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Hello from Brussels, yesterday’s demonstration against Covid-19 restrictions was a bit annoying and caused some actual riots, or at least some robberies. This is Wave of protest Oppose the new restrictions in Europe.Given that Belgium has actually responded well to the pandemic and is relatively high Vaccination rate, This is a bit worried.
Today’s main content is about the performance of world merchandise trade and supply chains, analyzing the two major institutions in the region, namely the World Trade Organization and the Asian Development Bank. Considering the panic tone in many aspects, we have been discussing for a while, and the answer is better than you expected.
The trade disaster that has not yet come
As we approach the end of the year, we seem to be very sure, and the trade in goods in 2021 is summarized as follows. Trade quickly recovered from the shock of the pandemic, more or less made up for last year’s losses, and then appeared to slow trend growth. The speed of recovery has put tremendous pressure on the supply chain and created bottlenecks in certain cargoes and certain ports. The Sino-US trade tension continues to heat up. But-interestingly-the idea that the company will completely reorganize the value chain to cope with transportation austerity or geopolitical risks is still theoretical.
We have always been Skeptical Covid will cause a major shift in the globalization landscape after the Cold War.Obviously, as we said recentThe bottlenecks and shortages in the past few quarters made us stop and think. There must be an uncomfortable level of turbulence. However, if you wish, you can call us reckless. Today’s “Trade Secrets” author still believes that there is no reason to justify a major government-led global reorganization.
So, let’s take a look at the numbers.WTO Annual Conference World Trade Report It is pointed out that trade in commodities (goods) has resumed the trend before the epidemic, and the impact is significantly smaller than the impact caused by the financial crisis. It also pointed out that trade is recovering faster than GDP, and economies that are severely affected by the new crown virus benefit from exports to countries that are relatively unscathed. If you want, you can play with reverse causality a little bit here (perhaps economies are trading more because they grow for other reasons), but it’s obviously not that countries that turn inward will perform better.
Specifically supply chain, ADB is good in the historical context. The growth of global value chains slowed down after 2008 and has been in a sluggish state since the “slowing down” after the “hyper-globalization” in the early 2000s. (Don’t blame us for the new words.) Although the events of last year did bring serious pressure on the value chain, the Asian bank concluded that the 2020 figures are basically in line with the post-2010 trends. This is consistent with other data on trade and investment intentions cited in a report by Megan Greene of the Harvard Kennedy School. Financial Times column last week. There is not much evidence that the supply chain is shortening or even fundamentally reorganizing. There may be: these things take time. But it hasn’t happened yet.
Back to the WTO report. Chad Bown of the Peterson Institute has an interesting cameo. He has become a prophet of the global chip trade in the trade world, and if you will, he is the sage of semiconductors.Bowen pointed out (page 93 report) In contrast to the general world economy having to cross dangerously narrow and dangerous mountain roads controlled by semiconductor robbers, chip production performed well during the coronavirus crisis.
It is now facing a lot of pressure, mainly for chips that are not technically complex, such as automobiles, but this is because of the huge and possibly unsustainable surge in demand. The situation now looks terrible, but in the long run, the risk of the world economy hitting a brick wall due to widespread chip shortages is more serious than the government’s possible response to this. The subsidy spiral and trade restrictions may lead to oversupply in the global semiconductor industry, unable to segment inefficiently by country/region, and relying on state subsidies indefinitely.
As Bowen said: “As we all know, the government shows too much love for the bargaining chip… In fact, during the escalation of geopolitical tensions, interdependence may help to maintain peace. Change the supply chain geography to reduce this interdependence. It may cause new loopholes.”
At this point—obviously they are talking about their book—WTO hopes to host a grand meeting of global cooperation to maintain open trade in strategic products. Without this, assuming that trade will always bring results, individual countries, especially small countries, will of course be at risk. If you are the one who opens the medical product market, but because everyone else is importing and hoarding, it will soon lead to domestic shortages, then there will be coordination problems. We got it. The point is that due to the pandemic, the performance of trade and supply chains does not have much reason to prove that the globalized free trade model has been broken.
Perhaps it is because of the WTO ministerial meeting to be held next week, the ten years before the global financial crisis has now come to our minds. The failure of trade policy, the breakdown of the 2008 World Trade Organization Doha round of negotiations leading to clothing tears, etc., people are endlessly grief-stricken. But the transaction itself? The trade itself is very good.As we said Come back in septemberNow the savior is business people, not bureaucrats. Many things in the past year have been disappointing, but considering the situation it faces, in fact, cross-border buying and selling of things is not high.
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