International economic fragmentation

Distrusted economic co-operation
Non-cooperative economic relations
Lack of international economic coordination
Lack of economic cooperation
Economic schism
Divided economic community

Nature

The EEC/EU, EFTA, the Nordic Council, and other regional organizations outside Europe; and the groupings of nations in the OECD, OPEC and various commodity cartels - all these fragment the world economic system into a drastic play of forces that are beyond any one group of nations to control. Rivalry forces the entire global network of trade and finance to drive upwards and downwards unpredictably with consequent hardships, usually falling more heavily on the smaller nations.

Background

International economic fragmentation emerged as a significant concern in the early 21st century, as geopolitical tensions, trade disputes, and shifting alliances disrupted established global supply chains. The 2008 financial crisis and, later, the COVID-19 pandemic highlighted vulnerabilities in economic interdependence, prompting renewed scrutiny. Policymakers and scholars increasingly recognized fragmentation’s potential to undermine global growth, with institutions such as the IMF and WTO issuing warnings and analyses from the late 2010s onward.

Incidence

International economic fragmentation has become increasingly evident in recent years, as global trade flows, investment patterns, and supply chains are disrupted by rising protectionism, geopolitical tensions, and the proliferation of regional trade blocs. This fragmentation undermines the interconnectedness that has characterized the global economy, leading to inefficiencies, reduced growth prospects, and heightened vulnerability for both developed and developing nations. The scale of this issue is significant, affecting industries, labor markets, and consumers worldwide.
A notable example occurred in 2022, when the war in Ukraine and subsequent sanctions against Russia led to a sharp decoupling of energy, food, and technology markets between Russia and Western economies, disrupting global supply chains and trade relationships.

Claim

For most developing countries except the largest, a new era of economic growth depends, in the short-term, on effective and coordinated management among major industrial countries in order to facilitate expansion, reduce real interest rates, and halt the tendency to protectionism. In the longer term, major changes are also required to make consumption and production patterns sustainable in a context of higher global growth. International economic cooperation to achieve the former is embryonic, and to achieve the latter is negligible.

Counter-claim

Integration schemes tend to favour the more advanced members of a grouping, who benefit from the liberalization of trade and the expansion of their markets; while the less advanced members of a grouping tend to gain less, unless the scheme provides for structural changes in the latter countries. Special problems facing the less advanced countries include not only the smallness of their markets, but more particularly the absence of supplies exportable to the other partners of their grouping.