Is it all globalization's fault?

PROTECTIONISM AND ISOLATIONISM HAVE GROWN AROUND THE WORLD IN WHAT HAS BECOME KNOWN AS THE BACKLASH OF GLOBALIZATION. USING RECENTLY COLLECTED DATA FOR 23 ADVANCED INDUSTRIALIZED DEMOCRACIES AND GLOBAL TRADE DATA, A STUDY ANALYZES VOTING BEHAVIOR AND TRACKS TRADE POLICY INTERVENTIONS

by Gianmarco Ottaviano, Italo Colantone, Piero Stanig, respectively full professor and associate professors at Department of social and political sciences

A heated discussion has arisen around the recent rise of populist parties in advanced democracies. One of the most relevant phenomena linked to the populist wave is the so-called "backlash of globalization". In a recent work on this topic, we define this phenomenon as the political shift of voters and parties towards a protectionist and isolationist direction, with substantial implications on the policies supported and implemented by governments.
To document this backlash, we collected recent data from 23 advanced industrialized democracies in Europe, North America and Asia. The analysis covers the period from 1980 to 2019. We begin by providing descriptive evidence of the backlash in terms of electoral support for parties with protectionist and isolationist tendecies. Looking at the aggregate average, there is a visible decline from the early 1980s to the early 1990s. This "globalist wave" is then followed by a protectionist turn from the mid-1990s onwards. This trend is clearly noticeable in most countries. Very similar results are obtained when looking at the party composition of parliaments and governments. This suggests that the electoral support has translated into shifts in the composition of the decision-making bodies.
A protectionist shift is also detectable in terms of trade policy, from Brexit to the US-China trade war and the stalemate of the World Trade Organization Appellate Body. However, more favorable developments for international trade can also be observed. For example, the number of active regional trade agreements and, in particular, the number of free trade areas, has continued to grow. At the same time, average trade duties have continued to decline. Nonetheless, the use of temporary protective measures (such as anti-dumping and countervailing duties) has become more frequent and more pronounced. Overall, the evolution of trade policy appears to be consistent with the political dynamics described above.

The picture, on the other hand, becomes more varied if we look at individuals’ positions on the issue. We do not find clear evidence of a generalized worsening of public opinion with respect to globalization. However, large minorities (and in some cases large majorities) of respondents believe that they have not benefited from international trade.
What are the drivers of the backlash of globalization? The available evidence allows us to conclude that the backlash is endogenous to globalization itself. For example, the regions most exposed to increased imports from China between the early 1990s until the 2008 financial crisis, due to their historical specialization in industrial manufacturing, were damaged in many ways: from higher unemployment to lower labor participation rates, from a greater use of disability and other social benefits to reduced wages, from a lower supply of public goods to a worsening of public health conditions.
However, the backlash is only partly being caused by international trade. Other factors, such as technological change, immigration, fiscal austerity in the aftermath the 2008 crisis, as well as cultural priorities have had a similar weight in driving observed political change. Borrowing from the medical literature, we describe this multi-causal nature of the phenomenon through the concept of "comorbidity", whereby several factors add up to generate the backlash. Advanced democracies must learn to manage the redistributive consequences of structural change in a more inclusive way to counter the populist trend.