[ad_1]
There is widespread concern that the protectionism of US President Donald Trump will erode the long-term benefits of global trade. There are also hopes, especially among Trump supporters – including many American companies – that harsh policies can prevent China from becoming America's technological equal. But concerns about the long-term impact of reducing global trade may be exaggerated, and the hope of keeping China at zero has no chance of being satisfied.
The trade takes place for three reasons. For starters, countries have different inherent resources: some have oil, others copper; some grow bananas, others wheat. If this trade were stopped, global prosperity would suffer. But trade in commodities and agricultural products actually accounts for a small share of total trade and will undoubtedly continue to do so.
Trade also reflects the differences in the costs of the workforce. Low-cost countries produce labor-intensive manufactured goods using machinery imported from countries with high labor costs. Economists such as David Autor of MIT have shown that the impact of this situation in developed countries can be both bad for some workers and good for corporate profits. But it can be extremely good for any developing country that promotes a successful balance between foreign investment and local entrepreneurship and uses the proceeds of export-led growth to invest in infrastructure and infrastructure. skills. The spectacular economic success of China would have been impossible without a trade initially motivated by differences in the cost of labor.
In the future, however, this type of trade will likely become less important. With wages in China rising rapidly, its labor cost advantage is falling rapidly. And while many assume that the manufacturing sector will then move to other low-wage countries – say in Africa – a large part of this sector could go back to advanced economies, but to highly automated factories that create very little money. # 39; employment. scale in manufacturing, research and development, and brands generate trade between equally rich countries. European luxury cars are exported to the United States, Harley Davidson is imported to Europe and many highly specialized equipment items are traded in both directions.
Once these commercial links are established, any sudden change in rates will be very disruptive. Trump's policies are therefore undoubtedly a major short-term threat to global growth. But in the long run, trade between continents with roughly equal per capita incomes is less crucial for prosperity than is often thought.
The key question is what is the size of the economic zone needed to promote economies of scale. maintain intense competition between several companies. If a country like Ireland, with a population of five million, was trying to be self-sufficient for all goods, its revenues would only represent a fraction of the current level. Even if Great Britain, France or Germany were trying to autarky, productivity and standard of living would be very high
. But the continental economy of 1.4 billion people could achieve almost all economies of scale while maintaining intense internal competition. ; in principle, India could too. The United States, with more than 300 million people, would suffer only slightly if they exported and imported little beyond their borders, and so did the single market of 520 million people. euros from the European Union
. the wider trade between equally rich countries inevitably diminishes. If there was less trade between the mainland economies of China, the United States and Europe in 2050 than today, the direct impact on the level of life would be minimal.
What would be lost without world trade? therefore without investment flow – would be the transfer of knowledge, technologies and best practices. China's economic takeoff began with the arbitration of labor costs, but was supported by a massive knowledge transfer. And even if a small element of this transfer reflected industrial espionage, the vast majority was automatic, legal, and inevitable.
Chinese workers and managers employed by Western societies learned new techniques. Suppliers had to meet high standards, and local contractors could then use quality supply chains to compete. Joint ventures have inevitably led to knowledge transfer to local partners, and Western companies have voluntarily engaged them to access China's vast domestic market.
The United States is now worried about China's rise in technological prowess. Companies regret the loss of economic rents stemming from superior technology and intellectual property; and the hawks of national security worry about the potential geopolitical consequences of America's eroded technological advance. The tariffs on Chinese products are partly a response to these concerns, and the limitations imposed on Chinese acquisitions of US high-tech companies directly address this perceived threat.
But it's just too late. If, in the 1980s and 1990s, the US government, rather than plead for China's economic openness, banned any US company from investing in it, China's rise would have been delayed. significantly, but not permanently prevented. happen, the rise of China is now autonomous. A huge and growing domestic market will make exports less vital for growth. The rapid rise in wages creates strong incentives to apply the best practices of robotics, and Chinese companies are becoming advanced innovators in artificial intelligence, electric vehicles and renewable energy. And President Xi Jinping's "Made in China 2025" program will help promote the move to high-value manufacturing backed by Chinese R & D. Even if the United States slammed the doors of trade and investment, that would not change the growing economic and political power of China.
This is not the case of poor developing economies, such as India and Africa. The rapid rise of China. These economies are already facing the threat that automation will prevent the creation of jobs in export-oriented factories. The most important priority in Trump's current turmoil is to ensure that such challenges are not exacerbated by harmful trade restrictions. – Project Syndicate
* Adair Turner, president of the Institute for New Economic Thinking and former president of the Financial Services Authority of the United Kingdom, is president of the Energy Transitions Commission .
[ad_2]
Source link
