International Economics: IB Economics

This World Bank clip looks at Bangladesh's roads, and their importance to development. Enhancing infrastructure, in boosting the supply-side is clearly a good thing - however, the schemes also employed nearly 800 rural women who have been able to save and start their own businesses, giving them the potential to break out of the poverty cycle.

Roads are essential to development - enhancing education and healthcare, as well as encouraging greater trade. 

The German Chancellor, Olaf Scholz, has tentatively highlighted the prospect of China acting in an 'unfair' fashion in the electric vehicle market, arguing that if China has access to EU market, that should be reciprocated with European firms having equal access to Chinese markets. 

Not much in the way of economic theory but an interesting look at the future for Hong Kong, with the BBC suggesting that it's in danger of losing its status as an Asian entrepot at the centre of the global trading system and that it will become poorer as a result. 

Certainly, it's had disproportionate power in the past, and the 40% fall in the Hang Seng stock index seems to be indicative of a wider decline. 

It's worth noting that as well as there being disruption on the Suez Canal, the Panama Canal has also seen a reduction in its capacity as a result of climate change. A lack of rain has meant that the number of ships able to get through the canal have fallen from 36 to 24, a 33% reduction. The situation isn't expected to change until at least May.

Presidential candidate re-affirms economic illiteracy. It's disappointingly predictable but but I'm sure that President Trump's core voters genuinely do think that China pays these tariffs. It looks like the trade war is set to continue.

The Head of the WTO, Ngozi Oknojo-Iweala has argued that nations need to reconsider their agricultural policies and subsidies in the light of both their impact on world trade and climate  change. She argues that $1.7 trillion in subsidies is given to inappropriate things, such as fossil fuels, when they should be targeting cleaner alternatives such as clean stoves. 

The EU's trade relations with China are also the focus of this article that notes that Ursula von der Leyen is meeting Chinese premier, Xi Jinping on Thursday and is reputedly going to tell him that the EU's current trade deficit (400 billion euros; £343bn) with China is unsustainable. 

One of the reasons for this is that the Chinese government is subsidising a number of sectors - electric vehicles, solar panels and medical equipment - a practice that allows these firms to sell below cost. You might know what this practice is called...

Normally, economists are in favour of free trade arguing that it brings with it more benefits than costs. That's not the view of Robert Reich who seems to argue that this ignores the distributional effects of trade which have seen companies and their shareholders benefit and US workers lose out - with fewer jobs and lower wages. Indeed, he argues that the former should have compensated that latter.  

The UK has joined The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) - the first non-founder member to join. The 11 member group currently accounts for around 13% of global income, and is anticipated to grow faster than the rest of the world in the next few years.

However, for all the Business Secretary's claims about the significance of the deal, it's own estimates only suggest that it will add 0.08% to GDP in the next decade. If only we'd thought of joining local trade partnerships.   

A consequence of the US-China trade war is the need for US companies to seek out alternative sources of supply for components, although I think that Apple will stop short of reshoring the manufacturing of iPhones.

In this instance, they've agreed to join forces with US chip-maker, Broadcom to develop components for 5G phones in the US; it seems as though the age of hyperglobalisation is dead? Is this a good thing for economic welfare?

Not much economic theory here but Nouriel Roubini's article just flags up the implications of the ongoing US-China trade war will continue to act as a headwind for the global economy. 

Two of the biggest contemporary names in development - the Director-General of the WTO, Ngozi Okonjo-Iweala, and the PM of Barbados, Mia Mottley, have contributed a piece to the Guardian that promotes greater equity in development, arguing that the living standards of the world's poorest have been compromised by the twin threats of climate change and the current higher levels of global inflation. 

They argue that it is the role of international organisations and the way they regulate global trade to ensure that any reimagining of globalisation is fairer.  

Mohamed El-Erian writes a Project Syndicate column looking at the changing nature of trade in the post-Covid world. He argues that we're moving away from hyperglobalisation, not so much towards reshoring, but shortening supply chains by relocating business operations in cheap, but close, locations instead. He suggests that this might be called 'near shoring' and that is represents a form of fragmented globalisation. 

Is there another trade war in the offing, with the news that the EU is weighing up whether to impose protectionist barriers to protect the electric car, steel and renewable energy markets from cheap Chinese imports? 

The EU authorities claim that Chinese state support in these sectors means that there is unfair competition in these markets and that, as a result, European firms and European jobs are under threat. 

The IMF has warned that aggressive use of government intervention, such as the Inflation Reduction Act perhaps, is likely to prompt future trade wars. Additionally, seeing pro-active industrial policy as a panacea could both have a high opportunity cost and result in government failure.

However, I can't help but wonder whether or not this particular horse has bolted?

India has signed a free trade deal with the European Free Trade Area - EFTA - meaning that Norway, Switzerland, Iceland and Liechtenstein will now have free trade with India.

For Brexiteers, it gives hope of an equivalent deal for the UK in due course after two years' worth of ongoing negotiations. 

Depending upon your point of view, this is a little bit niche, in looking at the role of Observatories for the Speed of Customs Clearance Operations, or OCODs. Alternatively, they're an important part of promoting freer trade across West Africa. 

They're also a lovely example of the marginal principle, in that they are going to be beneficial if their marginal cost is less than the marginal benefits they generate. In addition, it's implied that the creation of OCODs reduce corruption, and in doing so will increase certainty and hasten trade. 

Larry Elliott's piece for tomorrow's Guardian - yes, tomorrow's economic news today folks! - suggests that we've entered a different era as far as trade is concerned. 

Although rumours of the death of globalisation are "greatly exaggerated", it seems to be the case that economies have moved away from seeing it as a panacea, and retrenching in the sense that nations are looking for shorter supply chains and the government intervening strategically in trade. Again, he refers to green growth. It's almost if the Guardian is taking up the cudgels in defence of the Green Investment Plan in a week where it's seemingly going to come under greater scrutiny. 

The Deputy Director of the IMF, Gita Gopinath, has suggested that a move away from globalisation and an economic Cold War based on US and Chinese power blocs has the potential to wipe trillions of dollars off global GDP as the world seemingly enters new trading relationships. 

This Bloomberg clip, on the very day that the Berlin Wall came down 34 years ago - is a great look both at globalization and the recent collapse of globalization in the wake of COVID and successive wars in Ukraine and now Gaza. 

So what next? It seems unlikely that we're going to go back to hyperglobalization and lengthy supply chains? So where are we headed? A collapse of globalization is forecast to wipe off 7% of global GDP, as much as the French and German companies combined. 

The BBC news clip looks at the ongoing trade dispute between the US and China, with a number of prominent US political figures having recently visited the country, in the hope of resolving ongoing issues, notably protectionist measures and the subsequent retaliation. 

This comes against a background of the Chinese economy slowing. 

And here's an Australian perspective on the UK-Australia trade deal: it's now the case that 99% of Australian exports are going to be duty free under the deal, and the Australians think this is going to be good news for the agriculture sector in particular. 

This Wendover Productions clip looks at how the US-China trade war started to change US trade patterns, and how the coronavirus and its effect upon global supply chains, and lately the Ukraine war have all contributed to the US substituting in favour of Mexican goods and away from Chinese goods. 

As a result, Mexican manufacturing has benefitted, and China is no longer as appealing not least because China is no longer the low cost manufacturer that it once was. And who is best placed to step into the breach. Mexico? 

The Guardian's take on the ongoing chip war and the implications of this for the global economy and the UK, whose $1bn support for the sector looks to be somewhat overshadowed by the support packages offered by almost everyone else. 

The premise of the article is straight forward. There are no winners in zero-sum games; they have a point. And in trade terms it's unlikely that we'll ever return to the hyperglobalisation of the early 21st century in the near future. 

Phillip Inman argues that the announcement of Britain's membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), far from being a boon - and a pretty small one at that (0.08% of GDP) - is going to relegate the us to the second rank of trading nations. 

Instead of pursuing our own free trade agenda, he argues that we've effectively become a US pawn in the geopolitical game - doing the United States bidding in potentially vetoing China's accession to the trading bloc. We shall see...