UK-India Round Table with Confederation of Indian Industry

Volatility and Protectionism: How to Navigate Challenges for Opportunities

Chatham House Discussion 25 June 2019

The global economy is in a state of flux. After witnessing a pickup in growth over the past couple of years, there is concern that this trend may see a reversal. Already, there are calls for protectionism from advanced economies which are leading to restrictive policies for cross-border trade and investment flows. This has triggered a backlash against globalisation, a move which should be reckoned with. Free trade was under a cloud before the Brexit referendum and the American presidential election. In fact, non-tariff barriers were already on the rise in the world. On the other hand, there is the reality of the technology driven world order, with robotics, digitisation and artificial intelligence steering global manufacturing and subsequently leading to the creation of Global Value Chains.

In such a situation how can we create a strong, sustainable, balanced and inclusive growth through globalisation? What are the opportunities and challenges confronting this changing world order? How can companies prepare to meet the challenges posed by this process?

Volatility and Protectionism

There is increased volatility in this world as we are seeing instances of hyper-nationalism across the globe. There are increasing differences between 2 factions – the first is the group that wants to protect rule based international order and others who do not believe that a global world has resulted in tangible benefits at grass root levels, especially in Europe and in the US.

Vasuki Shastry, Associate Fellow, Chatham House, stated that this has impacted multi-lateral trade in multiple ways e.g. IMF not receiving enough attention and US sanctioning increase in funding to IMF. An under-funded IMF could be a huge problem whenever the world faces the next crisis.

Furthermore, central banks, who were the major pillars of stability during the last crises, are being captured by political forces, reducing their trustworthiness and commitment to a global world-order.