Topic 3: Globalisation today, and its future

Gramsci quote (Prison Notebooks, 1930s) used to describe today's world order

"The old world is dying; the new world struggles to be born, and in this twilight, monsters emerge."

What does "revenge of geopolitics" mean?

At peak globalisation, power/politics seemed unimportant and relations between states were market relationships. Now politics and power matter again, especially the link between economic power and political/military power (geo-economics).

Peak globalisation view of relations between states

Market relationships within a "rules-based" system, seen as positive sum (everyone gains) rather than zero sum/conflictual.

Geo-economics

The relationship of economic power to political/military power.

Is the shift away from globalisation "all about Trump"?

No. Protectionist pressures in the US were building for a long time (regional, sector-specific employment shocks), plus reactions to foreign policy failures ("forever wars") and the rise of the global south.

US reluctance to engage in "forever wars" – examples on the slides

Iraq (1991, 2003), Afghanistan since 2001, and Iraq since 1979 (?).

Rise of the global south – examples and what they seek

China, India, Brazil and many others; they seek geopolitical influence commensurate with their economic weight.

"The end of the peak unipolar moment" refers to

The end of the post-1990 period of US leadership/dominance, and of the post-World War II settlement (including on the military side).

The post-WWII military bargain that is now ending (end of US hegemony)

US military dominance was assured by a network of alliances, with the US as provider of a nuclear security umbrella.

Two consequences of the US now being seen as an unreliable partner

(1) Formation of new alliances (e.g. Turkey, Pakistan, Saudi Arabia – Aug 2026); (2) possible proliferation of nuclear weapons (Japan? Saudi? Germany?).

Carney's Davos 2026 description of the change in the global order

"A rupture, not a transition" – the rules-based international order and recent model of globalisation are over.

Carney quote on great powers and integration

Great powers have begun using economic integration as weapons, tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited.

Carney: "You cannot live within the lie of …" (complete it)

"…mutual benefit through integration, when integration becomes the source of your subordination."

Carney on the rules-based order – what was "partially false"?

That the strongest would exempt themselves when convenient, that trade rules were enforced asymmetrically, and that international law applied with varying rigour depending on who the accused/victim was.

Carney: why was the "useful fiction" of the rules-based order useful?

American hegemony helped provide public goods: open sea lanes, a stable financial system, collective security, and support for dispute-resolution frameworks.

Who wrote "The Weaponized World Economy" (Foreign Affairs, Sept/Oct 2025)?

Henry Farrell and Abraham Newman (authors of Underground Empire).

"Weaponisation of interdependence" – meaning

Using the points of control (chokepoints) in the infrastructure of the interdependent global economy – finance, information flows, technology – as tools of coercion: sanctions, supply chain attacks, export measures.

Irony of the weaponisation of interdependence

The closer you are to the US, the more vulnerable you are to coercion (alliances are made conditional on economic concessions, e.g. EU/NATO).

Farrell & Newman: what did the 2025 US–China "framework deal" show?

The US is discovering what it is like to have others do unto it as it has done unto others; China's chokepoints (rare earths) forced concessions on semiconductor export controls.

Trade-off in the 2025 US–China deal

US conceded on semiconductor export controls (e.g. chip design software, Nvidia H20 chips) in return for China easing restrictions on rare-earth minerals that were crippling the US auto industry.

Strategic industries subject to national security concerns (basis for US tariffs/homeland production)

Energy, pharmaceuticals/medical devices, steel, semiconductors, AI, shipping.

Four main types of chokepoint in the global economy (slides)

1) Payment systems/financial sanctions; 2) geographic chokepoints; 3) access to rare earths/critical minerals; 4) access to critical technologies (AI, semiconductors).

Examples of economic sanctions as a long-standing tool

Napoleonic/British blockades; UN sanctions on Iraq (pre-2003); 20+ rounds against Russia; US sanctions on Iran since 1979.

Sanctions on Russia – limitation noted on the slides

Attempt to control exports/price limit, but only partial EU buy-in.

Iran's role in US sanctions history

The test-bed for US sanctions since 1979; on-off as part of negotiations for the last "nuclear" deal; led to a major ramp-up of US institutional capacity to apply sanctions via the dollar financial system.

US Treasury unit devoted to sanctions

Office of Terrorism and Financial Intelligence (includes the Office of Foreign Assets Control, OFAC).

Source of financial sanctions that bind Irish/EU financial institutions (Central Bank of Ireland slide)

The EU and UN (sanctions lists). EU Council Regulations are binding on all Member States once published in the EU Official Journal.

"Exorbitant privilege" and "our currency, your problem" refer to

The US dollar's special position as the global currency.

Why is the US dollar dominant? (two reasons)

Network effects of a global currency (the more entities adopt it, the more useful it is – e.g. pricing energy in one currency lowers transaction costs) and credibility of the US government in keeping dollar assets a stable store of value.

Economic benefit to the US of dollar dominance

It can run large current account deficits, i.e. borrow economy-wide at lower interest rates.

Why is dollar dominance also an economic weapon?

Exclusion from the dollar banking system is effectively exclusion from the global economy.

De-dollarisation – the attempt on the slides

BRICS attempt to link alternative payment systems (trading system free of Western control); but dollar dominance is yet to be seriously challenged.

Dollar share (approx.) of foreign exchange transactions vs. foreign exchange reserves (JP Morgan/Atlantic Council chart)

FX transactions 88% (sums to 200% since two currencies per trade); FX reserves 58%. Others: international debt 66%, international loans 52%, trade invoices 54%, international payments 58%.

Geographic chokepoints – two key points

International waterways have long been a focus of conflict; keeping open sea lanes is a key public good.

Examples of geographic chokepoints

Strait of Hormuz, Strait of Malacca, Taiwan Strait, Suez Canal, Panama Canal, Bab al-Mandab, Strait of Gibraltar, English Channel, Danish Straits, Turkish Straits, Korea Strait, South China Sea.

Which chokepoint supplies energy to both Asia and Europe?

The Strait of Hormuz.

Chokepoints that throttle sea-lanes to/from Asian factories

Taiwan Strait and Strait of Malacca.

Chokepoints supplying Europe

Gibraltar, the English Channel, and the Kattegat, Skagerrak and Oresund off Denmark (Baltic–North Sea link).

Why are Suez and Panama important?

They are shortcuts so useful they were worth carving across continents.

Not all chokepoints are equal – the two dimensions in The Economist chart

Y-axis: average added travel distance if blocked (how good the shortest alternative route is). X-axis: share of global seaborne trade affected by value.

Hormuz and the Danish Straits in the Economist chart

No alternative sea route (if blocked).

Strait of Malacca – effect of closure despite enormous traffic

Only a minor detour needed (but if all Indonesian archipelago channels were blocked, a huge detour would be required).

Why are 'rare earths' called rare?

They aren't actually rare as elements/minerals; what is rare is the capacity to mine and refine them.

Why do rare earths/critical minerals matter in an economic war?

They are inputs into manufacturing; control of them gives power of access. China dominates refining.

US–China trade dispute timeline (slides)

April 1st/2nd 2025 "liberation day" – US tariffs spike – China retaliates (export controls on rare earths/magnets) – then a truce.

China's export controls 2023–2026 (Joris Teer paper)

Beijing imposed export controls on gallium, rare earths and at least seven other materials, including components such as permanent magnets and semiconductor wafers; usually following US tariffs/high-tech export restrictions.

April 2025 – how China surprised the West

It squeezed exports of predominantly heavy rare earths and magnets, catching the US and European governments entirely unprepared, and weakened their position in dealing with China.

China's share of global refining (CFR table): gallium, germanium, graphite

Gallium 99-100%; germanium 94%; graphite 94%. Controls: gallium and germanium since July 3, 2023; graphite since Oct 20, 2023.

China's share: rare earths overall, permanent magnets, batteries

Rare earths (refining) 91%; permanent magnets 94% (2024); cathode active material 87%; batteries 80% or more.

China's share: cobalt, lithium, manganese – covered by export controls?

Cobalt 76%, lithium 74%, manganese 96% (refining) – No export controls on these (as of the table).

Export controls scheduled for November 2026 (CFR table)

Five more rare earths, cathode active material (battery component) and batteries.

China and legacy semiconductors (CFR table)

33% of fabrication capacity in 2023; controls not across the board but introduced on Nexperia's semiconductors.

ASML – why is it a chokepoint?

Its EUV lithography technology is unique to ASML; it prints advanced microchips using 13.5 nm light and makes mass production of the most advanced chips possible.

Critical technology example from the slides – AI chips

Nvidia/AMD lobbying the Trump administration against lawmakers' plans to curb exports of AI chips to China.

The logic of a weaponised global economy (game theory)

A classic example of a zero/negative-sum game. Chokepoints are declining assets (others adapt).

Four possible responses to a weaponised global economy

Develop your own chokepoints; reduce interdependencies; form new alliances; rebuild a more globalised order.

Who are "middle powers"?

Not superpowers/hegemons (US, China), but large enough to have the capacity to do more than merely comply.

Middle power strategy 1 – "do nothing": risks and key quotes

Risks being the victim of great power coercion/conflict ("Thucydides Trap"); "If we're not at the table, we're on the menu."

Middle power strategy 2 – "strategic autonomy"

Build domestic economic strength and resilience (e.g. Canadian inter-provincial integration). Costly and has limits, so combine with variable geometry.

"Variable geometry" (Carney)

Flexible global coalitions for particular purposes (trade, security, climate), e.g. associate membership with the EU, agreements with China/India, trans-Pacific trade agreements, NATO.

Pluri-lateralism vs. multi-lateralism

Pluri-lateralism = flexible coalitions of subsets of countries for specific purposes; multi-lateralism = broad, universal rules-based institutions.

"Values-based pragmatism"

Carney's third element of the middle-power approach; slides note plenty of practical difficulties with it.