Get to know Globalization 3.0: A pop quiz

After the first and second waves of globalization, we are firmly in wave three. See it clearly in this three-question quiz.

If it’s cheaper to hire a translator, programmer, social media manager, or designer in another country, why not cross international borders for your required service? While today’s information and communication technologies enable the arbitrage of labor services, some are still doubting what difference this makes on the ground.

Test how well you know what’s happening in the realm of trade with this quick, three-question quiz:

1. Which of the following categories of global trade exports is currently climbing the most based on value?

A. Manufactured goods
B. Foreign direct investment (FDI)
C. Information and communication technology (ICT)-enabled services

The answer is: C. ICT-enabled services

Whatever rumors you may have heard about deglobalization are simply not happening, most especially in the realm of services. The world is growing closer here, with important implications for the future of work.

2. Where is ICT-enabled services growing fastest?

A. European Union member states
B. The United States
C. Emerging economies

The answer is: C. Emerging economies

Although developed countries, such as the United States and EU member states, are where most modern service exports originate, the share from developed economies is growing considerably faster. Look at what happens in the second chart above when we set 2016’s service export levels at 100 for both developed and emerging economies: Since that point, developed countries have grown 41% compared with 59% for emerging economies.

3. What’s happening in terms of FDI these days?

A. Investments in three categories – services, manufacturing, and other non-services – are evening out over time
B. Manufacturing continues to be an FDI magnet
C. Services are increasingly dominating

The answer is: C. Services are increasingly dominating

Over time, we’ve seen the focus in FDI shift decisively from trade to services. A recent report from the UN Trade and Development (UNCTAD) makes this clear. In the most recent data from 2022-2023, 81% of FDI is promoting service activities, with only 13% for manufacturing. So, in terms of this form of openness and globalization, it is a game of services, not of manufacturing.

Looking ahead

My 2024 prediction still holds that simultaneous speech translation (SST) will make service exports even more attractive around the globe. English speakers be prepared: When offering your skills to the labor market, you are likely to face much tougher competition as the language barriers crumble.

Richard Baldwin

Professor of International Economics

Richard Baldwin is Professor of International Economics at IMD and Editor-in-Chief of VoxEU.org since he founded it in June 2007. He was President/Director of CEPR (2014-2018), a visiting professor at many universities, including MIT, Oxford, and EPFL, and a long-time professor of international economics at the Graduate Institute in Geneva. Richard is an expert in global economic policy and theory, specializing in international trade.