After decades of unprecedented openness, international economic relations have entered a new era, characterized by mistrust and division. Given the potential costs of this shift, it is worth retracing how we got here.
Following the end of the Cold War, globalization brought about a drastic reduction in extreme poverty, not least by enabling East Asian countries, including China, to achieve rapid growth and development. Living standards (as measured by income per capita) also improved globally.
Open trade and market-oriented policies were central to this progress. Trade with low-wage (at the time) countries — such as China, Mexico, South Korea and Vietnam — kept goods prices and wages in advanced economies in check, benefiting both consumers in these countries and workers in the exporting economies.