from Greenberg Center for Geoeconomic Studies and Latin America Studies Program

The Globalization Myth

Why Regions Matter

Shannon K. O’Neil offers a powerful case for why regionalization, not globalization, has been the biggest economic trend of the last forty years.

Book
Foreign policy analyses written by CFR fellows and published by the trade presses, academic presses, or the Council on Foreign Relations Press.

Globalization is not the only—or even the real—story of the global economy over the past four decades. In The Globalization Myth: Why Regions Matter, Shannon K. O’Neil shows that the conventional wisdom about globalization is wrong. The world has become more international but not nearly as global as the narrative of economic globalization suggests. As companies, money, ideas, and people went abroad over the last forty years, more often than not they moved and traded regionally rather than globally. They did not go just anywhere; they stayed close to home.

This overlooked reality of regionalization has implications for U.S. policy. Regionalization has enhanced economic competitiveness and prosperity in Asia and Europe. It could do the same for the United States, if only it would embrace its neighbors.

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Americas

Globalization

Trade

Economics

Supply Chains

Charting the rise of three major regional supply chain hubs in Asia, Europe, and North America, O’Neil demonstrates how the countries that traded with countries nearer by gained a competitive edge. Regional production chains make products more competitively as they can draw on different skill sets, labor costs, raw materials, financing, and market access. Through lower prices due to economies of scale and higher quality through specialization, regionally made goods become more globally competitive and more likely to edge out similar products made in just one country that tries to go it alone. And this not only boosts sales; by keeping production near at hand in the region, it supports more jobs at home as these factories and assemblers draw on nearer by suppliers. By contrast, for nations without strong commercial ties to their neighbors, workers and consumers are largely left on the ends of global supply chains, relegated to sending out raw materials and bringing in final goods. Unlike in regional hubs, these goods from distant shores compete with, rather than support, local manufacturers, leaving these nations in the economic slow lane.

Despite the rise of a North American manufacturing platform—through the 1993 North American Free Trade Agreement (NAFTA), revised in 2020 as the U.S.-Mexico-Canada Agreement (USMCA)—the United States continues to be less integrated with its neighbors than its Asian or European commercial rivals, as more of its trade still goes to countries outside its region than within it. And while trade benefits the United States as a whole, regional ties in particular help U.S. workers and businesses more than global ones do.

O’Neil shows that while many of the technological, demographic, climate, and policy shifts happening today favor the United States and its economy, regionalization of production and supply chains will still provide commercial advantages. To keep up with and compete against Asia’s expansive reach and Europe’s industrial prowess, U.S. politicians, entrepreneurs, and workers need to recognize that the United States requires deeper integration with its neighbors. Regionalization begets variety, fosters innovation, enhances resilience, and creates a much stronger home base. International trade deals and other policies that recognize this reality would allow the United States to preserve and expand its domain in the global marketplace.

The Globalization Myth provides a path forward for the United States and other countries looking to get ahead in the global economy. The answer is not isolation, nor is it unfettered globalization. Rather, embracing and deepening regional ties is a way to succeed in an internationally connected and competitive world.

Educators: Access Teaching Notes for The Globalization Myth.

More on:

Americas

Globalization

Trade

Economics

Supply Chains

Reviews and Endorsements

Regionalization is quickly becoming the new globalization. Shannon O’Neil’s The Globalization Myth deftly explains why the key to America’s continued industrial competitiveness lies neither in ‘America alone’ reshoring nor in laissez faire offshoring but in nearshoring. An important corrective to a broken public policy debate.

Ian Bremmer, President, Eurasia Group

Shannon O’Neil’s call for ‘more NAFTAs and fewer America Firsts’ is timely, constructive, and pragmatic. With her deep knowledge of the Americas and of the politics of regional integration, she makes a practical case for an American economic strategy which would work in a world dividing more into blocks. I urge our elected officials to open their minds to O’Neil’s compelling argument.

Adam S. Posen, President, Peterson Institute for International Economics

This is a phenomenal book about regionalization. Global markets are consolidating into three regional hubs. The United States needs to act on that, or it will get left behind. I found this a gripping read!

Ann E. Harrison, University of California, Berkeley

It is regionalisation, not globalisation, that explains the mechanics of prosperity. . . . If hope truly does lie in thought, we need to take our thinking about the world a lot more seriously than we do today. 

Richard Horton, The Lancet  

The benefits of globalization have been uneven, and many who have suffered the loss of their jobs or the hollowing out of their communities are justifiably angry. According to O’Neil, these costs are much smaller when trade occurs at a more regional scale.

Raghuram G. Rajan, Former Chief Economist, International Monetary Fund

Over the past forty years as companies, money, ideas, and people went abroad, more often than not, they looked regional rather than globally. This is the core message in Shannon’s terrific book that looks at a consequential topic: the path to stronger and more inclusive growth isn’t less globalization, it’s more regionalization.

Elmira Bayrasli, CEO and Cofounder, Foreign Policy Interrupted

With strong arguments and data, O’Neil unmasks the myth behind the narrative of the free flow of trade and knowledge across the globe and explains that what has occurred is in fact the consolidation of regional trade and regional supply chains across three blocks: Asia, Europe and North America.

Carlos Alvarado Quesada, Former President, Republic of Costa Rica

O’Neil’s proposed policy solutions are eminently reasonable: further reduction of trade barriers, stronger border and port infrastructure, bi- and tri-lateral cooperation on regulatory policy.

Brian Palmer-Rubin, ReVista: Harvard Review of Latin America

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