A desglobalização do Covid-19 e o avestruz trumpista - Henry Farrell and Abraham Newman (Foreign Affairs)

Will the Coronavirus End Globalization as We Know It?

The Pandemic Is Exposing Market Vulnerabilities No One Knew Existed 

By Henry Farrell and Abraham Newman

Foreign Affairs, April 2020

The new coronavirus is shaping up to be an enormous stress test for globalization. As critical supply chains break down, and nations hoard medical supplies and rush to limit travel, the crisis is forcing a major reevaluation of the interconnected global economy. Not only has globalization allowed for the rapid spread of contagious disease but it has fostered deep interdependence between firms and nations that makes them more vulnerable to unexpected shocks. Now, firms and nations alike are discovering just how vulnerable they are.

But the lesson of the new coronavirus is not that globalization failed. The lesson is that globalization is fragile, despite or even because of its benefits. For decades, individual firms’ relentless efforts to eliminate redundancy generated unprecedented wealth. But these efforts also reduced the amount of unused resources—what economists refer to as “slack”—in the global economy as a whole. In normal times, firms often see slack as a measure of idle, or even squandered, productive capacity. But too little slack makes the broader system brittle in times of crisis, eliminating critical fail-safes.

Lack of fail-safe manufacturing alternatives can cause supply chains to break down, as they have in some medical and health-related sectors as a result of the new coronavirus. Producers of vital medical supplies have been overwhelmed by a surge in global demand, pitting countries against one another in a competition for resources. The outcome has been a shift in power dynamics among major world economies, with those that are well prepared to combat the new virus either hoarding resources for themselves or assisting those that are not—and expanding their influence on the global stage as a result.

FRAGILE EFFICIENCY

The conventional wisdom about globalization is that it created a thriving international marketplace, allowing manufacturers to build flexible supply chains by substituting one supplier or component for another as needed. Adam Smith’s The Wealth of Nations became the wealth of the world as businesses took advantage of a globalized division of labor. Specialization produced greater efficiency, which in turn led to growth.  

But globalization also created a complex system of interdependence. Companies embraced global supply chains, giving rise to a tangled web of production networks that wove the world economy together. The components of a given product could now be made in dozens of countries. This drive toward specialization sometimes made substitution difficult, especially for unusual skills or products. And as production went global, countries also became more interdependent, because no country could possibly control all the goods and components its economy needed. National economies were subsumed into a vast global network of suppliers.

The pandemic of the disease caused by the new coronavirus, COVID-19, is exposing the fragility of this globalized system. Some economic sectors—particularly those with a high degree of redundancy and in which production is spread across multiple countries—could weather the crisis relatively well. Others could be pushed close to collapse if the pandemic prevents a single supplier in a single country from producing a critical and widely used component. For example, car manufacturers across western Europe worry about shortages of small electronics because a single manufacturer, MTA Advanced Automotive Solutions, has been forced to suspend production at one of its plants in Italy.

In an earlier age, manufacturers might have built up stockpiles of supplies to protect themselves in a moment like this. But in the age of globalization, many businesses subscribe to Apple CEO Tim Cook’s famous dictum that inventory is “fundamentally evil.” Instead of paying to warehouse the parts that they need to manufacture a given product, these companies rely on “just-in-time” supply chains that function as the name suggests. But in the midst of a global pandemic, just-in-time can easily become too late. Partly as a result of supply chain problems, global production of laptops fell by as much as 50 percent in February, and production of smartphones could fall by 12 percent this coming quarter. Both products are built with components produced by specialized Asian manufacturers.

CRITICAL SHORTAGES

Production bottlenecks like the ones in electronics manufacturing are also hampering the fight against the new coronavirus. Critical medical supplies such as reagents, a key component of the test kits that laboratories use to detect viral RNA, are either running low or out of stock in many countries. Two companies dominate the production of the necessary reagents: the Dutch company Qiagen (recently purchased by the U.S. giant Thermo Fisher Scientific) and Roche laboratories, which is based in Switzerland. Both have been unable to keep up with the extraordinary surge in demand for their products. The shortfall has delayed the production of test kits in the United States, which finds itself having to get in line behind other countries to buy the chemicals it needs.

As the new virus spreads, some governments are giving in to their worst instincts. Even before the COVID-19 outbreak began, Chinese manufacturers made half of the world’s medical masks. These manufacturers ramped up production as a result of the crisis, but the Chinese government effectively bought up the country’s entire supply of masks, while also importing large quantities of masks and respirators from abroad. China certainly needed them, but the result of its buying spree was a supply crunch that hobbled other countries’ response to the disease.

European countries didn’t behave much better. Russia and Turkey prohibited the export of medical masks and respirators. Germany did the same, even though it is a member of the European Union, which is supposed to have a “single market” with unrestricted free trade among its member states. The French government took the simpler step of seizing all available masks. EU officials complained that such actions undermined solidarity and prevented the EU from adopting a common approach to combating the new virus, but they were simply ignored.

These beggar-thy-neighbor dynamics threaten to escalate as the crisis deepens, choking off global supply chains for urgent medical supplies. The problem is dire for the United States, which has been late to adopt a coherent response to the pandemic and is short on many of the supplies it will need. The United States has a national stockpile of masks, but it hasn’t been replenished since 2009 and contains only a fraction of the number that could be required. Unsurprisingly, President Donald Trump’s trade adviser, Peter Navarro, has used this and other shortages to threaten allies and to justify a further withdrawal from global trade, arguing that the United States needs to “bring home its manufacturing capabilities and supply chains for essential medicines.” As a result, Germany is reportedly worried that the Trump administration will make the aggressive move of completely buying out a new vaccine under development by a German company in order to use it in the United States. Berlin is now considering whether to make a counterbid on the vaccine or ban the U.S. transaction.

VIRAL INFLUENCE

Whereas the Trump administration has used the pandemic to pull back on global integration, China is using the crisis to showcase its willingness to lead. As the first country hit by the new coronavirus, China suffered grievously over the last three months. But now it is beginning to recover, just as the rest of the world is succumbing to the disease. That poses a problem for Chinese manufacturers, many of which are now up and running again but facing weak demand from countries in crisis. But it also gives China an enormous short-term opportunity to influence the behavior of other states. Despite early mistakes that likely cost the lives of thousands of people, Beijing has learned how to fight the new virus, and it has stockpiles of equipment. These are valuable assets—and Beijing has deployed them with skill.    

In early March, Italy called on other EU countries to provide emergency medical equipment as critical shortages forced its doctors to make heartbreaking decisions about which patients to try to save and which to let die. None of them responded. But China did, offering to sell ventilators, masks, protective suits, and swabs. As the China experts Rush Doshi and Julian Gewirtz have argued, Beijing seeks to portray itself as the leader of the global fight against the new coronavirus in order to promote goodwill and expand its influence. 

This is awkward for the Trump administration, which has been slow to respond to the new virus (and which thinks banning travelers from Europe is the best defense against a disease that is already spreading rapidly on its soil). Far from serving as a global provider of public goods, the United States has few resources that it can offer to other states. To add insult to injury, the United States may soon find itself receiving Chinese charity: the billionaire cofounder of Alibaba, Jack Ma, has offered to donate500,000 test kits and one million masks.

THE NEW GEOPOLITICS OF GLOBALIZATION

As policymakers around the world struggle to deal with the new coronavirus and its aftermath, they will have to confront the fact that the global economy doesn’t work as they thought it did. Globalization calls for an ever-increasing specialization of labor across countries, a model that creates extraordinary efficiencies but also extraordinary vulnerabilities. Shocks such as the COVID-19 pandemic reveal these vulnerabilities. Single-source providers, or regions of the world that specialize in one particular product, can create unexpected fragility in moments of crisis, causing supply chains to break down. In the coming months, many more of these vulnerabilities will be exposed.

The result may be a shift in global politics. With the health and safety of their citizens at stake, countries may decide to block exports or seize critical supplies, even if doing so hurts their allies and neighbors. Such a retreat from globalization would make generosity an even more powerful tool of influence for states that can afford it. So far, the United States has not been a leader in the global response to the new coronavirus, and it has ceded at least some of that role to China. This pandemic is reshaping the geopolitics of globalization, but the United States isn’t adapting. Instead, it’s sick and hiding under the covers.

Globalismo não é o problema, e sim políticas internas

Como sempre, aprecio a visão do mundo do Globalist:

The fight against globalization - and the resistance to globalism - is at its heart a contemporary form of anti-intellectualism. That’s the core argument in this weekend essay on The Globalist.

Cheers,

Stephan Richter, Editor-in-Chief

Stop Blaming Globalization: Most Problems Are Homemade

Amidst many worries about globalization, suggestions for a constructive path forward. | By Arthur E. Appleton

Arthur Appleton is an Adjunct Professor of International Law at the Johns Hopkins University School of Advanced International Studies (SAIS-Europe).

Stop Blaming Globalization: Most Problems Are Homemade

Amidst many worries about globalization, suggestions for a constructive path forward.

By Arthur E. Appleton 
The Globalist, February 16, 2020

Credit: xtock - Shutterstock.com

Takeaways

• The recourse to nationalism that is so temptingly offered by the populists does little to address the problem of – largely – domestic inequality.
• It is easier for politicians to blame “globalization” – instead of acknowledging the severe policy errors they have made at home.
• Both global prosperity and global progress depend upon a common understanding of how an interdependent world functions – economically, politically and socially.
• The fight against globalization and the resistance to globalism is at its heart a contemporary form of anti-intellectualism.

The move towards globalization made some believe that history is linear. This is certainly not the case.

Backlash against globalization

The continuing backlash against globalization, as well as the resulting retrenchment, which frequently takes the form of nationalism, demonstrates two facts: First, globalization is subject to setbacks. And second, the multilateral trade regime is both fragile and perhaps somewhat flawed. 

The backlash against globalization has globalists looking for pathways forward. This is all the more necessary as the dangers the world faces, both economic and political, are serious and growing. 

Mounting nationalistic tendencies in the United States, Russia, China, Brazil, Italy, Poland, Hungary, India, the Philippines and many other countries, are continuing to fragment the international consensus. This spread of nationalism is disrupting the established political and economic order. 

Trade and prosperity

Fragmentation of this consensus now threatens to destabilize the world and jeopardize the rapid economic growth and relative stability experienced since the Second World War. Bulwarks of stability, such as the World Trade Organization (WTO), are under attack. So are other multilateral institutions.

At the core, though, the backlash against globalization is misdirected. In most cases, the primary reason for the electorate’s frustration is the inequality of economic opportunity within countries. 

Some wrongly blame this inequality on international and regional trade agreements. Some blame immigration. Others more correctly place the blame on lack of education, poor infrastructure, poor governance and a lack of access to capital. 

Nationalism is no solution

Regardless of the causes identified above, most people would agree that inequality of opportunity has marginalized large segments of the population in many countries. In Europe, the United States and even across Africa, inequality of opportunity has fueled immigration by the “have-nots” which, in turn, has fueled resentment and nationalism.

One important point that should be clear is that: The recourse to nationalism that is so temptingly offered by the populists does little to address the problem of – largely – domestic inequality. 

The inequality battle revisited

Even so, one question that warrants reflection is this: Where did the West go wrong in its journey towards a more globalized world and the resulting nationalism? 

Our political and economic leaders share much of the responsibility. They have not taken adequate steps to address the rising inequality of opportunity. 

In pursuit of their respective self-interests, they have also failed to establish an environment that would nurture satisfactory employment opportunities and improve governance. 

For politicians, long-term thinking has been overtaken by short-term political opportunism. It is easier politically for politicians to blame “globalization” – instead of acknowledging the severe policy errors they have made at home.

No short-term solutions for long-term problems

Unfortunately, there are no short-term solutions to redress these problems. It is particularly distressing that many of the problems Western societies are experiencing are due to failures in their educational systems. 

This cannot be due to a lack of money or wealth. Instead, it is due to a lack of proper attention to other issues, such as how we educate those born in disadvantaged circumstances. Another shortfall is the failure to properly educate prospective business leaders. 

Education always takes (too) long

Complicating the debate is the realization that any realistic solutions to educational issues, if properly defined and arrived at, take at least one generation to implement. 

Since most politicians are notoriously fixated on the short-term election cycle, they are unwilling to invest the necessary political capital to address mid- to long-term educational issues.

In addition to the standard courses in literacy, math and science, there is an urgent need for high school students from all walks of life to understand two core issues. The first is basic economics, and the second is civics – the rights, obligations and the theoretical and practical aspects of being a citizen in a democracy. 

High school students should graduate with knowledge of supply and demand, return on investment, gains from trade, comparative advantage, externalities and the tragedy of the commons. 

They should also have a basic understanding of the cornerstone principles underlying the international trading system (non-discrimination, transparency, etc.), as well as the rights, obligations and the philosophy underlying democratic regimes. 

Too focused on business as usual

For business school students, the bar should be set even higher. In addition to more advanced economic knowledge, including principles related to taxation, business school graduates should have an advanced knowledge of political economy, development economics, environmental economics, ethics and global governance issues. 

This includes the business and societal risks posed by inequality, political uncertainty, corruption, racism, gender issues and the failure of rule-based systems, in particular judicial systems protecting democracy, property rights, investment and trade. 

Unfortunately, these subjects are seldom taught in business schools, or for that matter in other university curricula. 

Conclusion

The fight against globalization and the resistance to globalism is at its heart a contemporary form of anti-intellectualism.

Both global prosperity and global progress depend upon a common understanding of how an interdependent world functions – economically, politically and socially.

To get there, we must ensure that students understand basic economics and basic governance issues. We must move beyond the idea that school, in particular business school, is merely a vehicle for amassing personal or shareholder wealth. 

Don’t get me wrong: There is nothing wrong with making money and shareholders also deserve a fair return on their investment. But making money is much more enjoyable when everyone around us is also enjoying stability and prosperity. 

Mister Trump goes to Asia: a self-inflicted decline on the USA (NYT)

Asia Pacific

Trump Pitches ‘America First’ Trade Policy at Asia-Pacific Gathering

By JULIE HIRSCHFELD DAVIS and MARK LANDLER 

The New York Times, November 10, 2017

DANANG, Vietnam — President Trump on Friday vowed to protect American interests against foreign exploitation, preaching a starkly unilateralist approach to a group of leaders who once pinned their economic hopes on a regional trade pact led by the United States.

“We are not going to let the United States be taken advantage of anymore,” Mr. Trump told business leaders at the Asia-Pacific Economic Cooperation forum in Danang, Vietnam. “I am always going to put America first, the same way that I expect all of you in this room to put your countries first.”

But taking the stage at the same meeting immediately after Mr. Trump, President Xi Jinping of China delivered a sharply contrasting message, championing more robust engagement with the world. Mr. Xi used his own speech to make a spirited defense of globalization, saying relations among countries should be “more open, more inclusive, more balanced, more equitable and more beneficial to all.”

Mr. Trump’s remarks were strikingly hostile for an audience that included leaders who had supported the Trans-Pacific Partnership, a sweeping 12-nation accord that was to be led by the United States, from which Mr. Trump withdrew immediately after taking office.

And it indicated the degree to which, under Mr. Trump, the United States — once a dominant voice guiding discussions about trade at gatherings such as APEC — has ceded that role. Even as he was railing against multilateral approaches, the remaining 11 countries in the Trans-Pacific Partnership were negotiating intensively to seal the agreement — without the United States. Under the terms being discussed, the United States could re-enter the pact in the future.

Even without the United States, the Trans-Pacific Partnership would be the largest trade agreement in history. Under the partnership, members would enjoy tariff-free trade with each other, with companies in the member countries having faster and better access to other markets than their American rivals.

Promising to pursue “mutually beneficial commerce” through bilateral trade agreements, Mr. Trump roundly condemned the kind of multilateral accords his predecessors had pursued. His talk echoed his statements in China earlier this week that blamed weak American leadership for trade imbalances that he said had stripped jobs, factories and entire industries from the United States.

“What we will no longer do is enter into large agreements that tie our hands, surrender our sovereignty and make meaningful enforcement practically impossible,” Mr. Trump said.

He also spoke witheringly about an approach he said had led the United States to lower its own trade barriers, only to have other countries refuse to do so, and he accused the World Trade Organization of treating the United States unfairly.

Many of the president’s toughest lines — his vow to fight the “audacious theft” of intellectual property from American companies and the forced transfer of technology to foreign firms — were aimed at China.

But Mr. Trump avoided criticizing Mr. Xi personally. And he repeated his contention that he did not blame China, or any other country, for taking advantage of what he called weak American trade laws.

“If their representatives are able to get away with it, they are just doing their jobs,” the president said. “I wish previous administrations in my country saw what was happening and did something about it. They did not, but I will.”

 

White House officials had framed Mr. Trump’s speech as a chance to articulate the idea of a “free and open Indo-Pacific” region, which the Trump administration has adopted as its answer to former President Barack Obama’s pivot to Asia. First proposed by the Japanese, it envisions the United States strengthening ties with three other democracies in the region — Australia, India and Japan — in part to counter a rising China. But the president offered few details about that approach.

He spoke of the need for freedom of navigation — a reference to the South China Sea, which Vietnam, Malaysia and other countries complain Beijing is turning into a private waterway. But the president stopped short of calling out China by name.

He also did not fault China or his host, Vietnam, for their checkered human rights records, even as he offered a general endorsement of the rule of law and individual rights.

As in his speech to the United Nations in September, Mr. Trump emphasized the idea of sovereignty, a concept that is often seen as being at odds with global cooperation and that is sometimes used by countries to fend off interference by outside powers.

He closed the speech with an inward-looking paean to the virtues of home, declaring, “In all of the world, there is no place like home,” adding that nations should “protect your home, defend your home, and love your home today and for all time.”

Mr. Xi, in contrast, argued for pursuing the kinds of global initiatives that Mr. Trump had shunned. The Chinese leader praised the Paris climate accord, called globalization an “irreversible historical trend” and said China would continue to pursue a free trade area in the Asia-Pacific region.

American and Russian officials had been working to arrange a meeting between President Vladimir V. Putin and Mr. Trump on the sidelines of the meeting, in part to ask for Moscow’s assistance in countering the threat from North Korea. But as Mr. Trump arrived in Danang, the White House announced that he would not hold formal talks with Mr. Putin.

Officials cited scheduling issues as the reason the two leaders would not meet. But on Thursday, Rex W. Tillerson, the secretary of state, had said that a conversation between Mr. Trump and Mr. Putin was “still under consideration,” and that a final decision would hinge on whether there was “sufficient substance” to warrant face-to-face talks.

Mr. Trump’s last encounter with Mr. Putin — on the sidelines of the Group of 20 summit meeting in Hamburg, Germany — posed political challenges for the White House, which faced questions about whether and how sharply Mr. Trump would rebuke his Russian counterpart for meddling in the 2016 elections.

Mr. Trump was later criticized for not having pressed Mr. Putin more strongly in an hourslong meeting on the election interference, and for revelations that the two had a second, undisclosed discussion at a leaders’ dinner that night. Diplomats described being stunned to see the two presidents chatting intimately with only a Kremlin interpreter present.

The optics of a meeting this week would have been particularly tricky, given new revelations about the Trump campaign’s contacts with Russians, brought to light by the investigations into Moscow’s efforts to sway the American election in Mr. Trump’s favor.

The two presidents did end up shaking hands and exchanging greetings before posing for a photograph at the APEC gala dinner Friday evening.

Still, the change in plans appeared to have left the Kremlin exasperated. Asked about the absence of a meeting, Sergey V. Lavrov, the Russian foreign minister, told a Russian TV reporter: “Ask the Americans. We are not speaking on this matter at all.”

Mr. Lavrov noted that Mr. Trump himself had said last week that he would most likely meet with Mr. Putin during his trip to Asia. But, Mr. Lavrov added, “I don’t know what his bureaucrats are saying.”

Neil MacFarquhar contributed reporting from Moscow.

Follow Julie Hirschfeld Davis and Mark Landler on Twitter: @juliehdavis and @MarkLandler.

A version of this article appears in print on November 11, 2017, on Page A1 of the New York edition with the headline: President Puts ‘America First’ At Trade Talks. Order Reprints| Today's Paper|Subscribe

Globalizacao: atualmente e cem anos atras - M. Bordo, B. Eichengreen, D. Irwin (NBER, 1999)

Um paper de 1999, mas ainda muito interessante, para demonstrar que existem coisas novas e boas, mas, como se diz, as boas não são novas, e as novas podem não ser boas...
Vale ler...
Paulo Roberto de Almeida

Is Globalization Today Really Different than Globalization a Hunderd Years Ago?

Michael D. Bordo, Barry Eichengreen, Douglas A. Irwin

NBER Working Paper No. 7195
Issued in June 1999
NBER Program(s):   DAE   IFM   ITI 

This paper pursues the comparison of economic integration today and pre 1914 for trade as well as finance, primarily for the United States but also with reference to the wider world. We establish the outlines of international integration a century ago and analyze the institutional and informational impediments that prevented the late nineteenth century world from achieving the same degree of integration as today. We conclude that the world today is different: commercial and financial integration before World War I was more limited. Given that integration today is even more pervasive than a hundred years ago, it is surprising that trade tensions and financial instability have not been worse in recent years. In the conclusion we point to the institutional innovations that have taken place in the past century as an explanation. This in turn suggests the way forward for national governments and multilaterals.

Neste link: http://www.nber.org/papers/w7195

Trade integration in eight figures - Arvind Subramanian and Martin Kessler

REALTIME ECONOMIC ISSUES WATCH

Twenty-first Century Trade Integration in Eight Figures

by Arvind Subramanian and Martin Kessler 

Peterson Institute of International Economics, July 12th, 2013 

In this short post (based on our recent paper), we present eight attributes of the current phase of trade integration which began towards the end of the last millennium.

Hyperglobalization

Since 1870, there have been four phases of trade integration, as figure 1 shows. The first three were (1) globalization of the late 19th century; (2) the collapse of globalization in the Great Depression; (3) reglobalization after World War II. In this fourth phase of hyperglobalization, trade has grown substantially faster than world GDP and now represents about a third of world GDP. Trade in merchandise will soon reach twice what it was at the peak of the first globalization (just prior to World War I). This is true whether trade is measured in gross or value-added terms. (A chart on global foreign direct investment flows would show a similar trend.)

Figure 1 World exports as share of GDP, 1870–2011 (current dollars)

Sources: Klasing and Milionis (2013) for historical data, WTO for 1960–2011, Johnson and Noguera (2012) for value-added adjustment.

Dematerializing Globalization

Trade is becoming less about stuff and more about, well, fluff. But because services (fluff) are not traded directly, but embodied in goods which cross borders, their footprint is only visible when trade is properly measured (in value-added terms). Under this measure, services represented 43 percent of global trade in 2008 against 29 percent in 1980 (figure 2). Services are also becoming more tradable.

Figure 2 Exports of goods and services, in gross and value-added terms

Sources: World Development Indicators, Johnson and Noguera (2012) for value-added adjustment.

Democratic Globalization

Hyperglobalization is not confined to a few countries. It is not occurring because some large countries are emsbracing trade. It is a very broad phenomenon occurring across all countries, rich and poor, populous and less so (figure 3a).

Figure 3a Global openness, 1870–2010 (PPP dollars)

Notes: This chart shows two global openness indices: a simple average (holding the sample constant of export-to-GDP ratios), and a population-weighted measure.

Sources: Maddison for historical estimates, Penn World Tables 7.1 for 1951–2010.
It has been widely documented that hyperglobalization can be attributed to the sharp drop in transportation costs and to the revolution in communication technologies. Hyperglobalization also reflects a more democratic distribution of world output (figure 3b). If there were one country with all or most of the world’s output, there would be zero or little trade. The more output is spread the more there will be trade. Since the mid-1990s, as poorer countries have started growing faster than rich ones (the phenomenon of “convergence”), output is being more equally (less unequally) spread over the globe, leading to an increase in trade. It is as if now there are more countries and hence more trade.

Figure 3b Dispersion of world output and world exports, 1970–2010

Notes: Country-equivalents , where s_i is the share of each country in world output. A higher number denotes a more equal distribution of output.
Source: UNCTAD

Criss-crossing Globalization

More than before, flows, and similar kinds of flows, are going in both directions. After World War II, similar goods were flowing (think cars) between the rich countries. With integrated supply chains, unfinished goods go back and forth. This is criss-crossing globalization. We illustrate this with the example of foreign direct investment (FDI). It is much harder today to speak about “receiving” and “sending” countries, as FDI goes in both directions, between rich countries themselves, but also increasingly with emerging market countries investing in the developed world.

Figure 4 Two-way foreign direct investment flows, 1970–2011

Note: The Grubel-Lloyd index is computed for each country with nonzero positive flows. Each country is then weighted by its share of total FDI flows, with weights corresponding to the current year (red line) or with weights that are fixed at their mean over the period (blue line). The figure shows five-year moving averages (to avoid large spikes).
Source:UNCTAD various years.

The Rise of a Mega-Trader—China—the First since Imperial Britain

China has become a “mega-trader” in two senses. First, it recently overtook the United States as the world’s largest trader. Under realistic growth projections, it will pull further away from the United States and other countries. Second, and more impressive, is that China is a mega-trader compared to its own characteristics: A country is expected to trade more relative to its GDP when it is richer and when its size is smaller. Controlling for those criteria, China substantially over-trades, only slightly less than the United Kingdom did at its peak. On this second criterion, the United States in its heyday and Japan in the 1980s were under-traders (figure 5).

Figure 5 Trade openness and population size

Britain: 1870

China: 2008

Note: We regress exports to GDP (in log) on size (population, in log) and income (GDP per capita, in log). For 2008, we exclude small (<5 million habitants) and oil exporting countries. The charts present the bivariate relation between size and openness, controlling for income. A country above the line is more open than expected given its size.
Source: Maddison for 1870, Penn World Tables for 2008

Rise of Preferential Agreements and Impending Rise of Mega-Regionalism

A lot of the liberalization in the era of hyperglobalization has occurred in the context of preferential trade agreements, which increasingly address “behind-the-border” barriers (see figure 6). In part, this is because the Doha Round of multilateral negotiations remained stalled. This trend will be reinforced with the two mega-regional agreements being negotiated by the United States, the Trans-Pacific Partnership (TPP) with Asia, and the Transatlantic Trade and Investment Partnership (TTIP). About $2.5 trillion of trade in merchandise takes place within these two blocs, which accounts for 17 percent of world trade (the number would be higher if one includes services).

Figure 6 Number of new preferential trade agreements, 1958–2012

Source: World Trade Organization.

Decline of Formal Barriers

We have witnessed a long-term decline in tariffs across the world. This phenomenon is true across regions and has withstood the financial crisis, despite fears to the contrary.

Figure 7 Average most favored nation tariffs by income group, 1981–2009

MFN = most favored nation
Note: Spikes should not be over-interpreted as countries sometimes drop or enter the sample

Source: World Bank.

But Is the World Less Open Policy-wise?

There is a paradox: Liberalization is occurring all across the globe but the world may be getting more closed, or at least less open than people believe. This is because of two compositional shifts. Global output is moving away from less-protected manufacturing toward more-protected services (see figure 8) and from less-protected rich countries to more-protected poor countries (as shown in figures 7 and 8). Those shifts make the world as a whole less open and attenuate the liberalization trend that stems from all countries reducing barriers.

Figure 8 Index of services trade restrictiveness, by sector and region, 2008–10

Source: Borchert, Gootiz, and Mattoo 2012.

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Tags: globalization, services, trade, world economy

A globalizacao e as desigualdades: corrigindo velhos mitos

Estou revisando alguns dos meus escritos para um livro sobre a globalização e a antiglobalização, e fui naturalmente levado a verificar alguns links a matérias de imprensa, especificamente vinculadas a estudos do economista catalão da Columbia University, Xavier Sala-i-Martin, citado nas duas matérias do New York Times que transcrevo abaixo.
Paulo Roberto de Almeida

Economic Scene; The rich get rich and poor get poorer. Right? Let's take another look.
By Virginia Postrel
The New York Times, August 15, 2002

TO critics of economic liberalization and international trade, it is an article of faith that the rich are getting richer and the poor poorer.
''Inequality is soaring through the globalization period -- within countries and across countries,'' Noam Chomsky told a conference last fall, summarizing this common view.
Antiglobalization activists are not just making up this idea. They have taken it from seemingly authoritative sources, notably the 1999 United Nations Human Development Report.
That widely cited report stated: ''Gaps in income between the poorest and richest countries have continued to widen. In 1960 the 20 percent of the world's people in the richest countries had 30 times the income of the poorest 20 percent -- in 1997, 74 times as much.'' It added that ''gaps are widening both between and within countries.''
Fortunately, this scary portrait is highly misleading.
''When I started looking at the numbers, I saw a lot of mistakes,'' says Xavier Sala-i-Martin, an economist at Columbia. Some were departures from standard economic procedures, like not correcting for price levels from country to country.
''Some agencies didn't adjust for the fact that Ethiopia is cheaper than the U.S.,'' he said. ''Some of them were hiding numbers that we know exist.'' For instance, the report included data from only 19 of the 29 industrialized countries then in the Organization for Economic Cooperation and Development.
But the biggest problem was not so technical. It was hidden in plain sight. The United Nations report and others looked at gaps in income of the richest and poorest countries -- not rich and poor individuals.
That means the formerly poor citizens of giant countries could become a lot richer and still barely show up in the data.
''Treating countries like China and Grenada as two data points with equal weight does not seem reasonable because there are about 12,000 Chinese citizens for each person living in Grenada,'' writes Professor Sala-i-Martin in ''The World Distribution of Income (Estimated from Individual Country Distributions).'' That is one of two related working papers for the National Bureau of Economic Research. (The papers are available on Professor Sala-i-Martin's Web site at www.columbia.edu/xs23/home.html.)
Counting by countries misses the biggest economic advance in history, completely distorting the record of the globalization period.
Over the last three decades, and especially since the 1980's, the world's two largest countries, China and India, have raced ahead economically. So have other Asian countries with relatively large populations.
The result is that 2.5 billion people have seen their standards of living rise toward those of the billion people in the already developed countries -- decreasing global poverty and increasing global equality. From the point of view of individuals, economic liberalization has been a huge success.
''You have to look at people,'' says Professor Sala-i-Martin. ''Because if you look at countries, we do have lots and lots of little countries that are doing very poorly, namely Africa -- 35 African countries.'' But all Africa has only about half as many people as China.
In his paper, ''The Disturbing 'Rise' of Global Income Inequality,'' he estimates the worldwide distribution of income by individuals rather than countries. The results are striking.
In 1970, global income distribution peaked at about $1,000 in today's dollars, a common measure of poverty ($2 a day in 1985 dollars). In 1998, by contrast, the largest number of people earned about $8,000 -- a standard of living equivalent to Portugal's.
''That's what I call a new world middle class,'' says Professor Sala-i-Martin. It is mostly made up of the top 40 percent of Chinese and Indians, and the effect of their economic rise is big.
What about the argument that income gaps are widening within these rapidly advancing countries? With a few exceptions, it is true, but still misleading.
The rich did get richer faster than the poor did. But for the most part the poor did not get poorer. They got richer, too. In exchange for significantly rising living standards, a little more internal inequality is not such a bad thing.
''One would like to think that it is unambiguously good that more than a third of the poorest citizens see their incomes grow and converge to the levels enjoyed by the richest people in the world,'' writes Professor Sala-i-Martin. ''And if our indexes say that inequality rises, then rising inequality must be good, and we should not worry about it!''
There is, however, one large country where the poor really are getting poorer while the rich grow richer: Nigeria, the most populous country in Africa.
Nigeria's economy has actually shrunk over the last three decades, and the absolute poverty rate -- the percentage of the population living on less than $1 a day in 1985 dollars -- skyrocketed to 46 percent in 1998 from 9 percent in 1970.
While most Nigerians were falling further into destitution, the political and economic elite grew richer. The problem is not too much liberalization but too little, a politicized economy with widespread corruption.
''The rich guys are doing well, therefore reforms will not come,'' says a pessimistic Professor Sala-i-Martin. He has begun studying Nigeria, trying to come up with ways around the political problem.
That country is typical of Africa, which is growing ever poorer. Fully 95 percent of the world's ''one-dollar poor'' live in Africa, and in many countries they make up the vast majority of the population. That poverty, not the rising wealth of Asian countries, is the global economy's real problem.
''The welfare implications of finding how to turn around the growth performance of Africa are so staggering,'' he writes, ''that this has probably become the most important question in economics.''
Photo: While Nigeria is one country where the poor are getting poorer while the rich grow richer, data suggesting this is the case in much of the world may be misleading. (Associated Press)

Virginia Postrel is the author of ''The Future and Its Enemies'' and is writing a book on the increasing importance of aesthetics in the economy and society. E-mail: vpostrel@dynamist.com.

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OP-ED COLUMNIST
Good News About Poverty
By DAVID BROOKS
The New York Times, November 27, 2004

I hate to be the bearer of good news, because only pessimists are regarded as intellectually serious, but we're in the 11th month of the most prosperous year in human history. Last week, the World Bank released a report showing that global growth "accelerated sharply" this year to a rate of about 4 percent.

Best of all, the poorer nations are leading the way. Some rich countries, like the U.S. and Japan, are doing well, but the developing world is leading this economic surge. Developing countries are seeing their economies expand by 6.1 percent this year - an unprecedented rate - and, even if you take China, India and Russia out of the equation, developing world growth is still around 5 percent. As even the cautious folks at the World Bank note, all developing regions are growing faster this decade than they did in the 1980's and 90's.

This is having a wonderful effect on world poverty, because when regions grow, that growth is shared up and down the income ladder. In its report, the World Bank notes that economic growth is producing a "spectacular" decline in poverty in East and South Asia. In 1990, there were roughly 472 million people in the East Asia and Pacific region living on less than $1 a day. By 2001, there were 271 million living in extreme poverty, and by 2015, at current projections, there will only be 19 million people living under those conditions.

Less dramatic declines in extreme poverty have been noted around the developing world, with the vital exception of sub-Saharan Africa. It now seems quite possible that we will meet the United Nations' Millennium Development Goals, which were set a few years ago: the number of people living in extreme poverty will be cut in half by the year 2015. As Martin Wolf of The Financial Times wrote in his recent book, "Why Globalization Works": "Never before have so many people - or so large a proportion of the world's population - enjoyed such large rises in their standard of living."

As other research confirms, these rapid improvements at the bottom of the income ladder are contributing to and correlating with declines in illiteracy, child labor rates and fertility rates. The growth in the world's poorer regions also supports the argument that we are seeing a drop in global inequality.

Economists have been arguing furiously about whether inequality is increasing or decreasing. But it now seems likely that while inequality has grown within particular nations, it is shrinking among individuals worldwide. The Catalan economist Xavier Sala-i-Martin looked at eight measures of global inequality and found they told the same story: after remaining constant during the 70's, inequality among individuals has since declined.

What explains all this good news? The short answer is this thing we call globalization. Over the past decades, many nations have undertaken structural reforms to lower trade barriers, shore up property rights and free economic activity. International trade is surging. The poor nations that opened themselves up to trade, investment and those evil multinational corporations saw the sharpest poverty declines. Write this on your forehead: Free trade reduces world suffering.

Of course, all the news is not good. Plagued by bad governments and AIDS, sub-Saharan Africa has not joined in the benefits of globalization. Big budget deficits in the U.S. and elsewhere threaten stable growth. High oil prices are a problem. Trade produces losers as well as winners, especially among less-skilled workers in the developed world.

But especially around Thanksgiving, it's worth appreciating some of the things that have gone right, and not just sweeping reports like the one from the World Bank under the rug.

It's worth reminding ourselves that the key task ahead is spreading the benefits of globalization to Africa and the Middle East. It's worth noting this perhaps not too surprising phenomenon: As free trade improves the lives of people in poor countries, it is viewed with suspicion by more people in rich countries.

Just once, I'd like to see someone like Bono or Bruce Springsteen stand up at a concert and speak the truth to his fan base: that the world is complicated and there are no free lunches. But if you really want to reduce world poverty, you should be cheering on those guys in pinstripe suits at the free-trade negotiations and those investors jetting around the world. Thanks, in part, to them, we are making progress against poverty. Thanks, in part, to them, more people around the world have something to be thankful for.