The New Geography of Globalization

Abstract or executive overview

The global economy is not retreating from cross-border exchange in any simple sense. In 2025, the value of world trade in goods and services reached a record level above US$35 trillion, while foreign direct investment rose to approximately US$1.6 trillion. At the same time, the institutional and geographic logic of trade and investment is changing. Strategic sectors absorb a rising share of greenfield investment, governments are using industrial policy more actively, foreigninvestment screening is expanding, export controls and critical-input restrictions have become more prominent, and firms are reorganising supply chains around resilience as well as cost. (European Commission, 2026a; OECD, 2026d; UN Trade and Development, 2026a, 2026c) The central thesis of this monograph is that the defining feature of contemporary globalization is not deglobalisation but strategic reconfiguration.

Production, capital and technology remain internationally distributed, yet states and firms increasingly ask a second question alongside efficiency: which dependencies are acceptable under stress? This shift changes the geography of trade because cost minimisation is no longer the only organising principle. Political alignment, security, supply concentration, logistics, energy reliability, access to technology, regulatory compatibility, domestic political durability and the ability to substitute suppliers now influence location decisions. The distinction matters. A world in which all states attempt broad self-sufficiency is economically different from a world in which countries preserve open trade while diversifying selected chokepoints.

OECD modelling estimates that extensive relocalisation could reduce global trade by more than 18 percent and global real GDP by more than 5 percent, without producing consistent improvements in resilience. WTO modelling reaches a related conclusion from a different angle: a geopolitically fragmented world could reduce global GDP by 5.1 percent and global exports by 18.6 percent relative to its baseline, while a world in which multilateral cooperation is replaced by a network of free-trade agreements could generate still larger losses. (OECD, 2025; World Trade Organization, 2026d) These estimates do not imply that all interdependence is benign. Trade networks can create asymmetric power. Highly concentrated nodes in finance, technology, logistics, raw materials or digital infrastructure can become strategic chokepoints.

The literature on weaponised interdependence explains why network centrality can translate into coercive leverage when a state has jurisdiction over critical hubs. (Farrell & Newman, 2019) Contemporary policy therefore faces a genuine trade-off: the same specialisation and scale economies that generate efficiency can also produce dependency. The study develops an original Strategic Interdependence Framework built around eight dimensions: economic importance, concentration, substitutability, switching time, geopolitical exposure, policy exposure, domestic adjustment capacity and network centrality. It also proposes a Globalization Reconfiguration Index for research use, a supply-chain dependency graph, a resilience maturity model, a forty-eight-indicator early-warning dashboard and a set of testable i research hypotheses.

These tools are intended for governments, universities, firms, investors and international institutions. The monograph does not treat industrial policy as inherently effective or inherently harmful. Recent scholarship finds stronger empirical support for targeted industrial policy than older debates often acknowledged, especially where externalities, coordination failures, learning effects or scale economies are present. At the same time, new IMF modelling finds that recent subsidy and tariff packages can lower global welfare when interventions are poorly targeted or generate cross-border distortions. (Juhász et al., 2024; Rotunno et al., 2026) The policy question is therefore not whether industrial policy exists. It is whether objectives, instruments, governance, exit rules and international spillovers are disciplined enough to justify its costs.

The development implications are substantial. WTO analysis suggests smaller and poorer economies face disproportionate losses from a breakdown of rules-based trade. UNCTAD reports that strategic-sector investment is growing rapidly but remains highly concentrated: strategic sectors accounted for 44 percent of global greenfield project value in 2025, up from 16 percent in 2020, while low- and lower-middle-income economies captured only a limited share of this investment. (UN Trade and Development, 2026b; World Trade Organization, 2026d) A new geography of globalization could therefore create opportunities for connector economies, regional hubs and new industrial locations while also deepening exclusion for countries lacking infrastructure, skills, finance and institutional capacity.

The principal conclusion is that the world is moving from efficiency-first globalization toward managed strategic interdependence. The decisive policy challenge is not to eliminate dependence. It is to identify which dependencies are systemically important, diversify where concentration is dangerous, preserve the gains from open exchange where risks are manageable, and build domestic adjustment institutions strong enough to sustain openness politically.