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Two broad, contradictory trends are at work in the global economy. First, economic globalization through multinational corporation (MNC) production networks continues apace. This promotes global economic convergence and integration. The global value chains they operate have become the world economy’s backbone and central nervous system.
However, the second trend pertaining to economic crisis policy responses is one of divergence. Associated with this is the ever present threat of a destructive spiral of protectionism and consequent disintegration. That would have serious consequences for the global economy, particularly the most vulnerable and trade-dependent states. This highlights the critical role the World Trade Organization (WTO) has played in stemming the tide of protectionism. Unfortunately, WTO member states remain unable to conclude the Doha Development Round, throwing the WTO’s continued centrality to the global trading system into sharp relief. Fortunately, the resilience and increased interdependence of the global economy also played a key role in containing protectionism: governments quickly realized the futility of discriminatory stimuli and the cost of raising barriers on intermediate goods on which whole segments of domestic industries depend.
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