FRAGMENTATION OF THE GLOBAL ECONOMY

Abstract

This article explores the fragmentation of the global economy. It has been identified that most scholars tend to believe that the global economy is facing fragmentation in institutional, economic, and social aspects. Rising geopolitical tensions and the uneven distribution of past gains from globalization have contributed to growing skepticism regarding the attractiveness of inward-oriented policies. It is argued that increasing economic fragmentation does not necessarily reduce immigration, and it remains unclear whether immigration policy always has the expected effect. In recent decades, free trade has largely defined the global economy. However, geopolitical differences and conflicts increasingly prompt governments to raise tariffs and revive the use of industrial policies to stimulate national economic development or competitiveness. As a result, economic ties are being severed, and trade routes are being reshaped. Efforts are being made in various world regions to strengthen economic ties and expand free trade. There are also no signs of a systematic retreat in trade globalization due to geopolitical events. Trade relations and supply chains continue to evolve over time, reflecting economic and technological evolution, including adaptation to geopolitical factors. However, apart from some occasional instances of radical ruptures in the geopolitical landscape, global trade integration continued to move forward, sometimes with setbacks. Research on international trade has shown that political distance matters for international commerce through three main channels: the tendency to sign a trade agreement or grant preferential treatment, the likelihood of imposing economic sanctions and serious diplomatic incidents that lead to trade sanctions, and consumer sentiments and preferences. Wealth inequality, the dominance of transnational corporations, and the fragmentation of global supply chains have become hot political issues. Developing countries should focus on regional trade blocs and building resilience. The new global geo-economics landscape may require the EU to pivot toward economic security, even beyond the shift that has already occurred. However, economic security should not become an excuse for protectionism, and it should preserve international cooperation.