is interested in implementing a reform program that contributes to the stability and transparency of the global financial system.

Xu Sitao, chief economist of Deloitte, voiced China's position on the issue of free trade. According to him, President Xi Jinping firmly believes in the benefits of globalization for China. His country has powerful incentives to curb protectionist tendencies, but globalization means not only free access to other markets, but also a greater openness of one's own. And this is the challenge for China in the near future.

One of the manifestations of the departure from the principles of free trade is the policy of sanctions, the tone of which is set by Western countries, primarily the United States. According to Igor Shuvalov, Russia has come to an understanding that sanctions are above all an instrument of competition, and not a political lever. "The United States is hiding with the opportunity to impose sanctions in order to respond to some political events, but in fact quickly cleans up the opportunities for competition," Shuvalov said.

Discussing the problem of sanctions, Lord Malloch-Brown noted, that they rarely bring the desired effect. "Almost always, anyone who develops sanctions is surprised by the consequences that are far from what was planned," he noted. In the case of Russia, such consequences are the diversification of economy and import substitution. Shuvalov stressed, that the current growth of the Russian economy, albeit small, confirms the correctness of the economic course, whose foundations were laid back in 2000, and which allowed to smooth out not only the consequences of the Western sanctions, but also the ruble devaluation, and the prices fall for major export goods.

Discussing the growth of isolationist sentiments in the world, Western participants at the discussion showed great interest in the trends that exist in Russia. Russian panelists have pointed out in this regard that Russia is open-minded, including the economic sphere. "The openness of the economy is our national interest, an insurance for the wealth of the Russian people," Shuvalov said. According to him, if Russia wants to occupy a serious place in the world economy, then it is necessary to enter foreign markets. "The Russian authorities will support everything which promotes export," he stressed.

Andrey Bystritskiy, Chairman of the Board of the Foundation for Development and Support of the Valdai Discussion Club, in his turn, said, answering the question of the moderator, that the Russian society and the economy are much more open than it seems at first glance. "Russia is looking for a new place in the world. The process of forming a political nation is going on before our eyes. People want to live and create their own space, not separating it from the world. Without globalization it is not going to happen and this is well understood in Russia”, Bystritskiy said.

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