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What we are reading

The future of globalization, sanctions, and supply chains

Published 20 April 2022

Is globalization over? Are supply chains transforming – dramatically? As sanctions mount on Russia, is China taking notes? Find out more developments in trade in What we are reading, our list of reports and analysis on global trade.

Whither globalization? 

How is the war in Ukraine affecting the global economy and globalization? An online debate on the economic consequences of the Ukraine war, hosted by VoxEU, continues. Meanwhile, a new report by the World Trade Organization illustrates the importance of Ukrainian and Russian exports to global trade. The war has already changed the global economy, Adam Tooze argues in Foreign Policy and explains why the Russian ruble is rebounding.   

Indeed, the twin shocks of the Ukraine war and China’s lockdowns are hitting global trade hard, writes the Wall Street Journal. But there’s cause to be optimistic about globalization. Here are five reasons, says Alan Beattie in the Financial Times.  

Mentioned publications

  1. The economic consequences of the warVoxEU, 13 April 2022
    A series of articles focused on the fallout of Putin’s war on Ukraine. Recent analyses focus on the impact of sanctions on investment by Russian non-financial firms and of tariffs on Russian energy exports, and the future of China’s overseas lending.
  2. The crisis in Ukraine: Implications of the war for global trade and developmentWorld Trade Organization, 11 April 2022
    An overview of how the war in Ukraine is disrupting global trade, and in which markets Russian and Ukrainian exports have the greatest impact.
  3. Ukraine’s war has already changed the world’s economy – Adam Tooze, Foreign Policy, 5 April 2022
    Have we reached a point where we need to revisit the Bretton Woods accords? Is this the end of globalization or the start of a new integration of the global economy?
  4. The fall and rise of the Russian ruble – Adam Tooze and Cameron Abadi, Foreign Policy, 9 April 2022
    The Russian ruble has rebounded to its pre-war value despite ongoing and increasing sanctions. What led to this outcome?
  5. Global trade hit by Ukraine war, China lockdowns – Jason Douglas, The Wall Street Journal, 13 April 2022
    Recent economic data reveal a significant slowdown in trade flows in 2022 to date.
  6. Five reasons to be optimistic about the survival of globalization – Op-ed: Alan Beattie, Financial Times, 6 April 2022
    Many commentators are currently heralding the end of globalization as we know it. Here are five reasons why this may not be the case. 

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China is learning from Russian sanctions 

As the world considers additional tools and sanctions to further curb and punish Russian aggression, per the Economist, China is watching closely – to learn how to avoid a similar outcome. Nicholas Mulder considers the question in an interview with the Wire China, while Nikkei Asia evaluates the tools China is adopting to counteract punitive actions

Mentioned publications

  1. What other weapons could the West wheel out? – The Economist, 15 April 2022
    What additional sanctions should countries impose on Russia? What sanctions or other tools could help pressure Russia to stop fighting?
  2. Nicholas Mulder on economic warfare – Katrina Northrop, The Wire China, 3 April 2022
    What are the lessons that China might take from imposing sanctions on Russia? How might similar sanctions on China affect the global economy?
  3. China scrambles for cover from West's financial weapons – Cissy Zhou, Nikkei Asia, 13 April 2022
    The speed and aggression of Western sanctions against Russia have alarmed China. What actions will China take to insulate their economy from a similar outcome? 

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Reconsidering supply chains – and inflation

Global supply chains have changed radically due to the pandemic and continue to evolve in response to the war in Ukraine. Every step of the supply chain for American consumers in illustrated in an informative new documentary by the Wall Street Journal. The Financial Times provides a more specific example of the pressures involved in reshoring the manufacturing of European bicycles. 

How has China come to dominate global pharmaceutical supply chains? The final installment of Nikkei Asia’s series charts the reconsideration of supply chain structures in major economies around the world. 

Inflation is on the rise around the world. Trade liberalization may help to tame inflation, argues the Peterson Institute for International Economics.  

Mentioned publications

  1. Why global supply chains may never be the sameWall Street Journal Documentary, 23 March 2022
    A fascinating visual depiction of every step of the American consumer’s supply chain and the challenges of serving demand for near-immediate fulfillment.
  2. European bicycle groups put brakes on reshoring as energy prices bite – Harry Dempsey, Financial Times, 2 April 2022
    Reshoring is not as simple as may expect and costs decide decisions. For European bicycle makers, energy prices may trump shipping costs and uncertain supply chains.
  3. The great medicines migration: How China took control of key global pharmaceutical suppliesNikkei Asia, 5 April 2022
    In this series conclusion, Nikkei Asia examines China’s transformation into the primary global producer of key pharmaceutical ingredients, including for vitamins and antibiotics.
  4. For inflation relief, the United States should look to trade liberalization – Gary Clyde Hufbauer, Megan Hogan and Yilin Wang, Peterson Institute for International Economics, 30 March 2022
    How do tariffs contribute to inflation and how can tariff relief of up to 2% help alleviate inflation in the United States?  

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China challenges – and confounds

In this interview with the Wire China, Craig Allen, President of the US-China Business Council, provides unique insight into how US companies perceive the business environment in China and its challenges for the future, while urging the US government to take a nuanced view on its trade with China. 

Meanwhile, the up-and-down investment data in China is confounding. Portfolio investment is flowing out of China at unprecedented levels, reports Nikkei Asia. Yet in 2021, foreign direct investment in China was higher than ever. The Peterson Institute for International Economics explains why.   

Mentioned publications

  1.  Craig Allen on US business confidence in China – Andrew Peaple, The Wire China, 27 March 2022
    Many US businesses remain optimistic about China. But sentiment about engaging China’s economy is declining. Will this trend continue and what are its driving forces?
  2. Foreign cash flees China as investors shun autocracies – Takeshi Kihara and Akira Inujima, Nikkei Asia, 10 April 2022
    China has seen unprecedented investment outflows in recent months. Are investors pricing in uncertainty related to China’s system of government and policy decisions?
  3. Foreign corporates investing in China surged in 2021 – Tianlei Huang and Nicholas Lardy, Peterson Institute for International Economics, 29 March 2022
    Does the trend of increasing investment outflows from China apply to foreign direct investment?  Not as of the end of 2021, when FDI in China reached an all-time high.   

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A new era for India’s trade policy?

Is India making a concerted shift towards greater trade liberalization? Witness the trade agreement it has signed with Australia, reports the Financial Times. Might it be time for the US to take a new approach with India on trade? In Foreign Affairs, Kenneth I. Juster, Mohan Kumar, Wendy Cutler, and Naushad Forbes outline why the US should. 

Mentioned Publications

  1. India just signed a trade deal — really – Alan Beattie, Financial Times, 11 April 2022
    Are we at an inflection point in India’s approach towards trade? In recent months, India has made trade decisions that represent a possible departure from its previous policies.
  2. It’s time for America and India to talk trade – Kenneth I. Juster, Mohan Kumar, Wendy Cutler, and Naushad Forbes, Foreign Affairs, 14 April 2022
    The US and India have contended over trade despite decades of constructive engagement. Is it time for a renewed effort towards positive trade engagement? 

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