By Marc Jones
LONDON (Reuters) - Claims that globalization has peaked are misplaced, the Bank for International Settlements, the central bank for the world's central banks said on Sunday, although policymakers need to manage its side-effects carefully from here.
The BIS said the pace of globalization had been slowed by the global financial crisis, and that challenges created by an uneven distribution of wealth are known, but there was no basis to say it was going into reverse.
"Arguments that question the benefits of globalization have been receiving greater attention in the public debate," head of the BIS, Jaime Caruana, said in a pre-released chapter of its annual report.
"This shows that we risk forgetting the lessons of the past and taking for granted the gains in living standards, productivity and prosperity achieved over the last half-century."
The report said there was strong empirical evidence that globalization was also not actually the main cause of increased within-country income inequality; technology was.
Globalization itself has seen "global value chain" trade between emerging markets more than double since 2001 with China alone now responsible for 19 percent of that compared to 7 percent at the start of the century.
And although global trade is growing at a slower rate than the world economy for one of the only times since the mid-1800s, large multinational firms still account for around 90 percent of trade in the United States.
Dollar-denominated credit to firms and governments in emerging markets has also doubled since the outbreak of the financial crisis to $3.6 trillion, as global interest rates have tumbled.
Over the last two decades there has also been significant rise in the co-movement of global asset prices. For example, the correlation of advanced economy sovereign 10-year bond yields have more than doubled relative to the previous two.
Some of the options the BIS report cites to address the problematic effects of globalization include government policies to foster more adaptability, such as retraining programs and employment initiatives in affected regions.
Banking systems also have to be made strong enough so any financial busts can be cleared up quickly. It also called for globally applicable regulations and for beefed-up currency swap lines between the world's big central banks.
"Instead of retreating from the ties of global trade and finance, we should reinforce them. Instead of loosening them, we should make them more resilient," Caruana said.
(For full report click www.bis.org)