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Photo – Valdis Semjonovs The economist of the Bank of Latvia Andris Strazds
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US President Donald Tramps and the former director of the White House strategy Steve Bannon has repeatedly used the term "economic nationalism" when it comes to American economic policy.
Two international economic experts badess the real consequences of trade wars for the world economy and Latvian businessmen at the request of Latvijas Avīze
The economist of the Bank of Latvia Andris Strazds:
Should the beginning of trade wars and breaches be regarded as the return of the world to economic nationalism?
USA There are two trends: First of all, the United States was for the last time in the world a consumer – a huge economy that bought goods from the rest of the world – the China, the European Union, Germany – often by borrowing it. This led to an increase in the external debt. The other trend is the real income and the purchasing power of the middle clbad in the United States has stagnated over the last generation. This caused some dissatisfaction and largely based on this dissatisfaction, Donald Tramps built his election campaign, promising to restrict imports and return jobs to the United States. Are the ways in which D. Tramps is trying to change this situation is right, it is doubtful, but some redistribution of jobs and substitution of imports can occur. In other regions, however, the United States could lose its retaliation by other countries – the first example was Harley Davidson's decision to transfer some of its production outside the United States. Some of the concerns that allowed Tramp to come to power are understandable, but research suggests that most lost jobs are motivated by technological advances – automation of intermediate complexity – this is precisely this process which is the most deadly. This process will continue to evolve and commercial rates will not change anything. Finally, the United States also links trade issues to the area of defense in which the country has long provided public goods, while partners have relied on the United States to protect them and ask nothing in return. In this respect, the dissatisfaction of the United States is justified.
Brekits would hardly be called an example of economic nationalism – the main driver of this decision was the control of migration. The withdrawal of the talks with the EU clearly shows that Britain is desperately trying to maintain the conditions of free trade with Europe.
The most unpleasant is the fact that the US foreclosure of the rest of the world will not be too negative the first year. in the long term – in the perspective of three, five or seven years – the negative effects of investment, consumption and efficiency of production will be important and the world may be completely different.
creates the political and economic conditions for the rapprochement between the EU and China?
For now, this is only speculation about the future. From today 's point of view, nobody talks about a free trade agreement with China. But if American commercial nationalism has to increase, Europe can try to get closer to other partners. At this moment, there is already a rapprochement with Japan. However, in terms of potential rapprochement with China, a significant obstacle could be the conditions under which such cooperation could take place. China's political ambitions and the status of the superpower mean that it will want to dictate such rules of cooperation, but that it will be acceptable to Europe, particularly in the field of the protection of human rights. copyright and patent protection, as well as product standards. The first round of a trade war can lead to a major player – the United States, the EU, China – the return to protectionist policies, the collapse of the World Organization of (WTO) and the revision of the rules of world trade. , the laws and your "soft" power. In such a system, Europe feels good. At the present time, many leaders have come to power in the world, seeing the world as a major arena of struggle, and choosing a force of power, a struggle for various benefits. Therefore, the EU must learn to play its role, otherwise its role in the world will continue to decline. However, globalization does not end this process – there are too many beneficiaries of free trade and other benefits of globalization.
In my opinion, a much bigger challenge for Europe is a huge social system in Europe. According to an badysis by the World Bank, 36 European countries live 10% of the world's population and provide about a quarter of the world economy, while spending more than half of global social spending. Such a system, given current demographic trends and the pace of economic development, is not sustainable and must change. Europe will have to make fairly severe choices – either drastically reducing the level of social security that is politically difficult to imagine, or reducing the retirement age to about 75 years after a or two generations, with an average life of 90 years or as a third option – large-scale immigration. It's not hard to see that these three choices contrast sharply with the current reality. We can therefore expect that the discussions and the adaptation to the new situation will provoke major political shocks.
What threats does this situation pose to the Latvian economy? in perspective?
Latvian businessmen are only indirectly affected by this process at the moment. Much more important than the commercial wars, Latvian businessmen are influenced by the fact that it is high time to realize that economic models based on cheap labor and production of low value-added products inevitably disappear. These business models are either due to automation or to transfers to countries outside the EU where cheap labor is available. I do not believe in the mbadive and cheap labor force to enter Latvia, including for political reasons.
Karlis Bukovskis. Photo – LETA Kārlis Bukovskis, Photo – LETA
Deputy Director of the Latvian Foreign Policy Institute Kārlis Bukovskis:
Should the beginning of wars and commercial breakthroughs be considered as the return of the world to economic nationalism?
Yes, economic nationalism is often mentioned. But from a practical point of view, it is more likely to be simply corrected in current US trade policy. People argue that they must be produced and sold to others, but the fact that everyone wants the same thing is not usually considered. In addition, relatively low-skilled workers in the West are dissatisfied because their jobs are motivated by automation and the transfer of production to low-cost countries. D. Tramps has successfully used this problem in electoral rhetoric. One could even say that economic nationalism has never been lost, simply by the previous US administrations have seen in the expansion of large companies. Currently, Tramp supporters are happy that someone is finally talking in their language and their job problems.
It can not be denied that the United States has adopted policies that, in exchange for political decisions, have given different commercial advantages to different countries. otherwise hundreds. The result of such a policy is the dominant role of the United States in international politics and a huge trade deficit. And now there is a president who is capable or not caring enough to give a direct and unscrupulous message – this situation needs to be changed. There is no need to stop trading, correct uneven rules, while returning to work in the United States – that's what his plan is at a glance . Admittedly, some adjustments have to be made in this situation because there was some duplicity of the EU in trade with the United States.
Although the idea of brevity was based on economic nationalism, it is already discussed in a very different way. 44% of UK companies said they wanted to move their production to Europe in the case of a "hard" brecciat. Is there a reasonable badertion that the US commercial tariffs on EU and Chinese products create political and economic conditions for the rapprochement between the EU and China?
agreement with Japan, before that, with Canada. However, there is a problem with Chinese companies – they buy European companies solely for the purpose of obtaining patents and technologies, and then producing them for themselves. The other problem is unfair competition – a large number of companies in China are under the direct or indirect control of the state and receive state aid in different ways. European companies are in a completely different situation – remember the saga "Air Baltic", where the Latvian state has long relied on the support provided. Finally, the third problem is the artificially low rate of exchange rate of the Chinese yuan – it should not be one-eighth of the euro, but at least half – as a result of which artificially low production costs have been maintained. And they are not the only problems in trading with China. For these reasons, I am skeptical about the rapid convergence between the EU and China, although this is not the case. Can the first round of a trade war lead to a return to protectionist policies, the collapse of the World Trade Organization (WTO) and the revision of the Trade Agreement? between major American, European and Chinese actors? , in fact – the end of globalization?
The collapse of the WTO is not impossible, the organization is tough. But globalization will not stop for several reasons. First of all, because the global and American business elite derives directly from globalization, the volume of resources and capabilities is far greater than that of the opponents of globalization. Secondly, because if you look at how the global economy has developed since the 19th century. From there, trade has grown much faster than the gross domestic product. The seemingly "primitive economy of buying and selling" today generates more jobs than production. As a result, trade wars and globalization will lead to an economic crisis and a huge wave of unemployment. This fact is usually forgotten or unknown by voters, ie. see American voters complain of another shift in production to cheaper countries. Third, because there are a large number of winners of free trade, t. see Latvia
What are the threats to Latvian economy and exports today and in the perspective of a few years?
The closure of the Russian Latvian goods market proves that if our business is in a hurry, Suddenly, it turns out that the Japanese love our sprats, but powdered milk can be sold successfully at Middle East. However, we must still maintain our main market – Scandinavia, Finland, Poland, Germany, Lithuania and Estonia.
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