Significant events of the recent years such as the COVID-19 pandemic, the trade war between the U.S. and China, the Russian aggression against Ukraine and tensions in the Taiwan Strait resulted in an increasing polarization between the democratic and authoritarian states. In response, new alignments in both global political and economic arenas are starting to emerge. The global trade and investment regime as we know it is about to change. New political as well as economic alignments are being established. Friendshoring is trending upward. A growing number of countries have been strengthening their economic security through export controls, FDI screenings, diversification of supply chains and/or development of deterrence tools.
International economic institutions must be enhanced. The WTO needs be reformed to effectively respond to these shifting dynamics by ensuring that member states comply with the established rules and uphold their commitments. Price alone can no longer be the most important factor as values and security are becoming inseparable from trade relations. In this new political and economic reality, democratic countries should prioritize their long-term interest in values, collective resilience, and rules-based international cooperation over the short-term economic interests. The opposite of doing so could be detrimental not only to national economies, but also to the rules-based world as we have known it.