Published on February 6, 2024, 1:37 am

In a world increasingly characterized by multipolarity, a new economic system dubbed Mercantilism 2.0 is rapidly gaining traction. This trend marks an end to globalization, a product of the erstwhile unipolar world order dominated by American power. Now, as we stand on the brink of what many are calling Cold War 2.0, catalyzed by the ongoing tensions between Ukraine and Russia, it is clear that our globe is encountering profound shifts.

Mercantilism 2.0 operates on a different set of principles than those that fuelled globalization. Rather than fostering business relationships indiscriminately across the globe, this new system prioritizes trade with nations considered allies from both security and political perspectives while isolating countries perceived as threats to national security. This approach is not driven by notions of comparative advantage but rather shaped mainly by principals of national security encompassing military security, economic stability, and political safety.

Trade in this era involves stakeholders working mutually towards resilient and secure supply chains. It aims to foster strong bonds among nations having aligned vital interests while simultaneously acknowledging potential threats. The aim behind Mercantilism 2.0 lies in constructing an economically secure framework bolstered by strategic alliances.

Central to understanding this shift is the discarding of comparative advantage as a determinant force in global commerce. In times past, trading patterns were determined largely by each country’s ability to produce goods or services at lower costs relative to other countries – thus giving them a “comparative advantage”. However, this principle becomes irrelevant when national security emerges as the ultimate deciding factor on trade engagements.

The transformation announced by Mercantilism 2.0 does not render international trade obsolete; instead it signifies a major reshuffling based on national security considerations rather than strictly economical ones.

With China crunching forward as one of America’s biggest national security concerns for the foreseeable future, there is growing recognition that trading alignments must adjust to the new reality. While Mercantilism 2.0 doesn’t aim to cease global trade, it does intend to redirect it strategically. For instance, consider potential shifts in U.S.’ commerce with China and India. The U.S., foreseeing the imminent threat from China’s growing influence, might prefer to secure a partnership with India both for security reasons and in an attempt counterbalance Chinese hegemony.

The implications of U.S.’ shifting its imports from China towards India are substantial not only for these countries but global trade overall. Similarly, India may also consider shifting its imports away from China and favor the United States instead.

However, implementing Mercantilism 2.0 as a lever to resurrect U.S.’ dominance could be problematic if suggested by some including National Security Advisor Jake Sullivan and Treasury Secretary Janet Yellen apropos keeping American economic leadership alive. A more fitting approach for America may be one that embraces transitional periods with flexibility rather than imposing rigid ideologies.

Through realignment of trade relations based on national security concerns rather than pure economics, we can hope that Mercantilism 2.0 provides a constructive solution in navigating societal changes occurring amidst globes shift towards multipolarity.