Special Report
TradeTrend
Published: Sep 27, 2026
WASHINGTON, September 27, 2026: Global trade continues to expand, yet governments and businesses are simultaneously widening markets, suppliers and economic partnerships, raising questions about how countries now balance the gains of interdependence against the risks of dependence.
The governments are taking different positions on how the global trading system should respond to growing economic-security concerns. Japan's 2026 trade strategy describes a world in which economic security and greater state involvement are becoming more important alongside free trade. Tokyo is seeking new markets, diversified procurement and supply chains that avoid excessive dependence on particular countries, while maintaining a combination of multilateral, regional and bilateral arrangements.
China takes a different position. Its government has warned that excessive “de-risking” and diversification could disrupt global industrial and supply chains, which it says remain products of market forces, business development and technological progress. At the same time, China's trade is expanding across a wider range of partners, including developing economies.
Globalization Expanded Integration, But Dependence Developed Alongside It
The scale of international integration remains substantial. UN Trade and Development says global trade in goods and services surpassed $35 trillion in 2025, a record level. Developing economies are playing a larger role in that expansion, with South-South trade exceeding $6 trillion in 2024. Yet UNCTAD also reports that international integration has weakened across most manufacturing sectors since 2019 and that regionalization and uneven integration are becoming more pronounced.
The World Trade Organization provides another measure of the system's continuing reach. Around 72% of global merchandise trade still takes place under most-favoured-nation terms, while more than 380 regional trade agreements have been notified to the WTO. The figures indicate that regional and bilateral arrangements are developing within a trading system that remains overwhelmingly interconnected rather than replacing it.
But the aggregate expansion of trade does not mean that all economies occupy similar positions within that system. The WTO notes that least-developed countries account for less than 1% of world trade and face substantially higher trade costs than high-income economies. UNCTAD likewise reports persistent commodity dependence across developing economies.
This matters because increasing trade volumes can coexist with concentrated exports, limited domestic value addition and dependence on foreign technology, finance or processing. A country can become more integrated into global commerce without necessarily gaining greater control over the economic activities taking place within its borders.
Building Alternative Networks
Pakistan provides a useful developing-country example of this broader shift. Its Ministry of Commerce identifies market and product diversification as a trade objective, while Pakistan maintains bilateral and regional arrangements involving China, Türkiye, Uzbekistan, Azerbaijan, the D-8 and other partners. In August 2026, the ministry directed its foreign-trade wings to expand exports through market diversification, stronger business-to-business links and closer engagement with overseas trade missions.
Pakistan is also seeking to connect trade diversification with regional infrastructure. The government has presented CPEC and regional connectivity as mechanisms for linking China and Central Asia with Pakistani ports and international markets. The objective extends beyond moving existing exports: Islamabad is also seeking investment, industrial activity and greater participation in global value chains.
The private-sector perspective shows why simply adding trading partners is not enough. The Pakistan Business Council has identified market concentration, product composition, export reach and product complexity as central issues in Pakistan's diversification prospects. Its research identifies unrealized opportunities across products and destinations, while its work on non-traditional export sectors examines ways to move beyond established manufacturing exports.
The council's 2026 export agenda has also called for greater activity in processed food, pharmaceuticals, IT and ICT, mobile-phone manufacturing and other sectors. That approach links diversification not merely to finding more buyers but to changing what Pakistan produces and exports.
Other countries are pursuing similar strategies at different scales. India is expanding its network of free-trade and economic partnership agreements. The United States and Mexico are examining supply-chain and economic-security issues through the USMCA review. The European Union is using new trade partnerships to widen market access, investment and supply-chain relationships. ASEAN is simultaneously strengthening regional integration while seeking more diversified sources of supply and export markets.
Business organizations see the same movement from another angle. The International Chamber of Shipping has reported that companies are diversifying supply chains while new trade agreements are creating additional trade corridors. The International Chamber of Commerce has called for more plurilateral arrangements where existing multilateral rule-making has not kept pace with commercial requirements. The British Chambers of Commerce has likewise argued for diversification through a wider network of trading partners rather than withdrawal from global supply chains.
Diversification Does Not Automatically Remove Dependence
The economic logic behind diversification is straightforward: dependence on one supplier, market, route or source of finance can expose an economy to disruption. An IMF study on supply-chain diversification finds that spreading import sources can improve resilience against trade shocks, particularly for strategically exposed inputs. But the study also identifies a trade-off: diversification can reduce efficiency because maintaining multiple supply sources can cost more than relying on the most efficient supplier.
The issue becomes more complicated when dependence exists at several stages of production. A country may diversify where it buys a raw material while remaining dependent on another country for processing technology. It may gain new export markets while remaining dependent on foreign machinery, finance or intermediate goods. It may have several investment partners while remaining dependent on external demand for a narrow range of commodities or manufactured products.
Carnegie Endowment research on “portfolio politics” illustrates this pattern through Pakistan. The research describes Islamabad as maintaining several external relationships simultaneously, including with China, Gulf states, the United States and multilateral institutions. Different partners can serve different economic functions, creating additional room for manoeuvre. But the same analysis shows that diversification can distribute dependence among several relationships without eliminating it.
Chatham House reaches a similar conclusion in its analysis of critical-mineral supply chains. Its research on Britain's relationship with China finds that complete separation is difficult because companies remain connected through sales, financing, technology, infrastructure and mineral processing. Diversification can therefore reduce particular vulnerabilities without eliminating the broader interdependence of the supply chain.
From Trade Networks to Strategic Economic Networks
The shift becomes more significant when governments begin treating resources, technology, finance and infrastructure as strategic economic assets rather than simply commercial matters.
Global Mine Production Concentration
Single-country dominance across key energy transition minerals drives strategic diversification policies.
Critical minerals provide a clear example. UNCTAD reports that in 2025 the Democratic Republic of the Congo accounted for 74% of global cobalt mine production, Indonesia for 67% of nickel production and China for 69% of rare-earth mining. The concentration of production and processing has encouraged governments to seek alternative suppliers, domestic capacity and new international partnerships.
Chatham House research finds that governments are increasingly taking direct stakes in critical-mineral projects because private-market arrangements alone may not provide sufficient control over strategically important supplies. Its September 2026 research also links secure mineral supply chains with production practices, local communities and the political conditions in producer countries.
Technology adds another layer. Semiconductor production, advanced computing, telecommunications, artificial intelligence and data infrastructure increasingly intersect with trade and investment policy. Governments are using export controls, investment screening, industrial policy and domestic production incentives to reduce exposure to strategically important foreign technologies.
Finance and infrastructure create additional networks. Payment systems, development finance, ports, railways, energy corridors and digital infrastructure can influence which countries can trade, invest and move goods efficiently. These networks can operate alongside existing institutions rather than replacing them, allowing countries to develop additional channels while continuing to participate in the wider global economy.
A Reconfiguration of Globalization Rather Than Its Replacement?
The scale of continuing interdependence makes a clean division into separate economic blocs difficult to establish. The OECD's 2026 research on global value chains finds that participation in international production has increased in most economies. In 2024, 49 of the 80 economies covered by the study recorded a higher foreign-value-added share in exports than in 2011. Multinational enterprises remain central to these networks, while services are becoming an increasingly important component of global value chains.
The same data indicate that companies are not simply withdrawing from international production. They are changing suppliers, adjusting the location of selected activities and building resilience while continuing to rely on foreign inputs, services, investment and technology.
The IMF's 2026 assessment similarly finds that countries are pursuing new bilateral and regional trade opportunities while continuing to use existing international rules and systems. Its analysis describes diversification as a response to shocks and vulnerabilities rather than as a necessary rejection of international integration.
The WTO's modelling nevertheless shows what could happen if this process developed into full geopolitical fragmentation. Its 2026 World Trade Report estimates that a “geo-fragmented world” could reduce global GDP by 5.1% and global exports by 18.6%. An alternative scenario in which multilateral cooperation is replaced entirely by a network of free-trade agreements produces still larger modelled declines. These are scenarios rather than forecasts, but they illustrate the economic scale of moving from overlapping networks to sharply divided systems.
The Cost of Fragmentation vs. Continuing Integration
Estimated global economic losses under full geopolitical decoupling compared to actual value chain integration.
WTO Modelled Decoupling Impact (% Change)
For developing countries, the central issue is therefore not simply whether globalization survives or whether new blocs emerge. It is whether countries can use multiple economic relationships to expand productive capacity, diversify exports, obtain technology and finance, and move into higher-value activities.
Having more trading partners can provide alternatives. Having more suppliers can reduce exposure to disruption. Having multiple sources of investment can create additional choices. But lasting bargaining power depends on what a country can produce, the value it adds, the technologies it controls or can access, and the number of credible alternatives available to its economy.
The shift now taking place is therefore less straightforward than a transition from globalization to deglobalization. International trade remains extensive, while governments and businesses are constructing additional layers of regional, bilateral and strategic relationships around it. The longer-term question is whether these overlapping networks will make the global economy more resilient and diversified, or gradually produce separate systems in which access to markets, technology, finance, resources and infrastructure becomes increasingly shaped by strategic alignment.
