Globalization in a changing world

Jump to Section

Future of Globalization | Lessening dollar dependency | Vietnam gains from decoupling | European investments in China are changing | Inflation Reduction Act and WTO rules | US-China trade deteriorates | Missing trade tools | More research from Hinrich Foundation

Future of Globalization

For centuries, economists have theorized that greater economic integration leads to peace, but is that belief warranted? John Plender lays out the intellectual underpinnings of the idea that greater trade and economic interaction leads to peace between nations, and explains how that conventional wisdom survived through two world wars, in the Financial times. Meanwhile, Richard Baldwin in a series of blog posts (Part 1, Part 2, Part 3, Part 4) analyzes whether globalization has in fact peaked, and highlights the role of trade in services. 

Mentioned publications

1. Why trade couldn’t buy peace – John Plender, Financial Times, 23 September 2022
   Russia’s war and tensions with China are unraveling the notion that international trade leads to peace among nations. 
2. Part 1: The peak globalisation myth, Part 2: Why the goods trade ratio declined, Part 3: How global supply chains are unwinding, and Part 4: Services trade did not peak – Richard Baldwin, VoxEU/CEPR, 31 August to 3 September 2022
   Has globalization peaked? For trade in goods, it depends, but for trade in services the answer is no. 

🠕 Back to top

Lessening dollar dependency 

Fears over US sanctions tied to the dollar’s dominance in financial transactions are driving more countries to develop alternative payment systems and greater reliance on local currencies. The Economist looks at how a digital yuan can give China a way to avoid US dollar transactions, and in Foreign Policy, Zongyuan Zoe Liu highlights how China is working through the Shanghai Cooperation Organization to advance transactions in local currencies. 

Mentioned publications

1. The digital yuan offers China a way to dodge the dollar – The Economist, 10 September 2022
   The E-CNY could prove useful for avoiding dollar-denominated transactions, even with China’s strict capital controls. 
2. China Is Quietly Trying to Dethrone the Dollar – Zongyuan Zoe Liu, Foreign Policy, 21 September 2022 
   The Shanghai Cooperation Organization agrees to expand trade in local currencies. 

🠕 Back to top

Vietnam gains from decoupling 

While Vietnam is gaining from the push to de-couple from China, it is unclear whether Vietnam will become an innovative economy in the style of South Korea or Taiwan, as reported by Nikkei Asia.  

Mentioned publications

1. Vietnam emerges as Asia's growth leader as China slows – Francesca Regaldo, Nikkei Asia, 27 September 2022
   The World Bank finds that Vietnam is leading growth in the Asia-Pacific while China’s economy is slowing down significantly. 
2. Vietnam's battle to climb the global value chain – Lien Hoang, Nikkei Asia, 21 September 2022
   Can Vietnam follow in the footsteps of South Korea and Taiwan to become an innovative economy? 

🠕 Back to top

European investments in China are changing

European investment in China is becoming highly concentrated, according to a recent analysis from the Rhodium Group. Policy unpredictability in China is weakening investor confidence, per a recent paper from the EU Chamber of Commerce in China, reports Bloomberg. A high-level Chinese official makes a visit in an effort to signal support for foreign investment, per Nikkei Asia. 

Mentioned publications

1. The Chosen Few: A Fresh Look at European FDI in China – Agatha Kratz, Noah Barkin, and Lauren Dudley, Rhodium Group, 14 September 2022
   European investment in China is becoming highly concentrated among a few sectors and companies.  
2. China Loses Allure as European Firms Rethink Investments – Bloomberg News, 21 September 2022
   Less predictable Chinese policies are weakening EU investor confidence in China. 
3. European Chamber Advocates for Beijing’s Return to Reform Agenda – European Union Chamber of Commerce in China, 21 September 2022 
4. China signals support for foreign investment after virus curb fury – Pak Yiu, Nikkei Asia, 22 September 2022 
   Vice Premier Han Zheng visits a BASF factory to signal support for foreign investment. 

🠕 Back to top

Inflation Reduction Act and WTO rules

Recent US legislation designed to boost electric vehicle production in North America, is angering South Korea at a time when the US is seeking greater cooperation with this important ally, explains Ellen Kim from the Center for Strategic and International Studies, while China is threatening to take action, per Bloomberg. 

Mentioned publications

1. Inflation Reduction Act Comes into Focus at UNGA – Ellen Kim, Center for Strategic and International Studies, 22 September 2022
   Electric vehicle incentives in the US Inflation Reduction Act are causing tensions with South Korea  
2. China Threatens Action Against ‘Discriminatory’ US EV Tax Breaks – Bloomberg News, 22 September 2022
   China claims that new US electric vehicle production incentives are discriminatory.

🠕 Back to top

US-China trade deteriorates

Recent data shows a significant decline in US exports to China, because of Russia’s war, describes Chad Bown from the Peterson Institute for International Economics. Writing in Foreign Policy, Michael Hirsh argues that no one is winning the US-China trade war. 

Mentioned publications

1. First trade war, now Russia's real war. Why US exports to China continue to suffer – Chad P. Bown, Peterson Institute for International Economics, 12 September 2022
   US energy and manufacturing exports to China are down significantly, exacerbated by geopolitical tensions. 
2. Who’s Winning the U.S.-China Trade War? No One – Michael Hirsh, Foreign Policy, 21 September 2022
   As the US and China settle into a long-term trade war, a long-term strategy has yet to appear. 

Missing trade tools

US domestic politics have led the US away from trade liberalizing policies and the use of traditional trade tools. Matthew Schaefer of the Yeutter Institute asks whether geopolitics will drive the US back to an offensive trade agenda. 

Mentioned publication

1. Can Geopolitics Help Restore Missing Tools to the U.S. Trade Toolbox? – Matthew Schaefer, Yeutter Institute, 22 August 2022  
   US Congress and Biden Administration may return to more traditional trade tools or adopt new tools. 

🠕 Back to top

More related research from the Hinrich Foundation:

• Mercantilist reciprocity or free trade: Globalization at a crossroads
• Will war in Ukraine unperch US dollar preeminence in global trade?
• Supply chains are trying to diversify. Will ASEAN step in?

© The Hinrich Foundation. See our website Terms and conditions for our copyright and reprint policy. All statements of fact and the views, conclusions and recommendations expressed in this publication are the sole responsibility of the author(s).