Self-Imposed Isolationism is Bad for Business

Trade policy people have been in Washington, DC for the annual World Bank and International Monetary Fund meetings. Absent this year are groups of protestors including anti-globalists, anarchists and others who accuse these international bodies of driving the people of the developing world over a cliff of debt and consumerism. Unclear where they’ve gone, other than perhaps full employment is keeping them busy and off the streets.

The message from the IMF is that world economic growth is slowing and the trade row between the US and China is largely to blame by causing an uncertainty pandemic.
 
A closer look at the economic data does not itself seem like a cause for immediate panic. In the US employment and consumer spending are both up, and inflation is low. Manufacturing dipped in the third quarter, but services are what drives the economy. The suspension of the third round of tariffs and delay of the fourth until December 15, which is after the Christmas buying season and won’t be applied until goods on the water reach US shores, probably after January 1, are unlikely to affect consumer spending or mood at a sensitive time. Unexpected shocks can still happen in the waning days of the year.
 
US stock markets rallied on news of a modest trade deal, or progress toward a deal, the meaning depending on whether you were listening in English or Chinese. Regardless of what you thought you heard, it does appear the disputants are ready to buy and sell some agricultural products and at least to discuss other nagging trade matters, with written details available before the two presidents meet on the sidelines of the APEC meeting in November in Santiago, Chile, itself experiencing some civil discord over a hike in public transport fares.
 
For China, there doesn’t seem to be a huge rush to settle with the Americans. Growth is slowing to a 6 percent, or a bit below, in line with projections and still the envy of other industrialized economies. China’s interest in a deal is to remove global uncertainty that could be a drag on demand for their exports as well as on inward investment. The real drag is low productivity especially in the service sector which has become the most important part of the domestic economy. Paradoxically, foreign investment and know-how boosts productivity but could fall victim to China’s indigenous innovation plans. Walling itself off from the US could be just as damaging as the US decoupling itself from China. A way needs to be found around these self-isolationist impulses.
 
China looks to generate about 30 percent of world GDP until 2035, when an aging population and a maturing economy take some of the wind out of its sails and sales. External shocks whether delivered by US foreign policy, mistakes by central planners or a blowing up of public and private debt will adversely affect everyone else. This is what hawks in both the US and China don’t seem to get.
 
Patient, pragmatic engagement is the only way to inject confidence into the global system and ensure a soft landing for everyone.
 
 
 

0 Comments

Blog post currently doesn't have any comments.

Leave a Comment

 Security code

Related Posts:

Make Sure You're Complying with Export Control Laws

Heightened export control vigilance, especially in the US, adds additional burdens to supply chain management. Yet, remaining oblivious to the need...

Read More

How China is Using AI to Dominate the Global Economy

With the world’s largest population and soon to be the largest economy, China also aims to achieve global dominance in the...

Read More

New Online Tool for Protecting Your IP in China and Elsewhere

Intellectual property protection in China, always a concern for foreign businesses, now is more understandable thanks to a new tool from...

Read More

Irish Designer Introduces Fun, Sustainable Alternative to Disposable Cups

Mailo Power, founder of Monkey Cups, didn’t originally set out to design a permanent replacement for disposable coffee cups. A hotel...

Read More

Trade Barriers are Rising, but Deal Still Possible

Mixed news on the trade agreement front....

Read More

Cross Border Supply Chains are Good for Business

Creating an efficient supply chain opens a world of opportunity for smaller entrepreneurs. Such chains are mundane topics for many people,...

Read More

<   1  -  2  -  3  -  4  -  5  -  6  -  7  -  8  -  9  -  10 ...   >