This is Armchair Economics with Hamish McRae, a subscriber-only newsletter from The i Paper. If you’d like to get this direct to your inbox, every single week, you can sign up here.
That movement seemed unstoppable. As the late Kofi Annan, former secretary-general of the UN, famously observed: “It has been said that arguing against globalisation is like arguing against the laws of gravity.” Yet he also warned: “Globalisation is a fact of life. But I believe we have underestimated its fragility.”
However, it is only since Donald Trump took office this year that the fragility Annan talked about became fully evident, or indeed, how intertwined the world economy has become.
That was an obvious issue – or at least it should have been to the President and his colleagues. A less obvious example of the complex relationship between the US and China was exposed when China halted exports of seven medium and heavy rare earth elements.
Here in Britain we have just become very aware of the complexity of our commercial relationship with China over the future of British Steel. It’s not simply a question of how to continue production at what is a loss-making facility. It’s also a matter of where the coking coal needed for its blast furnaces comes from and the necessity of importing it from Australia and the US, as domestic mines have been closed for environmental reasons.
Another equally important but less obvious thing that has happened is the result of flows of investment capital. Many local enterprises are apparently controlled by foreign interests, while many businesses abroad are owned by UK investors.
On the other hand, anyone staying in a Holiday Inn or an InterContinental Hotel anywhere in the world might like to know that it is run by IHG, a British company based in Windsor, Berkshire, a couple of hundred yards from the castle.
What does it mean for the UK?
But what is worth saying is the push-back against these very complex global supply chains is nothing new. Think of offshoring being replaced by nearshoring (setting up a base in a neighbouring country), reshoring (bringing operations back to a company’s home country) and friendshoring. The last of those is nice – you try to deal with enterprises and countries that behave in a friendly way.
square HAMISH MCRAE
Trump won't crash the housing market - but prices falls are still likelyRead More
You can measure this. The peak of globalisation, as measured by the proportion of goods traded internationally as a percentage of total output, was way back in 2008. There are complicated reasons for this, including the fact that as China developed, its labour costs rose, eroding the price advantage it had earlier. Reshoring and nearshoring made financial sense.
This dominance is uneven, for more than half of these exports are from the London region, but it is better to have a boom and try to spread its impact rather than not have a boom at all.
There is still hope for free trade
None of this is to suggest that physical trade no longer matters or that Donald Trump’s tariffs on US imports are the right way to counter the barriers that other countries and trading blocs have imposed on the US. Disruption is never good, and we are getting that in spades.
The big point, however, is that globalisation is evolving, with some high-profile areas in retreat but other, less obvious ones still growing. The prize of a more harmonious trading environment is out there, even if the path towards it looks pretty stoney.
Need to knowThose with long memories may recall that during the 1960s and 1970s, there was an obsession with the monthly trade figures. Were they in surplus or deficit? What would be the impact on the pound?
At any rate, the Bank of England decided that services exports should have a higher profile and founded the Committee on Invisible Exports in 1966. It was funded almost entirely by London financial companies and acted as a lobby group, pushing to boost the City’s business. It gradually extended its work to include other invisible exporters and became the British Invisible Exports Council in 1983. However, the problem of service exports being “invisible” continues today, in that people don’t fully realise their importance. I didn’t appreciate that they had grown from 30 per cent of our exports in 1997 to that 56 per cent figure noted above until I checked the numbers this week.
Intuitively, I think it is. If you look at Germany’s dominance of luxury car production, a few years ago it seemed impregnable. Nobody else could beat Mercedes or, BMW, or VW’s Audi. While Toyota in Japan was still the world’s largest producer, it could not really break into the very top end. Now everything looks different. The Tesla revolution paradoxically opened the door for China to challenge everybody, and it now makes around 60 per cent of the world’s electric cars.
So, looking ahead, the great question is whether and how swiftly China can build up services exports. No one knows. We know it is trying hard to do so, and with some success. Exports were up 18 per cent in 2024. But somehow, I reckon the US will continue to dominate that game – and the UK will remain number two.
One thing’s for sure: services exports are no longer “invisible”, even if they do not receive the attention they deserve.
This is Armchair Economics with Hamish McRae, a subscriber-only newsletter from The i Paper. If you’d like to get this direct to your inbox, every single week, you can sign up here.
Read More Details
Finally We wish PressBee provided you with enough information of ( The end of globalisation is here – but the UK can still boom )
Also on site :