Protectionism and isolationism have been growing around the world, in what has been called the backlash against globalization. Using newly collected data for 23 advanced industrialized democracies and global trade data, Italo Colantone, Gianmarco Ottaviano, and Piero Stanig analyze electoral behavior and monitor trade policy interventions. They write that international trade is not the only factor behind the upheaval. Society needs to manage the distributive consequences of structural change in a more inclusive way.
A lively discussion has developed around the recent wave of populist parties in advanced democracies. One of the most salient phenomena linked to the populist wave is what is called the “backlash of globalization”. In our recent CEP working paper, we characterize this phenomenon as the political shift of voters and parties in a protectionist and isolationist direction, with substantial implications for the directions and policies adopted by governments. Globalization appears as a relevant driver of the backlash, through the distributive consequences of increased trade exposure. Yet the backlash is only partially determined by international trade. Other factors, such as technological change, immigration, crisis-induced fiscal austerity, as well as cultural concerns play a similar role in driving the observed political change. Borrowing from the medical literature, we describe this multicausal character of the phenomenon through the concept of “comorbidity”, by which different factors add up to generate the backlash.
Document the backlash
To document the backlash of globalization, we use newly collected data for 23 industrialized and advanced democracies, spanning Europe, North America and Asia. The analysis covers the period 1980-2019. We begin by providing descriptive evidence of the backlash in terms of voting behavior. Specifically, Figure 1 displays the situation of the electorate in terms of protectionism and isolationism. For each country, in each national election, this is obtained by combining two ingredients: (1) the vote share of each party; and (2) an ideology score, called Net Autarky, which reflects each party’s stance on trade policy and multilateralism, based on party manifesto data. The location of the electorate is then calculated as a weighted sum of party scores, using vote shares as weights. It is essentially the ideological center of gravity (COG) of the electorate. The top panel shows all countries (grey lines) as well as the international average (black line). The bottom panel highlights specific countries, such as the United States, or groups of countries, such as Southern, Western, and Northern Europe. If we consider the general average, there is a visible decline from the beginning of the 1980s until the beginning of the 1990s. This globalist wave is then followed by a protectionist drift from the mid-1990s. is clearly detectable in most countries. The only exceptions appear to be Australia and New Zealand, which start from relatively high levels of net autarky, and show a decline in recent years. Very similar evidence is obtained by examining the ideological position of legislatures and executives. This suggests that the change in electoral behavior had consequences for the composition of decision-making bodies.
Figure 1. Location of the electorate
Note: Figure taken from Colantone, Ottaviano and Stanig (2022). Both panels report figures referring to the center of gravity of the electorate in terms of net autarky scores. In the top panel, the light gray lines refer to each country in the sample; the black line is the cross-country average. In the bottom panel, we separately display specific countries and groups of countries in different colors; the black line is the cross-country average.
A protectionist shift is also perceptible in terms of the evolution of trade policy. In this regard, there are many recent cases, ranging from Brexit to the US-China trade war and the WTO Appellate Body dropout. More systematic evidence is presented in Figure 2, based on data from Global Trade Alert, that protectionist trade policy interventions have grown faster than liberalization interventions since the financial crisis. Yet, in addition to this dynamic, more trade-friendly developments can also be observed. For example, the number of active regional trade agreements (RTAs), and in particular free trade areas (FTAs), has steadily increased even after the financial crisis. At the same time, average fares have steadily declined over time. However, temporary protective measures such as anti-dumping and countervailing duties have been increasingly activated, and with rising ad valorem rates, resulting in stronger protectionist effects. Overall, trade policy developments appear consistent with the policy dynamics described above. Rather, the picture becomes more nuanced when we look at individual attitudes. We find no systematic evidence of a general downgrading of public opinion towards globalization. However, large minorities, and in some cases large majorities, of survey respondents believe that they do not really benefit from international trade (for example, 39% in the United States and 60% in Italy).
Figure 2. Increase in protectionist measures since the financial crisis
Note: Figure taken from Colantone, Ottaviano and Stanig (2022), based on data from Global Trade Alert. The green line displays liberalizing interventions, the red line protectionist interventions, the blue line is the sum of all interventions.
The drivers of backlash
What are the drivers of the backlash of globalization? An abundant literature has developed in recent years around this vast research question, questioning both economic factors and cultural determinants. Several studies have focused on the role of trade, looking particularly at exposure to the surge in imports from China between the early 1990s and the financial crisis. The regions most exposed to the Chinese shock, due to their historical industrial specialization, have been shown to be negatively affected in many ways, ranging from higher unemployment, lower labor force participation, increased use of disability benefits and other transfers, reduced wages, as well as reduced provision of public goods and worsening health conditions. This phenomenon has also had political repercussions, leading to growing support for protectionist, isolationist and nationalist parties and candidates. The available evidence allows us to conclude that the backlash of globalization is therefore endogenous to globalization itself. However, other factors have been found to tilt electorates in a similar way. In particular, technological progress, through the automation of production by robots, has been shown to generate distributional consequences close to those of trade, leading to similar policy responses. The same is true for crisis-driven fiscal austerity as well as immigration, which acts both as a catalyst for structural economic grievances and as a direct determinant of political reaction.
Overall, it seems that globalization is also at play for reasons that are not strictly trade-related. The political sustainability of globalization – and arguably of the international liberal order – will depend on society’s ability to more inclusively manage the distributive consequences of structural change.