February 26, 2020

As World Economy Shifts Gears, Trade Growth Slows

China’s scale and pace of development, its no-holds-barred approach to competition and the authoritarian regime that backs it fundamentally put in question the liberal model of globalism and win-win trade relations.

It is barely an exaggeration to say that the history of economic development, played out according to Western rules — the narrative that began with Adam Smith’s doctrine of free markets in the 18th century — starts to look like only a preface to an age of competition between large economic blocs.

The Europeans increasingly look like the last man standing when it comes to free trade. The United States, with its long history of protectionism, was always a somewhat reluctant recruit to the camp of free trade. In the 21st century, with the emergence of China and India, the United States has company on the global stage.

China, under its current rulers, is a resurgent and assertive nation-state that poses a fundamental challenge to the power position America built in Asia during the Cold War. What is at stake is more than trade. It is geopolitics.

This was made explicit by the Obama administration and its talk of an “Asia pivot,” with Mr. Obama focusing more on the rise of Asia and less on the Middle East. Superpower competition reduces Mr. Trump’s Phase 1 trade deal with its discussions about soy beans to a sideshow. What matters is the intersection of military and industrial policy in the tech arena — 5G and A.I., not steel and agriculture, will shape the future balance of power.

This new competition brings to mind the Cold War.

China is ruled by a Communist Party that pays lip service to the cult of Mao. America’s positions in Korea, Japan, Taiwan and the South China Sea are legacies of that era. But in the Cold War with the Soviet Union there was never the depth of economic, technological and cultural interconnection that the West has forged with China since the 1980s.

Article source: https://www.nytimes.com/2020/01/19/business/economy/davos-world-economic-forum-trade.html?emc=rss&partner=rss

Speak Your Mind