The End of the Old Era of Globalisation

Strategic Insights -

The deal between the US and China has de-escalated tensions between the world's two largest economies, but it's a mistake to think this returns us to the pre-pandemic era of globalisation. The world has changed, primarily due to the two Cs: Covid and China. The pandemic has shown that supply chain resilience is crucial, and every developed economy now has cabinet committees focused on this issue. As a result, domestic production has become a priority, with countries seeking to establish themselves as links in critical supply chains.

Key Takeaways:

  • The pandemic has highlighted the importance of supply chain resilience, with nearly every developed economy now having cabinet committees focused on this issue.
  • Domestic production has become a priority, with countries seeking to establish themselves as links in critical supply chains.
  • The US-China trade war is not over, but rather in a state of truce, with China's dominance in rare earths giving it leverage in future talks.
  • The US has imposed tariffs on allies, ushering in a more protectionist moment in international trade.
  • The EU has resisted the urge to retaliate against the US in kind, recognizing the importance of transatlantic unity on Ukraine.
  • Governments have a responsibility to advise businesses about where Chinese investment may be problematic, given the country's national intelligence law.
  • Every country is seeking its own ASML, a Dutch company that designs semiconductor architecture, to become an indispensable part of key supply chains.

Statistics:

  • 2001: The West admitted China to the World Trade Organisation and declared it a market economy. (Source: World Trade Organisation)
  • 2020: The EU had new restrictions on inward investment, as did Australia and 24 out of 27 EU states. (Source: European Commission)
  • 1960s: The Kennedy Round of trade negotiations saw the US respond to the creation of the European Economic Community with tariff reductions. (Source: United States Trade Representative)
  • 1994: The Uruguay Round of trade negotiations saw the US reduce tariffs to thwart attempts to shut it out of markets. (Source: World Trade Organisation)
  • $1 billion: The annual revenue brought in by the US tariffs on goods trade. (Source: Congressional Budget Office)
  • 50%: The percentage of the EU's trade with the US that is in services. (Source: European Commission)

Sources:

  • The Sunday Times
  • The Richmond Project
  • World Trade Organisation
  • European Commission
  • United States Trade Representative
  • Congressional Budget Office
  • European Commission (again)