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The Future of Globalization

July 20, 2023

In this Q&A, Prof. Bill Burke-White discussed the findings of a White & Case report on the future of globalization, for which he served as senior editor and advisor.

William W. Burke-White, Professor of Law, served as senior advisor and editor of “A world of clubs and fences: Changing regulation and the remaking of globalization,” a comprehensive report on the future of globalization compiled by White & Case, a global law firm with 46 offices worldwide.

Burke-White is an international lawyer and political scientist and a leading expert on U.S. foreign policy, multilateral institutions, and international law. He previously served as the inaugural director of Perry World House, Penn’s interdisciplinary international affairs institute and on Secretary of State Clinton’s policy planning staff in the Obama Administration.

More than 60 partners and associates from White & Case provided insights from their areas of practice and conducted research for the report, which covers developments in trade, investment screening, international taxation, competition, data privacy, sanctions and financial regulation. Burke-White worked with several University of Pennsylvania Carey Law School alumni, including Chris Curran L’85, Senior Litigation Partner in White & Case’s Washington, D.C., office; and John Reiss W’81, L’84, WG’84, Global Head of the firm’s Mergers & Acquisitions Group.

According to Burke-White, the report is designed to speak to heads of state, government officials, and corporate CEOs, and inform big policy debates.

He summarized the report’s findings and provided context during an interview with our Office of Communications.

Comms: How do you define globalization?

Burke-White: Between 1980 and 2020, we saw a rapid increase in the movement of goods, capital, people, and data across the globe that we have come to understand as globalization. What we’re seeing today is not the end of cross-border movement but a reshaping of it. Globalization is going to continue, but it’s going to look a lot different than it did over the last forty years.

Comms: What is the main premise of the report?

Burke-White: Globalization is not dead, but it’s changing and law is a big part of those changes. Global interconnectedness is changing based on how national regulation is evolving. The lines of global connectedness are being redefined not by geography or policy, but by legal and regulatory developments.

Across seven regulatory areas—trade, investment, international taxation, competition, sanctions, data privacy, and financial regulation—we are seeing states intervene in global markets through new and expanded regulation.

A new world of “clubs” and “fences” is emerging in place of the relatively open cross-border flows of goods, services, capital, people and data that characterized the past four decades of globalization. Clubs form when countries harmonize their regulations, thereby facilitating business activity between them. Fences are regulatory barriers that slow or block business activity, frequently between countries that compete strategically or ideologically.

Ultimately, national regulations will come to define which countries we engage with and which we don’t. What’s really going to be salient to the future of cross-border interconnectivity is how similar or different countries’ regulatory systems are from one another.

Comms: Why are rules and regulations changing?

Burke-White: Most countries used to see globalization as a net positive. Today they are more likely to view it as a risk to be controlled and managed through national regulatory processes. One big driver of these changes is national security. In international trade and investment, we’re seeing countries target national security rivals, such as U.S. export controls on China, Russia, North Korea, Iran. As economic and national security issues have become more deeply intertwined, countries are as concerned about Chinese balloons flying overhead as they are with Chinese investments in TikTok.

Other drivers of regulatory change include growing concerns about some of the unexpected externalities of the era of globalization—growing economic inequality between and within countries and the impacts of a globally connected economy on the climate, for example.

Comms: What are the ramifications of this change?

Burke-White: We may well be watching the “global” be removed from “globalization.” Our report suggests that we are quickly moving from an era where economic connections are truly global, to a world in which those connections are primarily among those that share a similar regulatory environment.

Regulatory clubs and fences are becoming more significant to cross-border connectivity. States that make similar legal and regulatory choices are generating clubs with broadly harmonized regulations. Fences arise where differences in applicable national regulations pose meaningful additional costs and burdens to cross-border activity. The boundaries of regulatory harmonization—not national borders themselves—are becoming critical dividing lines in the global economy.

For example, in the United States, we’re going to start seeing shifts in which countries we’re trading with and which countries are investing in the United States, changes in which countries allow business to share data with one another or those that have similar international tax regimes. As we say in the report, the future of the global economy may well be defined more by regulatory clubs and fences than by traditional geographic borders.

Comms: Will free trade become an anachronism?

Burke-White: Free trade won’t become an anachronism, but global trade will. For the last 70 years, the GATT and WTO set the terms for trade liberalization on a nearly global basis. Today, trade terms are being defined by regional trade agreements—clubs of states like the U.S.-Mexico-Canada Agreement or the Regional Comprehensive Economic Partnership, which is the Chinese-led trade grouping. More than half of world trade now falls under such an agreement. We’re going to see free trade, but within these groupings, not between them.

Comms: It sounds like national policymakers will have to be more resourceful.

Burke-White: Fundamentally, the interests of national governments are much more present in the global economy today than they were 20 years ago. During the era of globalization, from 1980 to 2020, governments were trying to get out of the way; today, governments are back. And that means if you’re a business, you’ve got to understand what governments want and why they’re doing things.

There are many regulators sitting in Washington, Brussels, and Beijing who are making national rules. And usually, they’re thinking about them in relative isolation. But ultimately those regulators are really shaping and structuring the global economy. And governments have to think about when they want to harmonize their regulations with another country because that’s going to pull those two countries together in the global economy. Conversely, they have to think about when they want to put a sanctions regime on Russia because that’s going to pull those two countries apart. So, our regulators are now part of a bigger process.

Comms: Could the new rules hurt multinational corporations and the global economy?

Burke-White: There will be winners and losers. Corporations are going to need to get much better at navigating highly complex regulatory environments. If you’re a multinational enterprise, you’ve got choices to make. You might decide that you’re going to do most of your business within a club of states that have similar regulations; but if you’re a business that realizes you need to be in Europe, China, and the United States, your world is getting harder because you have to cross regulatory fences, and that’s hard to do.

Comms: Will the U.S. role in the world be reduced?

Burke-White: The report’s basic premise is that efforts to regulate and to harmonize your regulations with other countries are reshaping the world. Over the last seven years, when regulations have been changing, the United States has not been leading these efforts; in fact, we have retreated from them, abdicating our historic role in helping to establish, for instance, the World Trade Organization and the World Bank. Now, we’re falling behind. China and the EU have been playing a much bigger role in the reorganization of global regulatory clubs. If we don’t get our act together and recognize the costs and benefits of regulatory alignment, we’re going to be left behind.

Comms: What is the potential for instability with all this change?

Burke-White: The world will remain stable but look very different. Some people wonder whether we’re going to see a new Cold War with China, or whether we’re going to see countries become more isolated.

The answer this report offers is that we will be deeply connected with those countries with whom we share values and national security concerns. For the United States, that means deeper connections with Europe, Mexico, and Canada, for example. But we’re going to see bigger divides between the United States and China and Russia. That doesn’t mean we’re going to have a new Cold War or even so-called “de-coupling,” but it does mean our economies are going to be pulling apart. I think we’re going to become less dependent on China over time because and going to see fewer Chinese companies buying businesses in the United States as a result of this new regulatory environment.

Comms: How will lawyers participate in this new world of globalization?

Burke-White: At its most fundamental level this report shows how important law and regulation is to global economic interconnectedness. And that means lawyers have a growing role to play—helping businesses navigate this new regulatory environment, helping governments determine the nature of regulatory alignment and divergence they seek. Lawyers are at the center of global interconnectedness because they’re the ones who facilitate the movement of things and people and money and ideas across borders.

Read the full report.