The countries that benefited most from globalisation in the 20th century are the same ones
closing their borders in the 21st. With reference to economic theory and current events,
evaluate this claim.
Essay by Juhi Samanta.
Not Closed Borders. Chosen Borders.
For most of human history, distance was a major barrier to trade. Globalisation changed this advances in transport, communication and trade liberalisation allowed countries to specialise
according to comparative advantage, creating enormous gains for every economy that
embraced it. From 1990 to 2017, developing countries increased their share of global exports
from 16% to 30%, while global poverty fell from 36% to 9% (World Bank, 2021)1.
Yet, many of the economies that benefited most from late 20th century globalisation particularly the United States and Western Europe - are now placing selective limits on the
system they built, such as reducing dependence on imports and introducing tariffs; while
China is pursuing greater economic self-reliance in critical industries, like semiconductors
and supercomputing. The US has raised tariffs and restricted advanced technologies, while
India and other economies are promoting domestic production in industries where
dependence on foreign suppliers is considered risky, such as telecommunications. Why would
countries that benefited from globalisation now make parts of it more expensive?
The answer is that countries are no longer optimising for efficiency alone, they are now
weighing efficiency against resilience, economic security and political stability. Therefore,
the claim is partly correct, but misleading if interpreted as a retreat from globalisation itself.
The world isn't trying to globalise and go back to the era where every country was
self-sufficient, instead they are trying to balance the best of both globalisation and
self-reliance.
The economic case for globalisation is straightforward. Comparative advantage suggests that
countries benefit when they specialise in products they can produce relatively efficiently and
1
World Bank. “Spreading the Gains from Trade More Widely.” World Bank Group, 19 May 2021,
https://www.worldbank.org/en/news/press-release/2021/05/19/spreading-the-gains-from-trade-more-widely. Accessed 9
Sept. 2026.
trade for the rest. A country doesn’t need to produce everything it consumes- allowing
resources to be allocated more efficiently, increasing competition and lowering prices for
consumers.
Global supply chains pushed this logic further - production could be divided across countries
according to cost and capability. A smartphone, for example, might be designed in the US,
use semiconductors manufactured in Taiwan, and be assembled in China. Firms reduced
costs, consumers gained access to cheaper goods and developing countries gained access to
foreign investment and export markets. (OECD, 2019) 2
However, aggregate gains don’t mean that every economy gains equally. The World Bank has
found that the benefits of trade can be widely dispersed while adjustment costs are
concentrated in particular sectors, jobs and regions.
The experience of the United States illustrates this problem. Research by Acemoglu et al.
estimated net US job losses of 2.0–2.4 million from rising Chinese import competition
between 1999–2011. The exact figure is debated, but the core finding stands: losses were
concentrated, gains were dispersed.(Acemoglu et al., 2016)3
This matters politically - a worker who loses a factory job doesn’t feel compensated by
cheaper imported goods after losing their livelihood. Over time, these losses can weaken
support for free trade and increase support for protectionism. Economic nationalism can
therefore emerge not because globalisation stopped producing aggregate benefits, but because
those benefits were distributed unevenly - not benefiting those who bore the greatest loss.
However, distribution isn't the only issue- strategic dependence matters too.
Globalisation allowed countries to stop producing everything they needed, but it didn’t
eliminate the need to have access to those things. When supply chains function normally,
extreme specialisation looks efficient, but when disrupted, they become a weakness.
2
OECD. “Measuring Distortions in International Markets: The Semiconductor Value Chain.” OECD Trade Policy
Papers, no. 234, 12 Dec. 2019, https://doi.org/10.1787/8fe4491d-en. Accessed 9 Sept. 2026.
3
Acemoglu, Daron, et al. “Import Competition and the Great U.S. Employment Sag of the 2000s.” NBER Working
Paper 20395, National Bureau of Economic Research, Aug. 2014, https://doi.org/10.3386/w20395. Accessed 9
Sept. 2026.
COVID-19 made this visible. Factory closures, border restrictions and transport disruptions
affected supply chains, while semiconductor shortages disrupted industries far from where
chips were manufactured. Geopolitical tensions have made governments aware that
dependence on another country can become a strategic risk. (IMF, 2024)4
Imagine that importing a component costs ₹100 while producing it domestically costs ₹115.
Under normal conditions, importing is clearly more efficient, but if the foreign supply is
vulnerable to sanctions, war or a sudden export restriction, the extra ₹15 may function like an
insurance premium. Redundancy looks inefficient until the day it is needed- in other words,
the market price of a component no longer equals its true economic price once strategic risk
is included.
The objective is shifting from lowest cost to an acceptable balance of cost and resilience.
Efficiency and security are not the same thing. The US’s approach towards China
demonstrates this shift. Restrictions on strategically important technologies, including
semiconductors, reflect concerns that economic interdependence can also create strategic
vulnerability. Though this doesn’t mean the US has abandoned trade- WTO data shows
merchandise trade volume rose 3.2% in Q1 2026, while value rose 11%- suggesting price and
composition changes, not just more goods moving (WTO, 2026).5 This weakens the idea that
globalisation is simply shrinking, trade is still expanding, but the economic relationships
within it are changing (WTO, 2026)6.
This can be seen through friend-shoring and supply-chain diversification. Instead of
completely bringing production home, firms and governments may shift parts of production
towards politically aligned or strategically safer countries. Vietnam has benefited from
US-China trade reallocation, but the IMF warns that connector countries can become
vulnerable to geoeconomic fragmentation in the long run (Schulze & Xin, 2025)7.
4
“Changing Global Linkages: A New Cold War?” IMF Working Paper 2024/076, International Monetary Fund, 5
Apr. 2024, https://doi.org/10.5089/9798400272745.001. Accessed 9 Sept. 2026.
5
“Global Goods Trade Resilient in the First Quarter of 2026 despite War in Middle East.” World Trade
Organization, 31 July 2026, https://www.wto.org/english/news_e/news26_e/rese_31jul26_469_e.htm. Accessed 9
Sept. 2026.
6
“WTO | Legal Texts – The General Agreement on Tariffs and Trade (GATT 1947).” World Trade Organization,
2026, https://www.wto.org/english/docs_e/legal_e/gatt47_e.htm. Accessed 9 Sept. 2026.
7
“Demystifying Trade Patterns in a Fragmenting World.” IMF Working Paper 2025/129, International Monetary
Fund, 27 June 2025, https://doi.org/10.5089/9798229011679.001. Accessed 9 Sept. 2026.
Diversification can therefore reduce one dependency without eliminating dependence
altogether (Schulze & Xin, 2025).
India demonstrates the same contradiction even more clearly.
In 1991, India faced a severe balance-of-payments crisis and was near bankruptcy, so it began
liberalising its economy- reducing trade barriers and opening to global markets. Decades
later, India is not reversing that integration, however becoming more selective about where it
wants to remain dependent on imports.
The Production Linked Incentive (PLI) schemes cover 14 sectors and aim to strengthen
domestic manufacturing and reduce import dependence in strategically important industries.
As of March 2026, the schemes had attracted ₹2.40 lakh crore in investment and generated
14.15 lakh jobs. They had also driven over ₹15.2 lakh crore in exports (Ministry of
Commerce and Industry, 2026).8
These figures show substantial industrial activity, but activity is not the same as
competitiveness. A stronger test would be whether productivity rises and whether firms can
compete on export prices and market share as government support is reduced. If firms remain
dependent on subsidies to survive, the policy may have increased domestic production
without creating genuine comparative advantage. This is the central difficulty of industrial
policy: a government can manufacture an industry without successfully manufacturing its
competitiveness.
Temporary protection can help new industries achieve scale, but permanent protection
reduces firms' incentive to improve productivity. Instead of creating competitive industries,
governments can create rent-seeking, where firms benefit from protection without becoming
more efficient.
There is an even deeper problem: resilience itself can become a convenient language for
protectionism. Once an industry is labelled “strategic” or “national security-related”,
governments may face pressure to protect it regardless of whether the economic case is
strong. Domestic firms, therefore, have an incentive to exaggerate external threats and lobby
for continued protection. GATT Article XXI's security exception is legitimate, but it blurs the
line between genuine strategic vulnerability and protectionism dressed as security
8
“PLI Schemes Attract Over ₹2.40 Lakh Crore Investment, Generate More Than 14.15 Lakh Jobs.” Press
Information Bureau, Ministry of Commerce and Industry, Government of India, 21 July 2026,
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2287008&lang=1&reg=3. Accessed 9 Sept. 2026.
This is why protection should not simply mean protecting industries because they are
politically important; governments should ask whether the expected cost of strategic
dependence is greater than the cost of maintaining additional domestic capacity.
One possible approach would be a Strategic Dependence Audit. Governments could identify
sectors where dependence on a small number of foreign suppliers creates unusually high
economic or national-security risks, estimate the potential cost of disruption, and compare it
with the cost of domestic production or diversification. Support could then be conditional on
measurable improvements in productivity, technology or export competitiveness, with
automatic sunset clauses if those targets are not met. Rather than protecting an industry
because it cannot compete, governments would protect it until it can compete.
But even this mechanism could fail if the industries being protected influence the criteria
used to protect them. To prevent the audit itself from becoming a tool for lobbying, its criteria
should be published in advance, independently evaluated and tied to enforceable sunset
clauses. Otherwise, the policy risks reproducing the very rent-seeking it was designed to
prevent.
Blanket protectionism swaps foreign dependence for reliance on inefficient domestic
industries. The purpose of resilience should therefore not be self-sufficiency, rather it should
be maintaining enough alternatives that a single disruption does not become an economic
crisis.
The irony is that if every country becomes more self-reliant simultaneously, global efficiency
suffers. What makes sense for one country may not make sense when every country does it.
Therefore the original claim captures an important change in policy, but it overlooks why
that change is happening. The countries that once gained from globalisation are now trying to
make sure that globalisation doesn’t leave them too vulnerable when circumstances change.
The question is no longer whether free trade creates efficiency - it does. The harder question
is whether that efficiency justifies vulnerability when critical supply is concentrated in
unreliable places. Globalisation taught countries they don't need to produce everything;
disruptions taught them they can't afford to lose everything.
The cheapest supply chain can be the most expensive one if a country cannot afford to lose it.​
​
​
Bibliography
Acemoglu, Daron, et al. “Import Competition and the Great U.S. Employment Sag of the
2000s.” Journal of Labor Economics, vol. 34, no. S1, 2016, pp. S141–S198. National Bureau
of Economic Research, https://doi.org/10.3386/w20395. Accessed 9 Sept. 2026.
OECD. “Measuring Distortions in International Markets: The Semiconductor Value Chain.”
OECD Trade Policy Papers, no. 234, Dec. 2019, https://doi.org/10.1787/8fe4491d-en.
Accessed 9 Sept. 2026.
“Changing Global Linkages: A New Cold War?” IMF Working Paper 2024/076, International
Monetary Fund, 5 Apr. 2024,
https://www.imf.org/en/Publications/WP/Issues/2024/04/05/Changing-Global-Linkages-A-N
ew-Cold-War-547357. Accessed 9 Sept. 2026.
“Global Goods Trade Resilient in the First Quarter of 2026 despite War in Middle East.”
World Trade Organization, 31 July 2026,
https://www.wto.org/english/news_e/news26_e/rese_31jul26_469_e.htm. Accessed 9 Sept.
2026.
“WTO | Legal Texts – The General Agreement on Tariffs and Trade (GATT 1947).” World
Trade Organization, 2026, https://www.wto.org/english/docs_e/legal_e/gatt47_e.htm.
Accessed 9 Sept. 2026.
“Demystifying Trade Patterns in a Fragmenting World.” IMF Working Paper 2025/129,
International Monetary Fund, 27 June 2025,
https://www.imf.org/en/publications/wp/issues/2025/06/27/demystifying-trade-patterns-in-a-f
ragmenting-world-567071. Accessed 9 Sept. 2026.
“PLI Schemes Attract Over ₹2.40 Lakh Crore Investment, Generate More Than 14.15 Lakh
Jobs.” Press Information Bureau, Ministry of Commerce and Industry, Government of India,
21 July 2026, https://www.pib.gov.in/pressreleasepage.aspx?prid=2287008&lang=1&reg=3.
Accessed 9 Sept. 2026.
“Spreading the Gains from Trade More Widely.” World Bank, World Bank Group, 19 May
2021,
https://www.worldbank.org/en/news/press-release/2021/05/19/spreading-the-gains-from-trade
-more-widely. Accessed 9 Sept. 2026.