What globalisation is and what drove it; who gained and who lost among consumers, producers, workers and governments; why trade stopped outpacing output after 2008; the UK as an open economy and what competitiveness depends on.
In 1970 world trade, exports plus imports, was 25% of world GDP. By 2008 it was 61%: shipping containers, the internet, the WTO, China’s accession in 2001 and the opening of former communist economies had stitched production together across borders. Then the financial crisis hit and the ratio stopped rising. It was 56% in 2019, 52% in the pandemic year, and 59% in 2023 after a spike in 2022 driven by energy prices rather than volumes. Economists call the period since 2008 slowbalisation.
In 2025 the United States raised tariffs to their highest level in nearly a century, and the WTO expected trade to stall. Instead goods trade grew 4.6% in 2025 as importers front-loaded orders, and in October 2026 the WTO raised its 2026 forecast from 1.9% to 3.9%, with AI-related goods accounting for nearly half the growth. Services trade was cut from 4.8% to 3.3% as the Middle East conflict hit transport and travel.
What is globalisation, what drove it, who gained and lost, and is it really in retreat?
Source: World Bank, World Development Indicators (trade, % of GDP); WTO, Global Trade Outlook and Statistics, October 2026.
Globalisation is the growing integration of national economies through trade in goods and services, flows of capital and labour, the spread of technology and the operations of multinational corporations (MNCs). Its marks: trade growing faster than output, global supply chains in which a product crosses borders many times, foreign direct investment (FDI), migration, and prices and interest rates moving together across countries.
Causes. Falling transport costs (the shipping container, 1956 onwards); falling communication costs (the internet) that let firms manage production abroad; trade liberalisation through the GATT and the WTO, and through trading blocs such as the EU single market; the opening of China, India and the former Soviet bloc, which doubled the world’s market labour force; the removal of controls on capital; and the growth of MNCs seeking lower costs and new markets.
Consequences are argued over in every exam. Consumers: lower prices, more choice. Producers: larger markets, economies of scale, cheaper inputs, but fiercer competition. Workers: hundreds of millions lifted out of poverty in Asia; manufacturing jobs lost and wages squeezed for the less skilled in rich countries. Governments: more tax competition and less policy independence, but faster growth to tax. Environment: more transport emissions and the shifting of pollution to poorer countries. Inequality: lower between countries, often higher within them.
In March 2026 the WTO expected world goods trade to grow 1.9% this year. In October it raised that to 3.9%.
This after a year of American tariffs, a war in the Middle East pushing up oil prices, and a decade of talk about globalisation going into reverse.
What was driving trade up?
Trade in AI-enabling goods rose 67% year on year and accounted for 47% of world merchandise trade growth in the first half of 2026. Globalisation did not stop; it changed shape. Services trade, by contrast, was marked down as the conflict hit travel and transport.
The rise. From 25% in 1970 to 61% in 2008: trade grew far faster than output. Three forces: cheaper transport (containers), cheaper information (the internet) and lower barriers (the GATT and WTO rounds, the EU single market, China’s accession in 2001, which brought 750 million workers into world markets). Multinationals split production into stages and placed each where it was cheapest: the global supply chain.
Check: Which of these was NOT a cause of the rise in trade between 1990 and 2008?
Tariffs fell through this period under the GATT and WTO. The other three cut the costs of moving goods, information and production abroad.
Who gained. Consumers: cheaper clothes, electronics and food, and more choice; the price of a flat-screen television fell by around 90% in two decades. Producers: bigger markets and economies of scale, cheaper components, access to skills and capital abroad. Developing countries: export-led growth lifted roughly a billion people out of extreme poverty, mostly in China and India. Inequality between countries fell for the first time since the Industrial Revolution.
Check: For a UK consumer, the clearest gain from globalisation has been:
Clothing and electronics prices fell in real terms for two decades as production moved to Asia, and competition kept retailers’ margins down.
Who lost. Less-skilled workers in rich-country manufacturing: competition from imports and offshoring cut jobs and held down wages in textiles, steel and electronics, concentrated in particular towns. Inequality within countries rose. Governments faced tax competition as capital and profits moved to low-tax countries. And global supply chains proved fragile: the pandemic cut trade to 52% of GDP in 2020 and emptied shelves.
Teacher tip: The “China shock” literature (Autor, Dorn and Hanson) is the reference for the losses: concentrated, persistent and local, while the gains were diffuse. That asymmetry is why the politics of trade turned, and it makes a strong evaluative point.
Check: Between 1990 and 2010 UK manufacturing employment roughly halved while manufacturing output did not fall. The best explanation combines:
Studies attribute most of the job losses to productivity growth, with trade and offshoring concentrated in particular industries and towns. Both mattered; both hit the same workers.
Slowbalisation. After 2008 the ratio stopped rising. Reasons: the easy gains from splitting production were taken; China began making its own components; the financial crisis cut trade finance; US–China tariffs from 2018; the pandemic; then war in Ukraine and the Middle East. Firms now talk of reshoring and friend-shoring, and governments of security over efficiency. The 2022 spike is prices, not volumes.
Check: “Slowbalisation” after 2008 refers to:
The ratio of trade to GDP plateaued around 55 to 60%. Trade still grows, but no longer outpaces output.
The UK. An open economy: trade is about 60% of GDP, with a goods deficit and a services surplus from finance, business services and universities. Its competitiveness depends on productivity, unit labour costs, the exchange rate, skills and infrastructure, not tariffs. Globalisation gave the UK cheap imports and a global financial centre, and cost it much of its manufacturing base. Brexit raised barriers with its largest market, the reverse of the trend.
Check: The UK is more exposed to globalisation than the United States mainly because:
Small open economies trade more relative to their size. The UK runs a large surplus in services (finance, consulting, education) and a large deficit in goods.
The line keeps climbing to 75%. In fact the ratio stopped rising in 2008: it was 56% in 2019, 52% in 2020 and 59% in 2023. Trade still grows, but no faster than output.
Evaluate the impact of globalisation on a developed economy such as the UK.
Globalisation is the growing integration of economies through trade, capital and labour flows, technology and multinational firms. Its scale is visible in one number: world trade rose from 25% of world GDP in 1970 to 61% in 2008, driven by containers, the internet, trade liberalisation and the entry of China and the former Soviet bloc into world markets.
For a developed, open economy such as the UK, where trade is around 60% of GDP, the gains have been large. Consumers paid less for clothing, electronics and food as production moved to lower-cost countries and competition intensified; the real price of many manufactured goods fell for two decades, raising real incomes. Producers gained larger markets, economies of scale and cheaper inputs, and the UK specialised in what it does comparatively well: finance, business services, higher education and pharmaceuticals, which run a large services surplus. Inward investment brought capital and technology.
The costs fell unevenly. Manufacturing employment roughly halved between 1990 and 2010 as import competition and offshoring hit textiles, steel and electronics, concentrated in particular towns that have not recovered. Wages for the less skilled were squeezed, so inequality within the country rose even as inequality between countries fell. Governments faced tax competition for mobile capital, and the pandemic exposed how fragile long supply chains had become, when trade fell to 52% of world GDP and shelves emptied.
**However,** the attribution is not simple. Most manufacturing job losses are explained by automation rather than trade, since output did not fall while employment halved; globalisation and technology hit the same workers together. The distribution of gains and losses depended on policy: countries that retrained and compensated displaced workers saw less damage than those that did not. And the era has changed. Since 2008 trade has grown no faster than output, tariffs have risen and firms talk of reshoring, yet goods trade still grew 4.6% in 2025, so the UK cannot opt out of global competition; it can only decide how to prepare for it.
On balance globalisation raised UK living standards overall while leaving identifiable groups and regions worse off, and the policy failure was in spreading the gains rather than in opening up. The right judgement is conditional: the impact has been positive in aggregate and negative for those whose losses were concentrated and left uncompensated.
Trade ratio: World Bank, World Development Indicators, trade (exports plus imports of goods and services) as a percentage of world GDP, 1970 to 2023; the labelled years are the published values and the years between are rounded to the nearest point. Trade forecasts: WTO, Global Trade Outlook and Statistics, October 2026. Diagrams drawn with Rough.js and perfect-freehand, both MIT licensed.