KOF Globalisation Index: Weaker World Trade Slowing Globalisation

The degree of worldwide globalisation grew rapidly between 1990 and 2007. However, the financial crisis and the subsequent Great Recession have curbed this trend. In 2017, the most recent year covered by the KOF Globalisation Index, the extent of worldwide globalisation once again increased only slightly.

Economic globalisation has hardly advanced at all since the financial crisis of 2007. However, a distinction must be made between financial globalisation and trade integration. Whereas international financial flows (de facto financial globalisation) have been growing for the past few years while underlying conditions (de jure financial globalisation) have remained unchanged, trade has become noticeably more sluggish. International trade integration (de facto trade globalisation) has declined since 2014, and the latest trends suggest that world trade is set to weaken further. Although underlying trading conditions have improved since 2014, the ongoing trade conflicts between the United States and China as well as those between the US and the European Union are not captured in the latest index. The US raised its tariffs for the first time at the beginning of 2018, imposing higher import duties on washing machines and solar panels from China, and it hiked tariffs on steel products from various countries in mid-2018.

Social globalisation has hardly advanced at all in recent years either. Whereas the intensity of personal contact (measured in terms of variables such as tourism flows and migration) is stagnating, information flows (measured in terms of variables such as patent applications and trade in high-tech goods) continue to grow. At the same time there are signs of a slight downturn in cultural globalisation. Meanwhile, the degree of political globalisation – as measured by the latest index – continues to increase.

Country-by-country analysis

Switzerland remained the most highly globalised country in the world in 2017, followed by the Netherlands and Belgium. Switzerland is strongly globalised across all categories (economic, social and political). The country has a high trade-to-GDP ratio and is strongly interconnected with other countries in the financial sector owing to its role as a banking centre and the headquarters of many international holding companies. Moreover, the country is also highly integrated from a social perspective owing to its geographical location, cultural diversity and high income levels. And, last but not least, the many international organisations headquartered in Switzerland are likely to have a positive impact on the country’s political globalisation. The countries ranked right behind the top three are Sweden, the United Kingdom, Austria, Germany, Denmark, Finland and France.

Small countries tend to be more strongly globalised than large ones because they are more highly interconnected with neighbouring countries, for example. Large countries conduct a sizeable proportion of their dealings domestically. The world’s largest economies therefore come halfway down the globalisation rankings. The United States ranks 59th in terms of economic globalisation, 27th in terms of social globalisation and 14th in terms of political globalisation. China comes in the lower third of the overall index, ranking 80th. Whereas China ranks 26th in terms of political globalisation, its degree of economic and social globalisation is much lower. Japan – the world’s third-largest economy – ranks 37th. Major EU economies – such as Germany, the UK, France and Spain – are much more strongly globalised overall because of their high levels of economic, social and political interconnectedness within the EU.