The US has always favoured bilateral trade, while Europe has hoped to redress the balance of economic power by establishing multilateral rules through institutions such as the World Trade Organisation (WTO).
However, the WTO's prestige has been weakened by the US and Europe failing to listen to the institution when they have broken its rules. The Doha Round has also been hampered by the continued wrangling over tariff walls. Just when the US needs globalisation to finance its huge account deficit with foreign capital, isolationism is taking root.
At the same time, China no longer gives foreign investors the same protected status as domestic venture capitalists. Globalisation has stronger institutional foundations than it did in 1914 and is not, therefore, likely to unravel quite so dramatically. However, without popular support, there could be a serious backlash against global trade.
Has globalisation passed its peak?
Rawi Abdelal and Adam Segal
Foreign Affairs, January/February 2007