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Global trade during a year of war

Published 07 March 2023

On the one-year anniversary of Russia’s invasion of Ukraine, we examine how the war has affected global trade. How did China dominate electric vehicle manufacturing? Can flexible immigration policies negate the need for automation? Explore our reading list for the latest developments in global trade.

Impact of sanctions on Russia 

The impact of a year of war has not been as dire on global trade as originally predicted. Global trade increased in 2022, writes the World Trade Organization in its analysis of the war’s impact.  Russia is learning to live without imports, says the Financial Times, though some imports may be making their way into Russia through third countries, finds the European Bank for Reconstruction and Development.  Russia has become much more dependent on the Chinese yuan and gold over the past year, assesses the Atlantic Council, and companies and households are borrowing and saving more in RMB, per the Wall Street Journal.

Mentioned publications 

  1. One year of war in UkraineWorld Trade Organization, February 2023 
    In spite of the war, global trade increased in 2022. 
  2. Russia’s wartime economy: learning to live without imports – Polina Ivanova and Max Seddon, Financial Times, December 14, 2022
    How is the Russian economy adapting in the absence of imports? 
  3. The Eurasian roundabout: Trade flows into Russia through the Caucasus and Central Asia – Maxim Chupilkin, Beata Javorcik and Alexander Plekhanov, European Bank for Reconstruction and Development, February 2023
    Trade through neighboring economies is helping Russia circumvent sanctions. 
  4. Russia and China have been teaming up to reduce reliance on the dollar. Here’s how it’s going. – Maia Nikoladze and Mrugank Bhusari, Atlantic Council, February 22, 2023
    Russia has turned to reliance on gold and the Chinese yuan. 
  5. Russia Turns to China’s Yuan in Effort to Ditch the DollarChelsey Dulaney, Evan Gershkovich and Victoria Simanovskaya, The Wall Street Journal, February 28, 2023
    Russian companies are borrowing and households are storing savings in RMB. 

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The supply chain shuffle 

Can a range of economies combine to replace supply chains located entirely within China? Can firms create a cleaner supply chain for graphite, a key component of EV batteries? The Economist assesses the options. The US may face trouble landing the IPEF given the high demands it places on trading partners, write Mary E. Lovely in Foreign Affairs.  

Mentioned publications 

  1. Global firms are eyeing Asian alternatives to Chinese manufacturingThe Economist, February 20, 2023
    Can firms patch together a regional supply chain comparable to what China offers? 
  2. Firms search for greener supplies of graphite for EV batteriesThe Economist, March 4, 2023
    Demand is growing for cleaner graphite, a key component of EV batteries. 
  3. The Trouble With Trans-Pacific Trade – Mary E. Lovely, Foreign Affairs, January 23, 2023
    With low demands on the US and high demands on trading partners, can the IPEF find success? 

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Trade and Investment with China 

Foreign investment in China is slumping, per Nikkei Asia, but Chinese manufacturing is undergoing a post-Covid surge, says the New York Times. Are Chinese companies leveraging domestic courts to misappropriate foreign technologies?  The Wall Street Journal calls the courts a “new weapon”, while the report is inconclusive, argues Mark Cohen in his China IPR blog. 

Mentioned publications 

  1. Foreign investment in China slumps to 18-year low – Iori Kawate, Nikkei Asia, February 28, 2023
    Investment in China by foreign companies in the second half of 2022 dropped 73 percent from 2021 levels. 
  2. China’s Factories Report Surge in Activity After Lockdowns End – Patricia Cohen, The New York Times, March 1, 2023 
    Chinese manufacturing increased in February to the highest levels in over a decade. 
  3. China’s Newest Weapon to Nab Western Technology—Its Courts – Stu Woo and Daniel Michaels, The Wall Street Journal, February 20, 2023
    US and European officials accuse China of using its courts to target foreign IP rights. 
  4. Are Chinese Courts Out to “Nab” Western Technology: An Inconclusive WSJ Article – Mark Cohen, China IPR, February 24, 2023
    Are foreign companies’ IPRs truly under fire from Chinese courts?  

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Industrial policies shaping semiconductor and EV manufacturing

Will TSMC successfully establish manufacturing in the US with help from the CHIPS Act? The Biden administration is using the CHIPS Act to accomplish other policy priorities reports the New York Times. Can the CHIPS Act bolster US export controls curbing China’s chip development? Arrian Ebrahimi explains the China guardrails in the legislation. China may have successfully employed industrial policies to dominate EV manufacturing, writes Zeyi Yang in the MIT Technology Review.

Mentioned publications

  1. Inside Taiwanese Chip Giant, a U.S. Expansion Stokes Tensions – John Liu and Paul Mozur, The New York Times, February 22, 2023
    Can TSMC’s fab in Arizona be a success?
  2. Biden’s Semiconductor Plan Flexes the Power of the Federal Government – Jim Tankersley and Ana Swanson,The New York Times, February 27, 2023 
    The US is using industrial policy to further a range of economic goals.
  3. Chip Grants in Return for China Guardrails – Arrian Ebrahimi,Chip Capitols, January 31, 2023
    The US has tied CHIPS Act funding to agreements not to expand production or research in China.
  4. How did China come to dominate the world of electric cars? – Zeyi Yang,MIT Technology Review, February 21, 2023
    In the past two years, sales of EVs in China rose from 1.3 million to 6.8 million.

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Immigration and Economic Development  

Can more flexible immigration policies negate the need for some technological innovations?  Lant Pritchett in Foreign Affairs argues for people over robots

Mentioned publications 

  1. People over Robots: The Global Economy Needs Immigration before Automation – Lant Pritchett, Foreign Affairs, February 28, 2023
    Would the world require automation if more workers were allowed to move across borders?

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