Has globalization peaked?

The common presumption is that it will spread, but I find this question not so easy to answer. Let’s say this is over the next 20 years: will the technologies of easier cross-border trade really outrace the other progressing technologies in play?

Here are a few factors that suggest the share of trade in GDP will go up:

1. More countries are attaining middle-income status and higher levels of productivity. In a “balls and bins” approach to trade, there will be fewer zeros.
2. The internet makes it easier to trade across borders and also more people are learning the global language, English.
3. Social and commercial networks are increasingly global rather than local or national. I think this is the most important positive force.
4. Natural resources are taking up a higher share of GDP, and trade in those resources is especially imperative, given the materials-intensive nature of most emerging economies.

Here are a few forces suggesting the share of trade will go down:

1. Services will take up a higher proportion of GDP and be harder to trade, for economic reasons as well as for legal, protectionist reasons.
2. China’s economy will become less resource-intensive. More generally, the rise of China will not continue at its previous pace.
3. There has been a lot of wage equalization across borders, and that limits future gains from additional cross-border trade. Even though average Chinese wages remain low, actually setting up an export-feasible enterprise in China cannot be done without paying a large wage bill.
4. Robots and smart software lower the returns of investing in and trading with lower-wage nations. Put the plant in Texas.
5. The next 20 years may not be as peaceful as the past 20 years.

When you add all of this up, globalization as a trend may well have peaked over the past 20 years.

Published in collaboration with Marginal Revolution.

Author: Tyler Cowen is Professor of Economics at George Mason University.

Image: The skyline of Singapore’s central business district is seen at dusk as operations continue at a PSA International port terminal in Singapore September 25, 2013. REUTERS/Edgar Su