Gabriel Makhlouf: Geoeconomic fragmentation from a small open economy perspective

Address by Mr Gabriel Makhlouf, Governor of the Central Bank of Ireland, to the Global Interdependence Centre Conference, Dublin, 16 May 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Good morning. It is a pleasure to welcome you all to the Central Bank of Ireland and to host the Global Interdependence Centre (GIC).

The GIC has long sought to boost international cooperation, by providing a forum for experts to discuss important issues facing economies and affecting the quality of life, part of the Centre's mission which resonates with me since the Central Bank of Ireland's constant and predominant aim is the welfare of the people as a whole.

I have remarked before that a striking feature of the first decades of the twenty-first century is the increased pace of change.

The focus of my remarks this morning is a potentially large and significant change: geoeconomic fragmentation, or, to be more specific, a policy-driven reversal in global economic integration.

This issue was at the forefront of discussions at the Spring Meeting of the IMF last month and is at the heart of the GIC's mission.

Rising global interdependence

Economies around the world have become increasingly interdependent in recent decades.

The ratio of world trade over world GDP, a standard measure of globalisation – or interconnectedness as I prefer to describe it – has more than doubled since 1970 to almost 30%.

This has led to increased specialisation, efficiency and productivity.

Increased trade and investment flows between countries has facilitated the transfer of technology and knowledge, and the development of global value chains.

Indeed, the value of traded intermediate goods now accounts for more than 50% of world trade.

Non-economic benefits of greater global interdependence are the spread of ideas, cultures, and people across borders.

This contributes to greater understanding of different viewpoints, helping to promote peace and stability and, in turn, greater prosperity.