La Jornada: Globalization did not die, it was transformed: IMF

Washington. Globalization did not die, it was simply “transformed” under the blows of war conflicts in various regions of the world and the protectionist wave, declared yesterday the chief economist of the International Monetary Fund (IMF), Pierre-Olivier Gourinchas.

“Supply chains have adapted, nations like Mexico and Vietnam have taken a step forward. The connector countries that have managed to grow took advantage of all this.” For these emerging economies, the challenge is knowing whether demand for their products in rich nations will be maintained, he said.

The IMF is preparing to publish an update of its forecasts for the world economy on July 8, which could be lower, following the impact of the war in the Middle East and difficulties in oil supplies.

By the time the organization publishes its new forecasts, Pierre-Olivier Gourinchas will have left the position of chief economist of the Fund, after four and a half years of service.

Gourinchas believes that the recent upheavals in global trade, caused by US President Donald Trump’s tariffs, are not necessarily ending globalization, but rather adjusting certain bilateral relations.

Globalization “is certainly not dead,” the French economist told the AFP agency in his office at the IMF headquarters in Washington. “What we have witnessed is how it transformed.”

Gourinchas said recent moves should be interpreted primarily as “a desire to reduce the bilateral level of trade between the United States and China. I don’t think that’s a mystery to anyone.”

Foreign trade is no longer the panacea

However, recent trade turmoil – which has led the United States’ major trading partners to respond with tariffs of their own – has also created opportunities. “Other actors have intervened,” he said.

He explained that supply chains have adapted, and countries like Mexico and Vietnam have taken advantage of that process.

For these emerging countries, he said, the challenge is knowing whether the demand for their products in rich nations will be maintained.

“There is this concern that it potentially creates a trap (…) for many emerging market economies,” the analyst said. Advanced economies are turning inward, he noted.

“That leaves a very narrow space for them to really adopt an export-based growth model, which has been the recipe for development and success for many countries,” such as China, Gourinchas said.

“A country like India, for example, is not at all clear whether it will follow in China’s footsteps.”